You don’t need to spend much time learning about investing before you encounter the name “Jim Simons.” At first, you may wonder, why is Jim Simons famous? Sure, he has a solid reputation as an investor who has accumulated tremendous wealth. But that’s true of many successful investors.
Here’s the skinny on this extraordinary investor.
Simons Is A Brilliant Mathematician
Most of Jim Simons’ wealth and fame stems from the same origin: he’s a brilliant mathematician.
Simons’ earned a bachelor’s degree in mathematics from MIT in 1958. Then he enrolled in the Ph.D. program at the University of California, Berkeley. His Ph.D. thesis was so impressive that he started working with Berkeley mathematician Shing-Shem Chem on an idea that eventually became known as Chem-Simons theory. His work led to several prizes in mathematics and geometry.
Simons’ work in math and geometry got the attention of MIT, Harvard University, and Stony Brook University. He taught at all three before deciding to take a faculty position at Stony Brook University.
Jim Simons didn’t keep his work in the academic world. He also spent time breaking codes for the National Security Agency and the Institute for Defense Analysis.
IBM hired him to find a way to block one of the earliest computer attacks in 1973. His work with IBM led to improved security standards.
All of these achievements make Jim Simons an interesting person, but they don’t answer the question, Why is Jim Simons famous? After all, plenty of brilliant mathematicians never earn a cult status outside of their professions.
Simons may have continued to work in relative obscurity, but he decided to apply his mathematical brilliance to the investment world. Then, everything changed.
Jim Simons Is a Billionaire
Jim Simons used his deep understanding of mathematics to make unbiased investment decisions.
As of 2020, Jim Simons has a net worth of about $21.6 billion, which makes him one of the 50 wealthiest people in the world.
Simons certainly earned good money working for colleges and the government. Most of his wealth, however, comes from investing. His net worth skyrocketed after he founded Renaissance Technologies.
Simons Founded Ultra Secretive Renaissance Technologies
Jim Simons founded Renaissance Technologies in 1982. As of June 2019, the hedge fund manages $110 billion in assets.
Renaissance Technologies uses mathematical models to make investment decisions. This approach works well for many hedge funds. Renaissance Technologies, however, gets unbelievable returns from its top fund.
The astounding returns couldn’t happen without Simons’ knowledge of mathematics. Renaissance Technologies keeps its methods secret, so very few people have access to the models used to predict the market’s movement.
Obviously, the model relies on statistical analyses that review big data to identify emerging trends. Focusing on math also takes human emotions out of trading.
Many investors make mistakes because they rely on gut instincts. They feel like something will happen in the tech industry, so they find a company they like and invest heavily in its stock. That approach can work, but it doesn’t generate exceptional returns as math-based models can.
Renaissance Technologies offers three products:
- The Medallion Fund
- The Institutional Equities Fund
- Institutional Diversified Alpha
The Medallion Fund gets the most attention because it generates tremendous returns. From April 2019 to April 2020, the Medallion Fund gained 24%. While 2019 was a good year for the market, the beginning of 2019 found prices jumping all over the place.
As people began to realize that coronavirus would disrupt their lives, the market responded wildly. It’s amazing that the Medallion Fund managed to earn so much money during a time when many funds were losing.
Simons left Renaissance Technologies in 2020 to retire. His retirement, however, has been quite busy compared to most. He still acts as a non-executive chairman of the fund he created. He also continues to support lobbying efforts and philanthropic pursuits.
Jim Simons’ Returns Are Astronomical
How much do you expect to get back on your investments? If you invest in the S&P, you can expect to earn about 12.25%, which is the average return from 1923 to 2016. You’d probably feel pretty lucky to get 12.25%, right?
You won’t feel so terrific once you see the astronomical returns that Jim Simons’ gets from his Renaissance Technologies hedge fund.
In 2013, the Medallion Fund earned a 17.64% return.
In 2014, the hedge fund made 14.53%.
In 2015, the Medallion Fund generated a 17.37% return.
2016 was an amazing year that netted a 21.46% return.
In 2017, it brought in a 15.22% return.
There was a huge hiccup in 2018 that led to an 8.5% return.
Even with 2018’s poor performance, Renaissance Technologies got an average 15.78% return over six years. Compare that to the 12.25% return that the S&P usually gets. You might think that 3.53% matters much. That small percentage adds up quickly, though, when investors keep their money in the Medallion Fund for years or decades.
By choosing the Medallion Fund over the S&P, someone investing $100,000 could earn an additional $41,469.28.
The exponential growth that occurs when interest gets added to the investment every year makes a big difference over a few years. The longer the money stays in the hedge fund, the faster and bigger it grows from year to year.
Jim Simons Is a Generous Philanthropist
Jim Simons and his wife Marilyn Hawrys Simons have devoted much of their money to philanthropic endeavors.
The couple founded the Simons Foundation in 1994 to provide money to programs focused on scientific research, education, and health. The foundation has been particularly generous to autism research. It even formed a separate branch called the Simons Foundation Autism Research Initiative (SFARI) to address the underlying genetic traits underlying the disorder.
Simons formed Math for America in 2004 with a $25 million donation from his foundation. Two years later, he doubled the donation to $50 million.
Math for America provides professional growth and enrichment opportunities for math teachers in the United States. Participants can take classes in a wide range of topics, including neuroscience and popular computer languages. Teachers can also lead classes that enrich their colleagues.
Other philanthropic causes from Jim Simons include:
- The Flatiron Institute, where scientists can advance their theories in astrophysics, mathematics, biology, and quantum physics.
- Avalon Park, a 130-acre nature preserve dedicated to the memory of his son Paul.
- Large donations to the Nick Simons Institute, a Napalese healthcare foundation named after his son who drowned in 2003.
Simons has also given large donations to MIT’s mathematics department, Stony Brook University, and other centers of higher learning.
Jim Simons isn’t the wealthiest man in the world. He’s also not the most famous billionaire. There is, however, a good chance that he’s the smartest person to become a millionaire.
Few people have reached his level of academic and professional accomplishments. Luckily, he’s used his outrageous intelligence to build a financial empire that contributes to worthy causes around the world.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.