The Legendary Jim Simons
Holding the top spot of Forbes’ list of highest-earning hedge fund managers and traders, Jim Simons is indeed a legendary trader. In 2005 he was added to Forbes’ Billionaires List and in 2022, he was ranked 48th on the Forbes’ list of American billionaires, with a net worth of $29 billion.
How did Jim Simons get into trading?
Jim Simons was born in 1938 in Brookline Massachusetts.
He attended the Massachusetts Institute of Technology (MIT) where he studied mathematics, and received a bachelor’s degree in 1958. He then attended the University of California, Berkeley, earning a PhD in 1961.
Jim Simons loved mathematics from a very young age and was very successful at code-breaking. During the Vietnam War, he worked for the National Security Agency as a code-breaker.
As a mathematics professor, Jim Simons has taught at the Massachusetts Institute of Technology (MIT), Stony Brook University and Harvard University.
Interested in finding out whether mathematics could be used to predict price patterns within the financial markets, Simons launched Monemetrics in 1978. Working with a team of mathematicians, he started to apply mathematical principles to financial data.
In 1981, Monemetrics became the Renaissance Technologies Corporation.
The famous Medallion Fund is part of Renaissance Technologies, and has a record of beating the market every year.
What is Jim Simons’ trading secret?
Jim Simons is part of a group of market specialists known as quantitative analysts, or “quants”. Quants analyse huge quantities of historical market data to identify patterns and trends. These patterns are then used to develop investment strategies. His success has meant he is often called the “Quant King”.
Jim Simons is more interested in hiring staff who have imagination and curiosity than those with financial experience. These often include mathematicians, statisticians and physicists rather than financial experts.
He credits this imagination or pondering, when he says:
What is the trading strategy of the Medallion Fund?
The Medallion Fund’s investment strategy uses a black box model.
The specific details of the Medallion Fund’s mathematical models and algorithms are kept secret of course, but the fund’s success has inspired a whole new generation of quantitative analysts.
There are whispers that even staff at Renaissance Technologies do not know the exact methods that the computers use to make trading decisions.
Interestingly, Jim Simons wants to keep the Medallion Fund relatively small, as he believes its success is partly down to its small size, at about $10 billion.
He keeps it small by only allowing employees to invest. This is a win-win situation because this policy attracts the brightest scientists to his staff, who not only want to work with him, but want to invest in the very fund they are working on.
Outside investors are able to benefit from Simons’ strategies through other funds within Renaissance Technologies, although their returns are not generally as impressive as the Medallion Fund.
This he puts down to the large size of the funds, which are not as nimble as the Medallion Fund.
What sort of returns have investors in Renaissance Technologies enjoyed?
Between 1988 and 2018, the Medallion Fund produced average annual returns of 66.1%. After fees, this was 39.1%, producing total profits of $104.5 billion.
Because of this, investment in Renaissance Technologies has steadily increased to $55 billion in 2022.
Has Jim Simons written a book about this trading strategies?
No, but Gregory Zuckerman wrote a book in 2019 entitled "The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution."
Simons was very reluctant to agree to the book, but Zuckerman persuaded him to talk about his career. The book took over 2 years to research, which included interviews with past and present employees, as well as Simons himself.
Is Jim Simons retired?
Jim Simons retired as CEO of Renaissance Technologies in 2010.
Zuckerman’s book discusses how Simons started applying the same principles used in Renaissance Technologies to other scientific research.
This was the idea behind the foundation of the Flatiron Institute, which aims to “advance scientific research through computational methods, including data analysis, theory, modeling and simulation.”
Is Jim Simons a Philanthropist?
The non-profit Flatiron Institute is part of the Simons Foundation, and uses similar methods to Renaissance Technologies in order to contribute to research in science. The Institute assists scientists in processing large amounts of data to uncover patterns that will help further their research.
Simons has said that he wishes to use his knowledge of quantitative analysis and his wealth, for philanthropy.
In 1994, Jim Simons and his wife Marilyn Simons founded the Simons Foundation with over $2.7 billion. The foundation supprts education, health and autism research.
In 2004, Jim Simons founded Math for America, an organisation which supports mathematics and science teachers, providing encouragement and professional development.
Jim Simons comes across as a kind, humble genius. He is even happy to credit luck when reflecting on his success in the markets.
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