James Simons is a world-class mathematician and an investing legend. He founded a very successful hedge fund, Renaissance Technologies LLC, that employs Ph.D. mathematicians to detect subtle predictive patterns in market data. He’s accumulated a net worth of almost $20 billion in his years of investment and has a quantitative hedge fund firm that manages $57 billion. Simons initially set out to make money as a student at Berkeley, he tried FX and commodity trading before settling on quant trading and amassing his fortune there.
His company Renaissance Technologies was founded in 1982 and Simons “officially” retired in 2010, but still plays a role at Renaissance and benefits from its funds. Renaissance Technologies is famous for its Medallion Fund, a $10 billion black-box strategy that is only open to Renaissance’s owners and employee’s…hence why he is still involved to benefit from its Medallion Fund.
Simons revealed that he wasn’t always so smart about investing and when he opened his first account, with Merrill Lynch & Co., and bought a few stocks, they didn’t move, so he asked his broker for something more “exciting.” The broker recommended soybean futures, and luckily enough they rocketed up in price, and it was this initial win that sparked his interest in investing. This point is a perfect example of how you can start at the bottom and finish at the top if you are willing to put in the work and not give up on yourself and your business.
His Hedge Fund, Renaissance Technologies, which invests using computer algorithms and quantitative strategies, has flourished where other hedge funds have nosedived. Its flagship fund, the Medallion fund, is known to charge much higher: a 5% management fee, and 44% cut of the profits which investors were willing to pay for it. While many other funds suffered outflows in 2016, I read in The Wall Street Journal that Renaissance attracted over $7 billion in new money during the year. Now, the firm is said to manage about $57 billion, with Medallion enjoying average annual returns of 40% since 1988.
As investors are walking away from the traditional hedge fund business models, major hedge funds are also turning to quantitative investing. Paul Tudor Jones, for example, has recently introduced computer-driven tools that would imitate trades from his firm’s best managers.
Although he is known to make a bucket load of money, with a $48m apartment overlooking Central Park, a $65m private jet and a 222-foot yacht, Simons is also a well-known philanthropist and has given $2.7 billion of his own money to philanthropic causes over his lifetime. The Simons’ foundation, run by Simons and his wife Marilyn send around $450bn a year into charitable causes.