James Harris Simons, the famed mathematician and hedge fund manager, has died at the age of 86, according to a statement from his family foundation. He was widely known among investors for leveraging quantitative analysis and mathematics to create complex algorithms, taking advantage of the market inefficiencies.
Jim Simons was born in Massachusetts in 1938 and he has liked mathematics from a very young age. He graduated from the MIT with an undergraduate degree in mathematics and earned a doctorate in the same subject at the age of 23. He soon began working in the academic world where he contributed to the development of knowledge in string theory, quantum field theory and condensed matter physics in the 1970s. Thanks to his talent, in 1964, he started working for the National Security Agency (NSA), an intelligence agency of the United States Department of Defense, as a codebreaker. After that he obtained the chair of math at the Stony Brook University in New York. In the following years he left academia and founded one of the most successful hedge fund in the history: the Renaissance Technologies. The fund was established in 1978 but renamed Renaissance Technologies only in 1982. It is specialized in systematic trading and works with the auxiliary of quantitative methods. As matter of fact, Jim Simons thought that it was possible to obtain huge profits recognizing and predicting market inefficiencies with algorithms based on mathematic, probabilistic and statistic models. The results show us that he was right, in fact, one of his fund, the Medallion fund, has returned 62% (before fees) and 37% (after fees) from 1988 to 2021, much better than the S&P 500 annual returns.
Despite that, Medallion has not been successful from the beginning, it was found in 1992 and in its first year only made a 9% return, while the S&P 500 went up by more than 16%. In the second year the fund had loss 4% while the S&P 500 gained over 30%. According to Renaissance website, there are “90 PhDs in mathematics, physics, computer science, and related fields” of 300 employees and over “50,000 computer cores with 150 gigabits per second of global connectivity” as technology infrastructure, which reflects the high level of education and technology needed to achieve this kind of performance.
In 1994, after stepping back from executive responsibility at his fund, Jim Simons and his wife Marilyn Simons established their foundation with the mission to advance the frontiers of mathematics and basic sciences.
Author: Luca Laurita