Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (2024)

Author: Zheng Xiaojie Editor: Yuan Chang

Investment gurus always come and go.

On May 10, 2024 local time in the United States, quantitative investment master James Harris Simons (James Harris Simons) died suddenly at the age of 86.

At this time, it was less than half a year before Munger's death.

Simmons is a mathematician, investor, philanthropist, quantitative industry trailblazer, codebreaker, and more.

But what really "defines" him seems to be the number one quantitative institution he founded in the industry-Renaissance Technology.

and the medal fund that is difficult for outsiders to "touch".

The latter has created long-term, high-profit results that cannot be replicated, and has also put the crown of quantitative investment on Simmons' head – to this day.

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (1)

In just half a year, the two top figures of active equity investment and quantitative investment have "left", which makes people see the flow of the times and the ruthlessness of time.

And it may not be just us who sigh that Simmons is leaving.

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (2)

Gifted investor

Simmons is a "genius," and not just in one area.

In 1955, he was admitted to the Department of Mathematics at the Massachusetts Institute of Technology, where he received his Ph.D. in mathematics from the University of California, Berkeley at the age of 23.

He taught at MIT, Harvard, and the State University of New York at Stony Brook, where he became Dean of the School of Mathematics at the age of Chinese New Year's Eve.

The 30-year-old dean of the School of Mathematics is nowhere near enough to define Simmons. The Chan-Simmons theorem, which he co-founded with Chern, has important achievements in geometry.

In 1976, he received the Oswald Wiblen Prize from the American Mathematical Society.

Two years later, at the age of 40, Simmons founded the precursor to Renaissance Technology and ushered in a new era of quantitative investing.

Did you find out, every ten years old, Simmons has to make some big moves.

Magical Medallion Fund

Observe the entry point of an investment tycoon, whose products are not to be missed.

The Medallion Fund is the investment "magic wand" wielded by Simmons, and in some ways is more famous than himself.

According to the data, the Medal Fund was formally established and operated in March 1998.

In addition to the 60-year-old Simmons, the fund manager at that time also had a fund manager named Ex. Both received the Webbron Prize from the American Mathematical Society, the highest honor in the mathematical community, in 1967 and 1976, respectively.

The so-called Medal Fund, from which it gets its name, demonstrates the academic ability of the fund manager.

The establishment of the Medallion Fund also means the formal formation of Simmons' quantitative investment philosophy:

"We stopped fundamental analysis altogether and became a thorough, model-based quantitative investor," he later recalled.

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (4)

From "groping" to miracles

In the early days of the Medallion Fund, the use of the strategy model was "not effective".

The after-fee yield in the first year was 8.8%, which is not satisfactory in the industry. The following year, the model went on strike directly in front of fund managers, losing four percentage points in earnings, while the S&P 500 jumped 30% that year.

Without giving up, Simmons hired experts everywhere, retuned the model, and made a splash in 1990, eventually earning 55% of the after-fee income for the full year.

It's a year worth remembering, 1990 was the "D day" of quantitative investing on Wall Street, and it was the year that another now-giant Citadel was founded.

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (5)

"Gathering" talent

Simmons was a pioneer in quantitative investing, so he almost completely defined the members of the quantitative team.

It is said that Simmons did not favor the investment experts in the market at that time, but was more keen to recruit talents from the fields of mathematics, physics, meteorology, cryptanalysis, etc.

But the people who are recruiting to enter must be able to meet Simmons's high demands, and Simmons has long asked team members to optimize the performance of their models and invest in multi-asset space.

It can be seen that Simmons's vision in the late 1980s was not limited to stock assets, but also covered bonds, commodities, currencies, derivatives, etc.

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (6)

"Miracles" of performance

In the early days, the Medallion Fund was an asset management product of the Renaissance, that is, it could be operated by raising funds externally.

As a result, many outside investors have enjoyed substantial returns.

The ability of the Medallion Fund to "print money" is amazing.

Data shows that in the 30 years since 1988, the average annual return of the Medallion Fund is 66%, and the cumulative profit has exceeded $100 billion.

During this period, the S&P 500 rose by 5.1% per year, which is exactly the level of the fixed management fee of the Medallion Fund "only".

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (7)

Notably, in 1993 the annual management fee of the Medallion Fund was as high as 5%, and by 2002 Simmons increased the performance commission from 20% to 36%, and then to 44%.

Such a high fee model also verifies the ability of the Medal Fund to make money.

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (8)

Product "internalization"

In addition to high-net-worth individuals, public pension funds, endowment funds, foundations, insurance companies, and family wealth offices have come to snap up shares.

The craze grew so fast that in 1993, five years after the Medallion Fund was founded, Simmons decided to stop accepting new money.

At the time, the fund size was only $270 million, and Simmons's decisiveness seems puzzling today.

Perhaps, he has long been aware of the "contradiction" between management scale, revenue, and strategy effectiveness.

From 2002 to 2005, Simmons gradually redeemed shares of the fund for external investors, and eventually transformed into a purely internal fund, held by Renaissance internal employees.

The right to invest in products as a benefit may only be possible for a few institutions such as the Renaissance.

Regarding the reason for the transformation of the Medallion Fund into an internal fund, Simmons once stated the following:

"I realized that we could manage a medium-sized amount of money, but not a billion-sized amount of money; At the same time, our fund size is growing rapidly, which requires us to make changes. As a result, we only accept investment from our employees and reject all external investors. ”

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"Binding" talents

If the investment strategy is successful, of course, there will be a flow of talent.

In the early days of the Medallion Fund, Berlekamp, a mathematician who built models with Simmons, also graduated from the University of California, Berkeley, and later decided to leave the Renaissance.

At the time, Simmons was said to have demanded a lot from his partner, constantly trying to optimize the model's performance, and the latter was overwhelmed.

After that, the top quantitative institutions in the United States, including Renaissance, began to "bind" talents:

Simmons required the investment team to sign a non-disclosure agreement, and employees were required to put a quarter of their compensation package in a badge fund as a kind of bail bond that would not be returned until years after they left.

It is also rumored in the industry that investors in the Medallion Fund may include former employees of Renaissance, but the latter must meet more stringent non-compete clauses, and these people can hardly engage in quantitative investment work, but rely on the income of the former boss's fund to "eat and drink".

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (10)

"What happened after the death" is of concern

Renaissance, as a hedge fund, has significantly fewer employees than other institutions of the same size and reputation.

The company is said to have only a few hundred regular employees, while Two Sigma has 2,000 employees, Bridgewater has at least 1,200 employees, and Castle Investment has nearly 3,000 employees.

According to anecdotal sources, when Simmons was still alive, the Renaissance was governed by

董事长詹姆斯·西蒙斯(James Harris Simons);

Executive Vice Chairman Nathaniel Simons, son of Simmons Sr.;

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (11)

首席执行官彼得·菲茨林·布朗(Peter Fitzhugh Brown);

Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (12)

Mendel Mark Silber, Executive Vice President, Chief Financial Officer, Chief Compliance Officer;

董事、副总裁保罗·杰拉德·布拉德(Paul Gerard Broder);

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Simmons, the King of Quantitatives: Those Investment "Miracles" and Unspeakable "Afterlife" (2024)
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