The revolution that Jim Simons, an award winning Maths professor from Stony Brook University, started in 1982 when he set up Renaissance Capital has changed the face of investing. Inspired by the success of Renaissance’s Medallion fund – 75% CAGR before fees from 1991 to 2005 – a whole generation of quant funds have transformed investing. Now, the majority of American money that is traded is managed by quants and their algorithms. This New Yorker article helps you understand the remarkable man behind this revolution.
A decade into his “retirement” from Renaissance Capital he is still one of the highest paid individuals in the world (puling in nearly a couple of billion dollars each year) thanks to his massive stake in the hedge fund he founded. In fact, the Renaissance Medallion fund still makes so much money that it for at least a decade now it has stopped taking any inflows.
But what makes Simons really interesting is not just his enormous networth (estimated at nearly $20bn). It is how he spends his wealth. Simons is spending close to $90m each year in funding and running the Flatiron Institute in Manhattan. The Institute’s sole job is to make world class computing firepower available to America’s smartest academics.
“The Flatiron Institute, which is in an eleven-story fin-de-siècle building on the corner of Twenty-first Street and Fifth Avenue, is devoted exclusively to computational science—the development and application of algorithms to analyze enormous caches of scientific data. In recent decades, university researchers have become adept at collecting digital information: trillions of base pairs from sequenced human genomes; light measurements from billions of stars. But, because few of these scientists are professional coders, they have often analyzed their hauls with jury-rigged code that has been farmed out to graduate students. The institute’s aim is to help provide top researchers across the scientific spectrum with bespoke algorithms that can detect even the faintest tune in the digital cacophony…The Flatiron doesn’t conduct any new experiments. Most of its fellows collaborate with universities that generate fresh data from “wet” labs—the ones with autoclaves and genetically engineered mice—and other facilities. The institute’s algorithms and computer models are meant to help its fellows uncover information hidden in data sets that have already been collected: inferring the location of new planets from the distorted space-time that surrounds them; identifying links to mutations among apparently functionless parts of chromosomes. As a result, the interior of the institute looks less like a lab than like an ordinary Flatiron-district office: casually dressed people sitting all day at desks, staring at screens, under high ceilings.”
Reading this piece makes you realise that the top researchers across disciplines as diverse as biotech, climatology, physics and finance are all collecting vast amounts of data and then applying quant techniques to tease out signals. That in turn is changing the nature of research & academia. Out of the window goes abstract theoreticising (for example, the kind of work that made Einstein an immortal) and into the arena comes data collection and heavy number crunching. In that sense, what Jim Simons is doing is taking the methods that made him rich and spreading them across all other academic disciplines. Now, that’s called building a real legacy.
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
