Renaissance Technologies: when a scientist gets down to business
Renaissance Technologies fund is familiar to everybody. Every action of the organization is the result of scrupulous calculations. The hedge fund owes its success to its founder, Jim Simons. In 2018 alone, Jim’s brainchild made more than a billion US dollars. And this seems to be only the start!
Jim Simons was born in 1938 near Boston. He was interested in logical-mathematical problems from a young age, for example, the Zeno’s paradox. After leaving school, the future founder of Renaissance Technologies entered the University of Technology in Massachusetts, where he studied mathematics. In Berkeley, the scientist received a doctoral degree in two years, lectured at universities in Massachusetts and famous Harvard. But then Jim faced a kind of black bar, which led to the creation of a business. Simons was fired for criticizing the US politics in Vietnam.
Emerge of Renaissance Technologies hedge fund
In the early 60s, Jim Simons and his soul mates invested savings in the production of floor coverings. The decision turned out to be correct, the construction market grew rapidly. In 1974, young investors had free USD 600,000. According to a common decision, funds were invested in commodity futures. This is not to say that Simons and his companions were lucky, because the investment decision turned out to be the fruit of continuous calculations. But the result is stunning: after 7 months, investors had USD 6 mln in their hands. That happened due to a sharp rise in sugar contracts.
Jim Symons decided to found Monemetrics Company. It is clear enough from the name what the company’s business model is: mathematical calculations for currency trading. Later, Jim Simons and his colleagues improved the formulas – and they became applicable for any trading. Thus, Medallion hedge fund was born in 1998 thanks to mathematicians Jim Simons and James Ax.
The nineties of the twentieth century were happy for the new business of Simons and his colleagues. 71% was the profitability of Medallion business at a time when the S&P 500 index lost one and a half percent. 98,5% was a leap of 2000. But at the same time S&P 500 dropped by 10%. The average annual profitability of the company of 150 people was 43.6%. Therein, Simons at that time was already left without partners who successfully established their business.
Renaissance Technologies Company appeared in 2005. The business model of the fund is investments in American corporations shares of which are traded on well-known exchanges. In 2014, the company managed funds in the amount of USD 5 bln. And the most profitable year was 2007 (USD 30 bln). Subsidiary company Renaissance Institutional Futures Fund appeared in 2015. It specializes in futures, including oil.
It is known that Jim Simons lost money only once. It happened in Medallion in 1999 (minus 0.5%).
Since 2010, Jim rejects the operational management in the business of his companies. Directors’ positions are held by former IBM programmers Peter Brown and Robert Mercer. According to the founder of the foundation, IT specialists are the best in calculating. Simons’ wealth USD 14 bln in 2018.