Jim Simons: Breaking the Code of Finance
Imagine, if you can, a hedge fund run by and for scientists, employing mathematicians, statisticians, and astronomers with non-financial backgrounds for financial research. It might sound like science fiction, but this fund actually exists – and it’s doing astronomically well.
It’s run by billionaire Jim Simons, a noted mathematician and the founder of Renaissance Technologies, one of the world’s largest hedge funds. His income in 2016 was $1.6 billion, the highest in the hedge-fund industry at that time.
Headquartered in New York, Renaissance Technologies is a quantitative investment management company trading in global financial markets, dedicated to producing exceptional returns for its investors by strictly adhering to mathematical and statistical methods. By design, one-third of the employees at Renaissance have PhDs in physics, mathematics, and statistics instead of finance.
Jim Simons founded the firm in 1982 after a lengthy and distinguished career in matters chiefly unrelated to finance. After receiving a bachelor’s degree in mathematics from the Massachusetts Institute of Technology in 1958 and a
I won’t even attempt to understand these Jim Simons’ important academic discoveries, let alone explain them; suffice it to say that he won the AMS Oswald Veblen Prize in Geometry in 1976. Many years later, in 2014, Dr. Simons was elected to the U.S. National Academy of Sciences.
Just in case that’s not enough to impress you, let’s not ignore the fact that Jim Simons was a code breaker for the U.S. government in 1964, as well as one of the first computer hackers (the good kind, not the evil type) for IBM in 1973.
Shifting to matters of finance, Dr. Simons brought his unique brand of scientifically based investment principles to Renaissance Technologies in the early 1980s. The results have been nothing short of phenomenal: the fund has $57 billion of assets under management, and its signature Medallion fund has delivered average annual returns of about 40% since 1988.
And here’s some more math for you: Jim Simons’ fund has paid him more than $6.8 billion in cash distributions since 2006, and his personal net worth stands at around $20 billion. Furthermore, over his lifetime Dr. Simons has donated more than $2.7 billion to philanthropic causes.
Looking back at all that he has done, it would be easy for Jim Simons to rest on his laurels and just enjoy what he’s accomplished in multiple fields of endeavor. Somehow, though, I get the feeling that there’s much more to come from the man who “broke the code” in more ways than one.