If it were a one man investment shop, then maybe it leans more towards fraud. But if they obviously employ dozens of quants, and have obvious hardware outlays, it seems less likely.
It makes a lot of sense to me that they just win a bit more than they lose, play a lot of hands, and treat everything with pretty even money, so they're never overexposed in any one place.
Blew them up
1 time a day 5 days a week 50 weeks a year, you're going to take your capital and place that many $1 bets with it.
Let's say you net +1% on your deployed capital ever day.
After 250 rounds, you have $1215 in the bank.
Again, correct the math if I'm wrong. But scale that down to 0.57%, which is the win rate I saw, and they're making ~$600/yr, which is the stated average return.
Seems legit
That's the "..." step in "1 steal underpants, 2 ..., 3 Profit!"
It's unlikely, but not impossible.
https://en.wikipedia.org/wiki/List_of_Nobel_laureates_by_uni...
Successful academics who have done that and made shedloads of money in the stock market would include, er, Jim Simons, founder of Renaissance Technologies, the very firm under discussion in this thread.
The thing that got acquired by Renaissance and turned into the Medallion Fund was called Axcom. That was founded by a guy called James Ax, who before he founded that was ... a mathematics professor at Cornell, Harvard, and Stony Brook.
Another key guy at Axcom was Elwyn Berlekamp. He was a mathematics professor at UC Berkeley.
So it doesn't seem like there's any incompatibility between being an academic and being very, very good at extracting money from the stock market.
Money Laundering of assets on a national scale, e.g., for oligarchs who have taken 95% of a nations' wealth. Their biggest problem is to get it "legitimately" into the international money system.
If the fund owners have really discovered a technological "secret sauce", why isn't it working in their other funds?
Not a conclusion, but a valid open question.
Renaissance focused on finding and developing novel mathematics that can be exploited to find an edge, some of which is extremely esoteric and unique, and then massively automating that. Consequently, they can find more new edges before breakfast than some hedge funds find all year. The real effect is that they don't need to milk a dying edge for returns because they are constantly generating new ones, and they can pick the best of the bunch at any point in time. The investment side of the business is mechanical. Their recruiting has reflected their deep interest in novel theoretical approaches to edge discovery.
In a sense, they are a higher order abstraction of a more typical hedge fund.
It seems very unlikely that Renaissance/Medallion constantly finds these things, whereas other operations almost never do.
The conspiracy theorist in the back of my brain thinks that Renaissance/Medallion hires a lot of eggheads so they can plausibly claim to keep finding mathematical and operational edges, but the actual money-making strategy might be something else entirely.
Not true at all as far as I know.
Name one member of RenTech that went else where and made similar returns; I don't think you can because its never happened as far as I know.
The closest I can think of is Pavel Volfbeyn and Alexander Belopolsky leaving to join the Millenium fund.
Their performance there was so poor even not comparing their performance to what RenTech did so much so that they were let go even after Millenium settled the lawsuit with RenTech that allowed them to stay at Millenium.
Then they say "The Medallion fund has been closed to external capital since 1993 ... whatever profit they make, they pay out". So clearly it can't be a ponzie scheme?
Still, it seems too good to be true. If financial experts are stumped as well then that also seems like a red flag.