Jim Simons, the investing mathematician who created what many in finance consider the world’s greatest money-making machine with his secretive firm, Renaissance Technologies, has died. He was 86.
He died Friday in New York. in accordance with his charity, which did not give a reason.
When he turned 40, Simons, moving from academia to investing, abandoned the standard practices of money managers in favor of quantitative analysis – looking for patterns in data that predicted changes in prices. His technique was so successful that he became known as the Quantum King.
At Renaissance, located about 60 miles east of Manhattan in quiet East Setauket, New York, Simons avoided hiring Wall Street veterans. Instead, he sought out mathematicians and scientists, including astrophysicists and code-breaking experts, who could find useful investment information in the terabytes of data his firm absorbed every day, on everything from sunspots to foreign weather.
For more than three decades, its returns consistently outperformed the markets, even as computer power became cheaper and rivals scrambled to imitate Renaissance’s success by creating their own complex algorithms to manage their funds.
“There are only a few people who have truly changed the way we look at markets,” Theodore Aronson, founder of AJO Vista, a quantitative money management firm, told Bloomberg Markets in 2008. “John Maynard Keynes is one of the few. Warren Buffett is one of the few. So does Jim Simons.” Play video
A former U.S. government codebreaker, Simons declined to provide details about how he achieved more than four times the S&P 500’s returns in his best-known fund, Medallion. From 1988 to 2023, the fund generated a staggering average annual return of nearly 40%, even after hefty fees, turning Simons and as many as three colleagues into billionaires.
His net worth is estimated at $31.8 billion, making him the 49th richest person in the world according to the Bloomberg Billionaires Index.
Clients and insiders paid handsomely to entrust their funds to Simons. He eventually raised commissions to 5% of assets and 44% of profits, among the highest in the industry. Believing that the algorithms the firm used to trade stocks, bonds and commodities wouldn’t work if Medallion got too big, he soon began limiting access to the fund.
In 1993, Simons stopped accepting new money from Medallion clients, and in 2005, he kicked out outsiders altogether, allowing only employees to invest. He returned profits every year, capping the fund at about $10 billion.
He opened up more walking foundations to the general public. Sometimes the difference in their performance was dramatic. In 2020, the Medallion Foundation received 76%, while government funds suffered double-digit losses.
Corporate travel
Simons’ talents also extended to inspiring the often quirky employees—300 in all—who came to Renaissance. One reason was the difficult problem of figuring out why markets rise and fall, as well as the high pay and sense of community it created.
“It’s an open atmosphere,” Simons said in a rare speech in 2010 at his alma mater, the Massachusetts Institute of Technology. “We make sure everyone knows what everyone else is doing, and the sooner the better. This is what motivates people.”
He played the role of a benevolent father figure, organizing company trips to Bermuda, the Dominican Republic, Florida and Vermont, and encouraging employees to bring their families.
The company’s story goes that during one of his ski trips, Simons, a chain smoker, bought an insurance policy for a local restaurant so he wouldn’t have to give up his favorite credits.
Many competitors have tried but failed to replicate the Medallion Foundation’s secret sauce. After Bernard Madoff’s money-making success was exposed as a Ponzi scheme in 2008, the SEC turned to Renaissance, Simons said at another MIT seminar. meeting in 2019.
“They studied us,” he said. “Of course they didn’t find anything.”
Political split
Simons stepped down as chief executive in 2010 and as chairman in 2021. Two of his key early collaborators were Peter Brown and Robert Mercer, mathematicians and pioneers in speech recognition and machine translation, poached from IBM’s famed Thomas J. Watson research center. — replaced him as co-CEO.
“Professionally, Jim was a mathematician and businessman. Spiritually, he was a seer. Personally, he was a man who cared deeply about people and humanity,” Brown said in a letter to Renaissance staff on Friday.
The Renaissance’s ability to make money made it a magnet for politicians from both major political parties.
Simons and his wife, Marilyn, have been leading donors to the Democratic Party, giving more than $109 million to candidates including Hillary Clinton and Joe Biden and supporting committees since 2015, according to OpenSecrets.
One of Simons’ early employees, Henry Laufer, a fellow multi-billionaire, also became a major supporter of Democratic committees and organizations. But Mercer, along with his daughter Rebecca, became major donors to the Republican Party, particularly Donald Trump, in 2016.
Circa 2020, Renaissance extended the group of directors that would eventually succeed Simons in leadership of the firm and named his son Nathaniel Simons as co-chairman, allowing him to eventually take over.
Math genius
James Harris Simons was born on April 25, 1938, in the Boston suburb of Brooklyn, the only child of Matthew Simons and the former Marcia Cantor. His father worked in the film industry as a sales representative for 20th Century Fox in New England. He later helped manage his father-in-law’s shoe factory.
