Renaissance Institutional Equities Fund MONTHLY COMMENTARY

May 2009 (page 1)

RIEF experienced modest, positive gains in May in all Series. Nonetheless, Gross Sector Allocation§
the S&P 500 meaningfully outperformed RIEF for the third month in a row.
RIEF is expected to underperform dramatic monthly gains in the index but it is Basic Materials -14.7% 4.1%

disappointing that we did not capture a larger fraction of the market gain.
Energy -8.5% 2.4%
RIEF’s performance can again be understood in terms of its risk aversion. The
recent, unusually large return differential between high and low beta stocks Consumer Noncyclicals -1.6% 16.4%

continued but at a less pronounced pace in May. Consequently, RIEF continued

Consumer Cyclicals -12.2% 12.0%
to underperform the index but experienced improved absolute and relative
performance compared to both March and, especially, April. Consumer Services -4.1% 5.3%

RIEF helps investors control risk through lower volatility and diversification
Industrials -6.2% 1.4%
away from index-like investments. Such diversification naturally leads both to
periods of dramatic out-performance, such as last year, and periods of dramatic Utilities -0.1% 3.7%
under-performance, such as this year. The patient RIEF investor has been and
should continue to be rewarded with higher average return and lower risk than Transportation -0.8% 7.6%
is achievable through conventional long-only investing.
Healthcare -8.5% 31.8%
Research was productive in May. We installed a new predictive signal of
unusually high statistical significance and discovered another promising signal Technology -6.1% 51.1%
that will be explored further in the coming weeks.
Telecommunications -1.7% 15.6%
We are striving to improve both the quantity and quality of the information
shared with our investors. We understand that investors can adopt a long- Commercial Services -2.2% 13.0%
term view of RIEF only if they have sufficient information to understand that
short-term disappointments do not necessarily reflect fundamental problems Financial -15.0% 17.3%

with the underlying strategy. Our first step toward improved transparency is an
-25% -15% -5% 5% 15% 25% 35% 45% 55%
improved monthly investor letter. Along with increased disclosure of portfolio
statistics, you will find a more in-depth and precise discussion of the drivers of §
Long and short gross sector weightings are for the static portfolio
monthly performance. at the close of 5/31/09 using the most current Barra model.

Monthly Statistics**
RIEF Onshore LLC RIEF Offshore LP
Series A Series B Series C Series D Series A Series B Series C Series D S&P 500

May Return 0.66% 0.80% 0.77% 0.80% 0.61% 0.75% 0.73% 0.75% 5.59%
*
Annualized Return -3.81% -2.98% -4.50% -5.05% -4.52% -3.66% -5.09% -5.60% -5.41%
Standard Deviation* 10.70% 10.36% 11.16% 11.46% 10.73% 10.39% 11.23% 11.54% 17.07%
Delta*‡ 1.60% 2.43% 0.91% 0.36% 0.89% 1.75% 0.32% -0.19% -

Risk/Return Since Inception** One-Year Rolling Standard Deviation**

0% 30%
S&P 500
-1%
-2% 25%
A nnua liz e d R e turn

R IE F L L C
-3%
Series B 20%
-4%
R us s e l l R us s e l l 2 0 0 0
-5%
S& P 500 1000 G r o wt h 15%
-6%
R us s e l l 2 0 0 0
-7% 10%
V a l ue
-8% RIEF LLC - Series B
-9% 5%

-10%
0% 5% 10% 15% 20% 25% 30% 0%
Jul-06

Sep-06

Jan-07
Nov-06

May-07

Jul-07

Sep-07

Jan-08
Mar-07

Nov-07

May-08

Jul-08

Sep-08

Jan-09
Mar-08

Nov-08

May-09
Mar-09

A nnua liz e d S ta nd a rd D e via tio n

*
Since Inception, 8/1/05.
**
Charts based on monthly data and are net of fees for a continuing investor. Some series were not populated with investors since inception. The results displayed are,
nonetheless, based on actual trading, gross profits being adjusted in each case by the applicable fees.
‡
The difference in return of RIEF and the S&P 500 since inception.

Renaissance Technologies LLC 800 Third Avenue, New York, NY 10022-7604 p: (212) 821-1502 f: (212) 848-1033 e: rief@rentec.com
 Renaissance Institutional Equities Fund MONTHLY COMMENTARY

May 2009 (page 2)

The volatility and beta controls of RIEF favor lower
Returns by Beta Decile*
volatility/lower beta stocks in the long portfolio and
higher volatility/higher beta stocks in the short portfolio.
This feature has helped RIEF maintain low volatility Period: March 2009 - May 2009*
140%
both in its live track record since inception and during
simulation since 1992. However, this very feature has 120%
been a key driver of relative underperformance versus
the S&P 500 over the past 3 months. 100%

80%
During the months of March, April, and May, high
beta stocks outperformed low beta stocks to an 60%
uncharacteristic extent. Using Barra betas, we bucketed
all of the stocks in our trading universe into beta deciles. 40%
By taking cap-weighted average betas and multiplying
20%
by actual S&P returns (demonstrated by the solid black
line on the graphs to the right), higher beta stocks 0%
would have been expected to outperform lower beta 10 9 8 7 6 5 4 3 2 1
stocks by roughly 40%. However, in these past three
Weighted-Average Actual Return by Beta Decile
months those same higher-beta stocks (dotted line) Weighted-Average Expected Return
have in fact outperformed by a margin of 120%. This
3-fold difference indicates a short-term phenomenon Period: January 1999 - December 1999*
that we believe is unsustainable. At the same time, it 100%
makes RIEF’s recent underperformance understandable.
A similar trend was evident during calendar year 1999,
80%
another year in which RIEF’s simulations dramatically
underperformed the index. Over the next year, all of
60%
those relative losses were recouped.
40%

Gross Long/Short Return Attribution**

20%
Long Portfolio Return 9.8%
0%
Short Portfolio Return -9.0%
10 9 8 7 6 5 4 3 2 1
Total RIEF Return 0.8% Weighted-Average Actual Return by Beta Decile
Weighted-Average Expected Return

Quarterly Market Cap Exposure† Three-Year Rolling Empirical Beta‡

100% 1.0

90% Small Cap 0.9

8 0% 0.8

70% 0.7

60% Mid Cap 0.6

50% 0.5

40% 0.4

30% 0.3

20% Large Cap 0.2

10% 0.1

0% 0.0
Q3 05

Q4 05

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Q2 07

Q3 07

Q4 07

Q1 09
Q1 08

Q2 08

Q3 08

Q4 08

Jul-08

Jan-09
Sep-08
Aug-08

Feb-09

May-09
Oct-08

Nov-08

Dec-08

Mar-09

Apr-09

*
Charts based on daily log data.
**
Gross of fees for the month of May 2009.
†
Using Russell Index methodology, as of each quarter-end.
‡
Relative to the S&P 500 based on daily gross of fees log returns.

Renaissance Technologies LLC 800 Third Avenue, New York, NY 10022-7604 p: (212) 821-1502 f: (212) 848-1033 e: rief@rentec.com