JIM SIMONS AND HIS RENAISSANCE FLAGSHIP MEDALLION FUND: The Brain Behind The Fund, How It Works, Performance, And How To Invest In The Fund

The Medallion fund is the flagship hedge fund of Renaissance Technologies. It is mostly run to fund employees and is famous for one of the best records in investing history, after it returned over 35% annualized profit over a span of 20 years. The fund uses sophisticated quantitative algorithms and latest computer hardware to detect fleeting anomalies in the global financial market and at the same time, making profit from it before anyone else does. The Renaissance Medallion fund is very active in the global financial market and trades almost every known financial asset on its platform. Future price changes in liquid financial instruments can be predicted by the Medallion fund using complex mathematical models or algorithms. The computers used in this process consumes a large amount of time and energy, while its mathematical computations often help to filter the noises in the financial market and also look for non-stochastic price movement that can be predicted in advance.

A brief history of Renaissance Fund and the Brain Behind it

Renaissance Technologies was started by Jim Simons as far back as 1982. Prior to 1982, Jim Simons was primarily an academic and he taught math at MIT and Harvard. He was later appointed as the chairman of the mathematics department at Stony Brook.

Jim Simons mathematical training was finally put to use when he started Renaissance Technologies in 1982. At Renaissance, Simons became one of the first pioneers to apply advanced mathematical and statistical concepts to the financial markets. It has been reported that since 1989, the Medallion Fund has returned over 35% after fees, which is believed to be quite impressive. At a time, fees for the Renaissance funds were part of the highest in the hedge fund industry. The Renaissance management fees approached 5% and performance fees approached 40%, making the raw return before fees enormous.

Jim Simons has had great accomplishments in the financial world and has also made great contributions to academia as well. Jim has also contributed million of dollars to the Chem-Simons theory, which has diverse applications in the quantum field theory and employs some difficult mathematical algorithms. He has also made multi-million dollar contributions to Stony Brooks, however reported to be lesser than the amount contributed to the Chem-Simons theory.

Jim Simons has also been involved in some philanthropic activities. One of such is the Paul Simons Foundation, which he started to fund educational and health initiatives. Through the Nick Simons institute, he is also funding some health initiatives in Nepal. In 2006, he donated $13 million to the Brookhaven National Laboratory to kept the Relativistic Heavy Ion Collider running and he also donated $25M to the Stony Brook Foundation.

In 2008, Jim Simmons made the largest single donation to a New York University when he donated $60M to fund a center for physics and geometry at Stony Brook.

How the Renaissance Medallion Fund works

The Medallion fund works by employing strategic quantitative trading. The process of using quantitative trading by the organization  requires staff to tap data into its peta-byte scale data warehouse to analyze statistical probabilities for direction of securities in the financial market.  The amount of data obtained is attributed to events peripheral to economic and financial phenomena, which Renaissance Technology takes into consideration, as well as a firm's ability to manipulate large amounts of data by using technological procedures for computation and execution. Daily, Renaissance synthesizes large tetra bytes of data and extracts information from petabytes of data. Renaissance Technology's hedge fund trades in the global markets and employs complex mathematical models to analyze and execute many automated trades. The computer models easily predicts price changes in financial instruments. These models rely on analyzing much data as can be gathered.

Performance of the Renaissance Medallion Fund over time

The Medallion fund is considered to be one of the most successful hedge funds. From 1994 till the middle of 2014, the fund had an average annual return (before fees)  of 71.8% , while from 1988 till 2000, it had an average return (after fees) of 34% a year. Since 1993, the fund has not been open to external investors, however it is open to current and past employees and their families. The last investor in the Medallion fund was bought by the firm in 2005. Renaissance has about 200 employees, and only about 100 are qualified to invest, i.e., having at least $5 million to invest.

Between January 1993 and April 2005, Renaissance had only 17 monthly losses. Also between 1989 to 2005, Medallion data indicated only year that the firm had a loss. This was in 1989.

How to Invest in the Renaissance Medallion Fund

The only way to invest in the Medallion fund is by becoming an employee of the organization. This is because the fund is not open to external investors, however it is open to current and past employees and their families. The Renaissance Institutional Equities Fund (RIEF) and Renaissance Institutional Diversified Alpha (RIDA) can be looked into.

The Renaissance Institutional Equities Fund (RIEF) was created in 2005 and contains the personal money of the firm's executives. Renaissance offers two kinds of RIDAs to external investors. The RIEF  utilizes some of the mathematical techniques that made the Medallion Fund so successful and applies them to primarily large cap equities. Its goal is to beat the S&P 500 by four to six percent per year while taking less risk. The RIEF performed decently until 2008, where it hit a rough patch and lost 16%. The losing trend continued in 2009 when it lost an additional 6%. But in 2010, it bounced back with a 16.5% return. The Renaissance Institutional Equities Fund is designed for institutional investors and it has a theoretical capacity of $100 billion.