Jim Simons: Top Quant Trader

From Renaissance Technologies:

Renaissance Technologies is a private investment management company with over $4,000,000,000 under management founded in 1982 by Jim Simons, who (correctly) believed in the potential of technical trading models

Jim Simons had this to say about science and trading:

The advantage scientists bring into the game is less their mathematical or computational skills than their ability to think scientifically. They are less likely to accept an apparent winning strategy that might be a mere statistical fluke.

Euromoney Institutional Investor PLC:

Chances are you haven’t heard of Jim Simons, which is just fine by him. Nor are you alone. Many on Wall Street, including competitors in his specialty, quantitative trading, haven’t heard of Simons or of his operation, Renaissance Technologies Corp., either. And that’s simply extraordinary–because, gross or net, Simons may very well be the best money manager on earth. An extreme judgment? Perhaps. Certainly, there has been no end of claimants to the title. And one after another, over the past few years, these celebrated managers have either blown up or folded their tents. After big reverses, Julian Robertson closed down Tiger Management, and George Soros scaled back the activities of his Quantum Fund this year. John Meriwether’s Long-Term Capital Management neatly took down the financial world in 1998.

Simons, by contrast, just keeps getting better. Consider his performance over the past decade. Since its inception in March 1988, Simons’ flagship $ 3.3 billion Medallion fund, has amassed annual returns of 35.6 percent, compared with 17.9 percent for the Standard & Poor’s 500 index. For the 11 full years ended December 1999, Medallion’s cumulative returns are an eye-popping 2,478.6 percent (see graph, page 47). Among all offshore funds over that same period, according to the database run by veteran hedge fund observer Antoine Bernheim, the next-best performer was Soros’ Quantum Fund, with a 1,710.1 percent return. Simons is No. 1, says Bernheim. Ahead of George Soros. Ahead of Mark Kingdon. Ahead of Bruce Kovner. Ahead of Monroe Trout.

Jim Simons is without question one of the really brilliant people working in this business, says quantitative trading star David Shaw, chairman of D.E. Shaw, which boasts returns above 50 percent this year. He is a first-rate scholar, with a genuinely scientific approach to trading. There are very few people like him. Simons surrounds himself with like minds. The headquarters of Renaissance, in the quaint town of East Setauket on New York’s Long Island, resembles nothing so much as a high-powered think tank or graduate school in math and science. Operating out of a one-story wood-and-glass compound near SUNY Stony Brook, Renaissance, founded in 1982, has 140 employees, one third of whom hold Ph.D.s in hard sciences. Many have studied or taught in Stony Brook’s math department, which Simons chaired from 1968 to 1976. Among their ranks: practitioners in the fields of astrophysics, number theory, computer science and computational linguistics. In notably short supply are finance types. Just two employees, including the head of trading, are Wall Street veterans.

I have one guy who has a Ph.D. in finance. We don’t hire people from business schools. We don’t hire people from Wall Street, says Simons. We hire people who have done good science. The atmosphere is college casual, if intense–think of a perpetual exam week. Though a natty dresser, Simons sets a properly idiosyncratic tone. He has been known to show up at formal business meetings without socks, says Jerome Swartz, Simons’ next-door neighbor on Long Island. Job candidates don’t have to know any finance–in fact, Wall Street experience is a black mark–but they must present a talk on their scientific research to the entire firm before being offered a job.

Most staffers seem to know little about the rest of the financial services industry, or even the hedge fund business. Asked about the performance of legendary futures trader and Renaissance rival Paul Tudor Jones, one researcher says, Who’s Tudor Jones?

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