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Jim Simons: The World’s Most Successful Hedge Fund Manager

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by Gavin in Blog
May 23, 2020 2 comments

Hi traders, I watched a couple of really interesting videos this week on Jim Simons “The Mathematician Who Cracked Wall Street”.

Really interesting story and I highly recommend you check out the videos below if you have some time.

Here is a transcript of some of the first video:

Who is the greatest investor of all time? is it Warren Buffett, Ray Dalio, George Soros or some other investor?

This could be considered the pantheon of great investors, if it wasn’t missing Renaissance’s founder, Jim Simons, who should be considered the world’s most successful investor.

His legendary Medallion Fund has returned 39.1% on average per year since 1988, generating over 104 billion of trading profits.

Even better, he is showing no signs of slowing down.

Renaissance is often excluded from the best hedge fund list because its well-known Medallion Fund’s results are hard to verify as it has been closed to outside investors since 2003, but there is undeniable evidence that the returns are very real.

For example, when an employee was fired in 2017, he negotiated into his settlement a clause that allowed him to stay invested in the Medallion Fund which has produced otherworldly returns since 1988.

Other facts showing legitimacy is that Renaissance would be the world’s worst Ponzi scheme as it does not allow in outside money.

In addition, Securities and Exchange Commission evidence shows it manages over 100 billion of assets and it confirms its famous 544 structure, which is likely the highest v-structure in the world.

This means an investor pays 5% of his assets each year and 44% of his profits to Simons.

Even at this structure, investors would line up to invest in Renaissance, if it was open to outsiders. Simons’ wealth did not come out of thin air, and Renaissance’s strong returns has made him one of the richest people in the world.

Finally, the IRS is asking for 6.8 billion in back taxes.

The IRS believes a strategy used from 2000 to 2015 was for tax avoidance. Renaissance disagrees but the dispute has not yet been settled.

Simons, now 81 is eccentric, despite keeping a low and secretive profile.

His secretive personality may have developed when he worked for the Institute for Defense analysis from 1964 to 1968.

Simons remembers not even telling his wife, soon-to-be-ex-wife, what he did there, but we now know his task was to decode Soviet messages.

He earned more than any hedge fund manager in 2017 with 1.7 billion of fees, and again with 1.6 billion in 2018.

Renaissance’s strategies are standing the test of time better than any other legendary active fund such as Ray Dalio, who’s famous Pure Alpha Fund, has struggled compared to the S&P 500, since the financial crisis.

Warren Buffett has made many recent investment mistakes, including his investment in IBM and Kraft Heinz.

Buffett’s firm has only slightly better results than the S&P 500 since the Great Recession and this is excluding the incomplete 2019 year, where Berkshire Hathaway is badly losing.

The key lesson for me from these videos is that markets are clearly not efficient. Anomalies exist and they can be exploited.

And the other lesson? Teach your kids math!

Enjoy the videos

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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2 Comments
  1. Peter Meijburg says:

    Hi Gav,
    Thanks for sharing the videos. Great stuff.
    I’m not a mathematician myself, but I can highly recommend the book about Simons (The Man Who Solved The Market). Great read.

    1. Gavin says:

      Excellent, thanks Peter! I will add it to my reading list.

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