The Secret Fund Making 39% Yearly
Jim Simons is a mathematics professor who, two decades ago, begun work on a “refined model of the financial markets.” He had no time to buy and hold. His ambition was to develop a warp speed ‘black-box’ trading algorithm that would automatically scoop up eye-popping returns. Get in, get rich, get out. And wouldn’t you know it? He did exactly that!
Today, over 300 scientists, statisticians, and mathematicians (a third of whom have PhDs) toil away at Renaissance Technologies (street name: ‘Rentec’) on trading models. The Medallion Fund has carried Simons to 21st on the Forbes list, helping him and his friends compound gains of 66% before fees (39% after) each year irrespective of booms and busts. That’s insanity. For context, investing GOAT Warren Buffett mustered 50% gains in his heyday!
Many investors claim “you can’t automate alpha,” but they have no answer to what Jim Simons is doing right now (even in retirement). The man’s livin’ it up, constantly smoking even in enclosed conference rooms and draping himself in affluent cabana wear. His words of wisdom for the rest of us mere mortals; “never override the model.”
Unfortunately, this article isn’t about to launch into a step-by-step tutorial in joining the fund or recreating its success. Medallion is insider-only or by family invitation, and the quant trading models that it uses are kept more secret than Coca-Cola’s soda recipe, the contents of Area 51, and the Krabby Patty Formula combined. All this either makes Rentec 100 times cooler, or 100 times fishier!
It’s not fraud to keep the source of your billion-dollar market edge under wraps, and it can’t be a Ponzi scheme if the fund is invitation only. The worst that can be levied against Rentec is spoiling the fun for the rest of us! All credit to “the best math and stats department in the world,” but many still see Simons profiting from a loophole that needs plugging. Warren Buffett remains the people’s Champion!