ITEM DETAILS
video
https://www.youtube.com/watch?v=xkbdZb0UPac
Adopting technology to perfect quantitative trading
Finance and technology
The Story of James Simons - Renaissance Technologies & Medallion Fund
Jim Simons founded the most successful quant hedge fund in history. In the process, he proved wrong the idea of markets being perfectly efficient.
James graduated high school in 3 years, received a mathematics degree from MIT in 3 years, and a PhD from UC Berkeley at 23.
He then sequentially:
- taught mathematics at Harvard University
- spent some time at NSA as a code breaker
- led the math department at SUNY Stony Brook (30 years old by then)
- made scientific contributions to geometry and topology
This person continually looked for new challenges (or wanted to make a lot of money, or both) so he quit academia and founded a trading firm called Monemetrics in 1978.
Despite his evident personal accomplishments, his greatest skill was surrounding himself with the most qualified people at any given time, preferring mathematicians and scientists to business school graduates and financiers.
His motley crew started building quantitative trading models.
In 1982, they renamed the firm Renaissance Technologies (cka RenTech) because Jim was also interested in making venture capital investments.
A string of relative failures follows over a 10 year period, and in 1988 they launch the Medallion Fund, which immediately begins losing money in 1989 before returning 78% in 1990 and subsequently never having a down year again.
From 1990 to 2000, they traded commodities and currencies with an average holding period of 1.5 days, with the goal of removing cognitive bias from decision making. This principle made their trading algorithms especially successful in turbulent markets when human emotion influenced behavior even more than normal.
To conceal their strategies, they built in ways to contain slippage, which is the consequence of making such big trades that your trade moves the market.
By 2002 their trading fees were 5% management (rather than 2%) and 44% carry (rather than 20%). This is astronomical compared to the norm. But investors were so desperate to get in with RenTech that this didn't matter.
On the surface, this story is that you must fail, fail, fail before succeed like no one else ever has. That is not to say that success is guaranteed, because luck really matters as well.
The reason i learned about Jim Simons and RenTech is that Robert Mercer, who was co-CEO of RenTech from 2009 to 2017, was the single most important donor to Donald Trump's first political campaign in 2016.
James Simons meanwhile, was a major donor to the Democratic Party.
Goes to show that for way too long, money didn't take into consideration that fascism could be a consequence of the type of world economy we started building after 1945.
James graduated high school in 3 years, received a mathematics degree from MIT in 3 years, and a PhD from UC Berkeley at 23.
He then sequentially:
- taught mathematics at Harvard University
- spent some time at NSA as a code breaker
- led the math department at SUNY Stony Brook (30 years old by then)
- made scientific contributions to geometry and topology
This person continually looked for new challenges (or wanted to make a lot of money, or both) so he quit academia and founded a trading firm called Monemetrics in 1978.
Despite his evident personal accomplishments, his greatest skill was surrounding himself with the most qualified people at any given time, preferring mathematicians and scientists to business school graduates and financiers.
His motley crew started building quantitative trading models.
In 1982, they renamed the firm Renaissance Technologies (cka RenTech) because Jim was also interested in making venture capital investments.
A string of relative failures follows over a 10 year period, and in 1988 they launch the Medallion Fund, which immediately begins losing money in 1989 before returning 78% in 1990 and subsequently never having a down year again.
From 1990 to 2000, they traded commodities and currencies with an average holding period of 1.5 days, with the goal of removing cognitive bias from decision making. This principle made their trading algorithms especially successful in turbulent markets when human emotion influenced behavior even more than normal.
To conceal their strategies, they built in ways to contain slippage, which is the consequence of making such big trades that your trade moves the market.
By 2002 their trading fees were 5% management (rather than 2%) and 44% carry (rather than 20%). This is astronomical compared to the norm. But investors were so desperate to get in with RenTech that this didn't matter.
On the surface, this story is that you must fail, fail, fail before succeed like no one else ever has. That is not to say that success is guaranteed, because luck really matters as well.
The reason i learned about Jim Simons and RenTech is that Robert Mercer, who was co-CEO of RenTech from 2009 to 2017, was the single most important donor to Donald Trump's first political campaign in 2016.
James Simons meanwhile, was a major donor to the Democratic Party.
Goes to show that for way too long, money didn't take into consideration that fascism could be a consequence of the type of world economy we started building after 1945.
United States of America
2021-01-22
Patrick Boyle
The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution by Gregory Zuckerman
This item is shared by Philip M Shearer
with
the Community and the World.