Outside of the financial district, the name Jim Simons might not ring a bell. If you do a quick internet search you will be amazed at his body of work and his hedge fund and investment brilliance. As with many entrepreneurial success stories, it didn’t come easy for Jim Simons either. He would eventually make his fortune in investments, but not before overcoming a considerable mid-life learning curve.
Simons grew up in Massachusetts, the son of father who owned a shoe factory, where he must have obtained a portion of his business DNA. Like many of his generation, he had modest jobs as a youth, one of which was sweeping floors at a local garden supply store.
In 1955, Simons was accepted into MIT where he studied mathematics and graduated with a bachelor’s degree in 1958. There was no doubt in his mind that he was meant to be a mathematician and professor. He went on to pursue his Ph.D. in mathematics from the University of California, Berkeley and graduated at 23 years of age. Simons began his career as a popular professor at MIT and Harvard University.
Before Simons became an investor he was a Russian code breaker during the Cold War. He had always been interested in finance and during the 1970’s he seriously started thinking about establishing his own business in the field. In 1978, he quit academia and founded a hedge fund management firm called Monemetrics.
In 1982, Monemetrics would morph into Renaissance Technologies. When I first read of his 39% annual returns my jaw dropped. Then I realized that those returns were after fees, meaning he was grossing returns of some 66% yearly! With numbers like these Simons sits at the top of the great investors of all time.
The much publicized Ray Dalio has a rate of return that is no better than the market during his years at Pure Alpha. Simons could be referred to as the father of quantitative analysis. His idea of using big data to predict future price movements was revolutionary. In certain markets, he had data going back to the 1700s.
“Jim Simons and Renaissance showed it was possible,” says Dario Villani, a Ph.D. in theoretical physics who manages a quantitative hedge fund. However, as any investor will testify, investing is not easy, even for the brilliant minds at Renaissance. There were several times early on where Simons doubted his models and thought of abandoning computer algorithms. Over time, the right formula of partners and data patterns eventually played out and proved that mathematics was a valid principle in and of itself to dispose of the random walk or efficient market hypothesis.
Renaissance Technologies has grown significantly over the years using its complex mathematical models to analyze and execute trades. The company currently has more than $22 billion in assets under management across the three funds it operates. In 2009 Simons retired as the company’s CEO and became chairman of its board. He has been devoting more time to philanthropy in recent years.