Jim Simons, the award-winning mathematician who abandoned a stellar academic career to then plunge into finance (a world he knew nothing about) and become one of the most successful Wall Street investors of all time, died Friday at his home. from Manhattan. He was 86 years old.
His death was confirmed by his spokesman, Jonathan Gasthalter, who did not specify the cause.
After publishing groundbreaking studies in pattern recognition, string theory, and a framework that combined geometry and topology with quantum field theory, Simons decided to apply his genius to a more prosaic topic: making as much money as he could in the shortest time possible. possible.
So, at age 40, he opened an office in a Long Island shopping mall and set about proving that trading commodities, currencies, stocks and bonds could be almost as predictable as calculus and partial differential equations. Disdaining financial analysts and business school graduates, he hired like-minded mathematicians and scientists.
Simons equipped his colleagues with advanced computers to process torrents of data filtered through mathematical models and turned the four mutual funds of his new company, Renaissance Technologies, into virtual money-printing machines.
Medallion, the largest of these funds, made more than $100 billion in trading profits in the 30 years after its creation in 1988. It generated an unprecedented average annual return of 66 percent during that period.
That was a much better long-term performance than famous investors like Warren Buffett and George Soros achieved.
“No one in the investing world even comes close,” wrote Gregory Zuckerman, one of the few journalists to interview Simons and author of his biography, “The Man Who Fixed the Market.”
By 2020, Simons’ approach to the market, known as quantitative investing, accounted for nearly a third of Wall Street’s trading operations. Even traditional investment firms that relied on corporate research, instinct and personal contacts felt compelled to adopt some of Mr. Simons’ computer methodology.
For much of their existence, Renaissance funds were the largest quant funds on Wall Street, and their investment style sparked a sea change in the way hedge funds traded and made money for their wealthy investors and pension funds. .
When he retired as the company’s CEO in 2010, Simons was worth $11 billion (nearly $16 billion in today’s currency), and a decade later his fortune had doubled.
While he continued to oversee his funds as president of Renaissance, Simons increasingly devoted his time and wealth to philanthropy. The Simons Foundation became one of the largest private funders of basic science research. And the Flatiron Institute used Renaissance analytical techniques for research in biology, astronomy, and quantum physics.
In 2011, his foundation donated $150 million to Stony Brook University, with most of the money going toward medical science research. It was the largest gift ever given in the history of the State University of New York and, at the time, was considered the sixth largest gift ever made to an American public university.
James Harris Simons was born on April 25, 1938 in Brookline, Massachusetts, the only child of Matthew Simons, who owned a shoe factory, and Marcia (Kantor) Simons, who managed the household. A mathematics prodigy, he completed his undergraduate studies at the Massachusetts Institute of Technology and was only 23 years old when he received his doctorate at the University of California, Berkeley.
Beginning in 1964, Simons taught at MIT and Harvard University while simultaneously working as a Soviet code-breaker at the Institute for Defense Analysis, a federally funded nonprofit group. But he was fired from the institute in 1968 for publicly expressing strong opinions against the Vietnam War.
Over the next decade, he taught mathematics at Stony Brook University on Long Island and became chairman of the mathematics department. While leading the department, he won the country’s highest prize in geometry in 1975.
Then, in 1978, he abandoned his academic career and founded Monemetrics, an investment firm with offices in a small shopping center in Setauket, just east of Stony Brook on the north shore of Long Island. He had never taken a finance course or shown more than a passing interest in the markets. But he was convinced that he and his small team of mathematicians, physicists and statisticians (mainly former university colleagues) could analyze financial data, identify market trends and make profitable trades.
After four rollercoaster years, Monemetrics was renamed Renaissance Technologies. Simons and his growing team of former academics initially focused on currencies and commodities. Every type of data imaginable—news reports about political unrest in Africa, banking statistics from small Asian nations, the rising price of potatoes in Peru—was fed into advanced computers to detect patterns that allowed Renaissance to earn consistently huge annual returns.
But the real bonanza came when Renaissance dove into stocks, a market much bigger than currencies and commodities.
Stocks and bonds were long considered the province of Wall Street’s brokerage houses, investment banks, and mutual fund companies, whose young, tireless MBAs analyzed publicly traded companies and reported results. their research to high-level wealth managers, who then relied on their experience and instincts to choose the market. winners. They initially mocked the Renaissance math nerds and their quantitative methods.
On some occasions, Mr. Simon’s methodology led to costly mistakes. His company used a computer program to buy so many Maine potato futures that it almost controlled the market. This was opposed by the Commodity Futures Trading Commission, the regulatory agency in charge of futures trading. As a result, Mr. Simons had to sell his investments and lose a large potential gain.
But much more often he was so successful that his biggest problem was hiding his trades and research techniques from his competitors. “Visibility invites competition and, with due respect to the principles of free enterprise, the less the better,” he wrote in a letter to his clients.
Business rivals weren’t the only ones who viewed Simons’ results with envy or suspicion. In 2009, he faced a rebellion from outside investors over the huge disparity in the performance of Renaissance Technologies’ different portfolios. The previous year, the Medallion Fund, which was available only to current and former Renaissance employees, posted an 80 percent gain, while the Renaissance Institutional Equity Fund, offered to outside investors, fell 16 percent in 2008. .
In July 2014, Simons and his firm received bipartisan condemnation from the Senate Permanent Subcommittee on Investigations for using financial derivatives to disguise day-to-day trading as long-term capital gains. “Renaissance Technologies was able to avoid paying more than $6 billion in taxes,” Sen. John McCain, R-Ariz., said in his opening statement at the subcommittee hearing.
Both Simons and his former co-CEO, Robert Mercer, were among the largest financial contributors to politicians and political causes. While Simons generally supported liberal Democrats, Mercer was fervently right-wing and became a major financier of Donald Trump’s presidential campaigns.
In 2017, Simons, then president of Renaissance Technologies, fired Mercer as CEO because his political activities were causing other key Renaissance executives to threaten to resign. Mercer remained as an investigator. According to both men, they remained friendly and continued socializing.
As he grew older and wealthier, Mr. Simons enjoyed a luxurious lifestyle. He bought a 220-foot yacht for $100 million, spent $50 million on an apartment on Fifth Avenue in Manhattan and owned a 14-acre estate in East Setauket, overlooking Long Island Sound. A heavy smoker, he refused to put out his cigarettes in offices or conferences and instead willingly paid fines.
His first marriage, to Barbara Bluestein, a computer scientist, with whom he had three children, Elizabeth, Nathaniel and Paul, ended in divorce. He later married Marilyn Hawrys, an economist and former Stony Brook undergraduate who received her doctorate there. They had two children, Nicholas and Audrey.
Paul Simons, 34, died in a bicycle accident in 1996, and Nicholas Simons, 24, drowned in Bali, Indonesia, in 2003. He is survived by his wife and other children, as well as five grandchildren and one great-grandson. .
Mr. Simons lamented to a friend over the death of his children, according to his biographer, saying, “My life is one of aces or two.”
Hannah Fidelman contributed reporting.