5 ms·

James Simons: former mathematician and now billionaire hedge fund manager

26 points by getp 18y ago

byrneseyeview 18y ago
Another profile: http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=ayjImYcoCiH8 http://www.bloomberg.com/apps/news?pid=20601109&refer=ho... For folks interested in understanding his strategies, here is a thread by some quants: http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=4851 http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=48...
gaika 18y ago
His fund suffered loses recently, making it all suspicious that the math was just good old "sweeping the risk under the rug" kind: You buy a decent assets that give you 7% return, but have a 2% chance of default. You borrow at 5% and leverage to the max. As long as your assets perform, you have returns that beat the market consistently with high probability. But with a low probability you lose a lot more, and you just hope that this doesn't happen while you rake all the fees and gains.
- byrneseyeview 18y ago
  Medallion was up something like 70% after fees last year. Are you talking about REIF, which is benchmarked to the S&P, and which performed close to the S&P? Edit: Now is as good a time as any to disclose that I work with Rentec, among other companies. I'm not sure if this makes me informed or just biased, though. Everything I've said about them is publicly available.
  - gaika 18y ago
    I'm talking about Renaissance. Medallion is closed and manages money only for Renaissance employees.
    - byrneseyeview 18y ago
      Renaissance is the fund management company. It manages several funds, which have different returns because they use different strategies and have different benchmarks. Which fund do you mean? What strategy are you talking about?
      - gaika 18y ago
        You're right, it was RIEF down for the year, but even Medallion suffered losses in August, here's his letter to investors explaining it: http://www.dealbreaker.com/2007/08/simons_warns_about_august_resu.php http://www.dealbreaker.com/2007/08/simons_warns_about_august...
        byrneseyeview 18y ago
        "Medallion's 3.9 percent return during August, though that fund too was whipsawed by volatility, bolstered Simons's reputation as the silver-bearded wizard of quantitative investing." http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=ayjImYcoCiH8 http://www.bloomberg.com/apps/news?pid=20601109&refer=ho... So you may mean that they suffered from volatility in August. But making 4% per month is not bad, even if there are 10% swings along the way.
        gaika 18y ago
        Here's another one - from April this year: http://www.bloomberg.com/apps/news?pid=20601103&sid=a6eSZD5YgDTI&refer=us http://www.bloomberg.com/apps/news?pid=20601103&sid=a6eS...
        byrneseyeview 18y ago
        Oh no! A fund that correlates with the S&P is down about 12% from peaking in May to early April! Meanwhile, the S&P is down, um, 13.8% from peaking in May to early April! So the fund is slightly outperforming its benchmark, even though it's dropped. I don't think anyone invested in the fund hoping to lose 12%, but this is within the range Simons said to expect. One thing you claimed was that we should expect stable, high returns, and the occasional massive crash. And yet the massive crash you predict has not materialized! Instead, we have a slight decline, mirroring a slightly larger decline in the index one fund follows -- as well as a record-breaking year, in which Medallion appears to have earned over 100% before fees, on over $5 billion in assets. It's suspicious to me that you point to their low-risk institutional fund's losses as proof that their high-risk strategy is dangerous, even as their high-risk fund is posting record gains.
- 1gor 18y ago
  Your concern is valid, but a bit misplaced. Rentec is actually one of the (very) few funds that seem not to bullshit their investors and have a fully rational investment strategy. Majority of 'hedge' funds are simply volatility sellers in one form or another. They run disproportionate and unannounced risks of instant death. Again, it seems like Renaissance is not this type of a firm, even though it can have a few bad months.
zandorg 18y ago
Can quants see into the future or is it just luck or market-custom algorithms? Out of amusement I love it saying he's no longer a mathematician, because now he's a hedge fund manager! He must have given that up to play the market.

26 points by getp 18y ago

Another profile: http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=ayjImYcoCiH8 http://www.bloomberg.com/apps/news?pid=20601109&refer=ho... For folks interested in understanding his strategies, here is a thread by some quants: http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=4851 http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=48...

gaika 18y ago

His fund suffered loses recently, making it all suspicious that the math was just good old "sweeping the risk under the rug" kind: You buy a decent assets that give you 7% return, but have a 2% chance of default. You borrow at 5% and leverage to the max. As long as your assets perform, you have returns that beat the market consistently with high probability. But with a low probability you lose a lot more, and you just hope that this doesn't happen while you rake all the fees and gains.

byrneseyeview 18y ago
Medallion was up something like 70% after fees last year. Are you talking about REIF, which is benchmarked to the S&P, and which performed close to the S&P? Edit: Now is as good a time as any to disclose that I work with Rentec, among other companies. I'm not sure if this makes me informed or just biased, though. Everything I've said about them is publicly available.
- gaika 18y ago
  I'm talking about Renaissance. Medallion is closed and manages money only for Renaissance employees.
  - byrneseyeview 18y ago
    Renaissance is the fund management company. It manages several funds, which have different returns because they use different strategies and have different benchmarks. Which fund do you mean? What strategy are you talking about?
    - gaika 18y ago
      You're right, it was RIEF down for the year, but even Medallion suffered losses in August, here's his letter to investors explaining it: http://www.dealbreaker.com/2007/08/simons_warns_about_august_resu.php http://www.dealbreaker.com/2007/08/simons_warns_about_august...
      - byrneseyeview 18y ago
        "Medallion's 3.9 percent return during August, though that fund too was whipsawed by volatility, bolstered Simons's reputation as the silver-bearded wizard of quantitative investing." http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=ayjImYcoCiH8 http://www.bloomberg.com/apps/news?pid=20601109&refer=ho... So you may mean that they suffered from volatility in August. But making 4% per month is not bad, even if there are 10% swings along the way.
        gaika 18y ago
        Here's another one - from April this year: http://www.bloomberg.com/apps/news?pid=20601103&sid=a6eSZD5YgDTI&refer=us http://www.bloomberg.com/apps/news?pid=20601103&sid=a6eS...
        byrneseyeview 18y ago
        Oh no! A fund that correlates with the S&P is down about 12% from peaking in May to early April! Meanwhile, the S&P is down, um, 13.8% from peaking in May to early April! So the fund is slightly outperforming its benchmark, even though it's dropped. I don't think anyone invested in the fund hoping to lose 12%, but this is within the range Simons said to expect. One thing you claimed was that we should expect stable, high returns, and the occasional massive crash. And yet the massive crash you predict has not materialized! Instead, we have a slight decline, mirroring a slightly larger decline in the index one fund follows -- as well as a record-breaking year, in which Medallion appears to have earned over 100% before fees, on over $5 billion in assets. It's suspicious to me that you point to their low-risk institutional fund's losses as proof that their high-risk strategy is dangerous, even as their high-risk fund is posting record gains.
1gor 18y ago
Your concern is valid, but a bit misplaced. Rentec is actually one of the (very) few funds that seem not to bullshit their investors and have a fully rational investment strategy. Majority of 'hedge' funds are simply volatility sellers in one form or another. They run disproportionate and unannounced risks of instant death. Again, it seems like Renaissance is not this type of a firm, even though it can have a few bad months.

zandorg 18y ago

Can quants see into the future or is it just luck or market-custom algorithms? Out of amusement I love it saying he's no longer a mathematician, because now he's a hedge fund manager! He must have given that up to play the market.