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How does this prize-winning mathematician and former code breaker rack up his astonishing returns? Try a little luck - and I a firm full of Ph.D.s.
Last April the State University of New York at Stony Brook held a gala reception at the Waldorf-Astoria Hotel in midtown Manhattan to celebrate raising a record $1 million - a tidy sum for a state school. After cocktails a balding, white-haired man rose from his seat on the dais to thank the sellout crowd, which included such celebrities as Oscarwinning movie director Martin Scorsese, for its generosity.
"I told my wife, `We raised $1 million for Stony Brook,"' said the speaker, hedge fund manager James Simons. "She said, `Gross or net?"'
Chances are you haven't heard of Jim Simons, which is just fine by him. Nor are you alone. Many on Wall Street, including competitors in his specialty, quantitative trading, haven't heard of Simons or of his operation, Renaissance Technologies Corp., either. And that's simply extraordinary - because, gross or net, Simons may very well be the best money manager on earth.
An extreme judgment? Perhaps. Certainly, there has been no end of claimants to the tide. And one after another, over the past few years, these celebrated managers have either blown up or folded their tents. After big reverses, Julian Robertson closed down Tiger Management, and George Soros scaled back the activities of his Quantum Fund this year. John Meriwether's Long-Term Capital Management nearly took down the financial world in 1998.
Simons, by contrast, just keeps getting better. Consider his performance over the past decade. Since its inception in March 1988, Simons' flagship $3.3 billion Medallion fund, has amassed annual returns of 35.6 percent, compared with 17.9 percent for the Standard & Poor's 500 index. For the 11 full years ended December 1999, Medallion's cumulative returns are an eye-popping 2,478.6 percent (see graph, page 47). Among all offshore funds over that same period, according to the database run by veteran hedge fund observer Antoine Bernheim, the next-best performer was Soros' Quantum Fund, with a 1,710.1 percent return (see table, page 44).
"Simons is No. 1," says Bernheim. "Ahead of George Soros. Ahead of Mark Kingdon. Ahead of Bruce Kovner. Ahead of Monroe Trout."
And Bernheim's numbers...