Precocious in mathematics, Simons graduated from Newton High School in three years. He became a bar mitzvah at age 13, but said he had little interest in Judaism after that.
From MIT he received a bachelor’s degree in mathematics in 1958 after just three years of study. While working on my doctoral dissertation. At UC Berkeley, he got his first taste of investing, going to the Merrill Lynch brokerage house in San Francisco to trade soybean futures. He also married his first wife, the former Barbara Bluestein, with whom he had three children: Nathaniel, Liz and Paul, who died in bicycle accident in 1996.
This marriage ended in divorce. With his second wife, the former Marilyn Horis, he had two children – Nick, who died in swimming accident in 2003 and Audrey. He is also survived by five grandchildren and one great-grandchild.
Simons returned to MIT in 1961 to begin his teaching career, feeling his future path was set. “I remember sitting in the library one day and saying, ‘Well, I think I’m going to become an assistant professor, then an assistant professor, then a professor, and then I’ll go through life like that, and then I’ll die,’” he said. recalled in 2020 oral history interview with the American Institute of Physics. “And it made me think, maybe there are other things in the world.”
Cracking the Cold War Codes
In 1964, after teaching at Harvard University, Simons moved to Princeton, New Jersey, to take a high-paying, highly classified job at the Institute for Defense Analyzes. The non-profit research organization hired mathematicians to support the US National Security Agency in breaking codes and ciphers used by the Soviet Union.
This work introduced Simons to the possibilities of creating algorithms for computers. IDA employees were allowed to spend half their time on personal work, and Simons devoted part of his time to forecasting short-term movements in the stock market.
Simons worked there for more than three years before losing his job after publicly challenging IDA President Army General Maxwell D. Taylor over the Vietnam War.
IN piece for the New York Times Magazine, Taylor insisted that the United States was winning a war worth fighting. Simons, responding letter to the editorexpressed his belief that “any political benefits flowing from a military victory cannot be offset by the enormous economic, intellectual and moral investments we continue to make in this enterprise.”
Simons was hired to chair the mathematics department at State University of New York at Stony Brook. WITH Shiing-Shen Chernhe created the Chern-Simons theory, outlined in paper 1974. The theory provides tools known as invariants, which mathematicians use to distinguish between certain curved spaces—the kinds of distortions of ordinary space that exist according to Albert Einstein’s theory of general relativity.
In 1976, the American Mathematical Society awarded him the Oswald Veblen Prize in Geometry.
Traded goods
Heading the math department and using connections he had made while working in cryptography, Simons tried his hand at trading again.
Initially, he bought and sold commodities, making bets based on fundamental factors such as supply and demand. He found the experience harrowing, so he turned to his network of cryptographers and mathematicians for help in learning the patterns: Alvin Berlekamp and Leonard Baum, former colleagues at the IDA, as well as Laufer and James Axmathematician whom he personally recruited to leave Cornell University and join the faculty at Stony Brook.
“Perhaps there were some ways to predict prices statistically,” Simons told Numberphile in 2015. “Little by little we built models.”
In 1978, he left academia for good to try his hand at money management.
He founded Monemetrics, a precursor to the Renaissance, in Setauket, east of Stony Brook. He turned to his old friend and fellow IDA codebreaker Leonard Baum, whose mathematical models could be used to trade currencies. He invited Ax, his former colleague from Stony Brook, to observe Baum’s work.
Ax concluded that these models worked not only with the currencies for which Baum wrote them, but with any commodity futures. Simons opened Ax with his own trading account, Axcom Ltd., which eventually gave birth to Medallion.
Medallion’s first two years of operation were mixed, but in 1990, by focusing solely on short-term trading, Medallion recorded a 56% return net of commissions, and results never fell off after that.
About his transition from science to finance, Simons once remarked: “It’s easier to predict the course of a comet than to predict the stock price of Citigroup. The appeal, of course, is that you can make more money by successfully predicting stocks than you can making comets.”
Simons has pledged to donate the majority of his fortune to charity. Based in New York Simons Foundation, founded with Marilyn in 1994, supports research in mathematics, science and autism. Simons also founded Math for America, which expands scholarships math and science teachers in New York City public schools. Last year he sacrificed $500 million endowment to Stony Brook University, one of the largest gifts to higher education in U.S. history.
“Jim had three absolutely remarkable careers—as a mathematician, as a pioneer of quantitative methods in trading, and as a philanthropist,” said Jeff Cheeger, silver professor of mathematics at the Courant Institute of New York University, who was a student of Simons. “He was one of the greatest men of our time.”