About Jim Simons
On May 10th, 2024, the investment, math and science communities and the world overall lost a profoundly impactful investor, philanthropist and person, founder of prolific quantitative hedge fund Renaissance Technologies, one of the greatest performing hedge funds of all time, one of its most famed funds maintaining a track record of notching annualized returns of 66% since the late ‘80s, which, over the span of time it has been up and running, is unheard of, well outpacing the likes of other hedge fund and investor greats such as Warren Buffett, George Soros, Paul Singer as well as direct competitors, primarily other high performing quantitative hedge funds.
One of my most memorable birthday gifts was waking up to a copy of The Man Who Solved the Market by famed Wall Street author Gregory Zuckerman, which detailed the life of the legend himself and his rather head scratching path from being a math-obsessed young man to a MIT-trained mathematician, subsequently receiving a PhD in what else but mathematics from Berkeley, becoming a mathematical researcher and eventual acclaimed theorist (Chern-Simons theory) to a code breaker for the National Security Agency (NSA) to eventually developing an infatuation for financial markets and raising a fund by the name of Renaissance Technologies.
The fund (and funds within, for that matter) are incredibly secretive and little is known about the firm’s specific investment strategies and processes, however, what is known is the fact that Simons is the godfather and pioneer of the quantitative hedge fund industry in that he specifically made it a point from day one to not hire those with finance or finance-related backgrounds, but rather focused intensely on hiring those with extensive and impressive backgrounds within mathematical and science-based realms such as astronomists, mathematicians, physicists, topologists, computer scientists, statisticians and others from many other different, seemingly unrelated fields, not merely allowing but encouraging brilliant minds to collaborate with one another and work on solving problems all the livelong day, and stocks just so happened to be an outlet through which they could state their opinions.
Additionally, the unorthodox-edness continues, as the firm and those within relied and continue relying primarily on mathematical models and copious amounts of deep and wide datasets to determine which securities (stocks) to invest in, in lieu of employing traditional hedge fund research strategies such as cracking open financial statements and handpicking stocks, instead, allowing the machines and models the firm’s employees continuously obsess over and finetune make the decisions on behalf of the firm and apparently, the significant returns that follow.
Evidently, it pays to go against the grain sometimes, especially within the context of high finance, as there is a constant herd mentality phenomenon plaguing financial markets (and the world more broadly, but that’s another story) and suffice it to say real money isn’t made when everyone is at the same place at the same time, but rather when a market participant performs their own research and finds winners before the rest find said winners.
In fact, the majority of the greatest investors ever made a bulk of their prized returns during times where pricing gaps needed to be filled and once the gap was filled after everyone piled into the fold on a certain company and its stock, the gap was their profit and everyone else just showed up late to the party.
I suppose this is one of the greatest benefits of making your investment decisions based solely off of the utmost objective, unemotional, purely profit-driven mathematical and computational models.
Sure, I imagine the firm’s models account for overall market sentiment surrounding a company and its stock to a degree, but using cold, hard math and the implementation of models drowns out a lot of noise and makes investing a bit more clear-cut and focused, and it has served the fund and its general partners (GPs) or owners and limited partners (LPs) or investors quite well.
A brief example of this firm’s strategy working can be seen in its largest position found in its most recently published 13F, one of the world’s largest diabetes treatment companies, Bagsværd, Denmark-domiciled Novo Nordisk (click here to learn more about the company through one of our past stock analysis articles performed on the firm), holding 2.22% of the entire portfolio and firm’s invested assets under management (AUM), which is most definitely a lot when contextualizing it with the fact that Renaissance has a little over $64 billion in terms of AUM.
Given that Novo Nordisk (NYSE: NVO) has been the number one staple within the hedge fund’s portfolio for quite some time now, generating a nearly 400% return on this position alone, it is only natural for one to ponder the elements of foresight the firm and its researchers developed in order to see such an opportunity before the rest of the market did, of which I can only assume while many other hedge funds were far more focused on where the market was and where hot technology stocks touted by the business news network pundits were valued, involved those within the firm identifying through deep research early on just how alarming obesity rates were rising across the globe, which companies were more than statistically likely to capitalize on such a trend, and a whole lot of pure and complicated mathematical models and research performed regarding specific obesity trends, clinical trials being done within publicly traded companies within the industry and so much more.
This is just one example of many for this firm, of course.
If I’ve learned anything about investing (and perhaps about life in general, for that matter) from reading about Jim Simons and through examining his personal and professional track record and legacy, it is that passion for process will take you far greater distances than passion for profits, as even when Simons had become a wild success and a billionaire many times over, you can still find videos of him with his shirt tucked in, heading lecture halls, scratching chalk across a blackboard, enthusiastically proving out proofs and theorems alike with fellow mathematicians, which says a lot about someone who after his first billion alone could have phoned it in and spent the rest of his life doing nothing at all.
I can’t help to think that if Simons was purely financially motivated and didn’t deeply care for or have an intrinsic allure towards mathematics and modeling that he would absolutely not be the success that he and his firm have morphed into today.
The moral of the story is to value inherent passion for process over passion for profit.
In keeping with this general theme, while the basis of this website’s very existence is rooted in essentially nothing but my affinity for writing about and analyzing companies, at the end of the day, sometimes the countless amounts of figures and more than impressive annual returns need to not matter as much, as sure, Jim Simons and his associates have made and continue to make their investors a lot of money, but he certainly wasn’t able to take it with him and thus one of the most important things to touch on is that his success in business has and will continue to transcend in far more important and impactful ways.
I think Mr. Simons said it best: “I did a lot of math, I made a lot of money and I gave almost all of it away…that’s the story of my life.”
This legend will be missed but many can rest assured that the fruits of his labor and his many career successes will live on and move forward his legacy.
Rest in peace one of the greatest investors and philanthropists of all time, Jim Simons.