Niccolo Conte
2024-06-19 15:25:20
www.visualcapitalist.com
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$100 Invested in Jim Simons’ Medallion Fund vs. the S&P 500
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The late Jim Simons was arguably the best trader of all-time, achieving 66% average gross annual returns over the span of three decades.
At the age of 40, the former mathematics professor at the Massachusetts Institute of Technology and Harvard built the renowned hedge fund, Renaissance Technologies, out of a strip mall in Long Island. Notably, Simons applied artificial intelligence and massive datasets to build an automated trading system that detected price patterns back in the 1980s.
This graphic shows the extraordinary performance of Simons’ flagship Medallion Fund in comparison to the S&P 500 over the same time period, based on data from Gregory Zuckerman’s The Man Who Solved the Market via Cornell Capital Group.
The Best Performing Fund in Modern History
Below, we show the performance of the Medallion Fund between 1988 and 2018 compared with the S&P 500 index using data from TradingView. Figures are based on net returns, which factor in fund and performance fees:
| Year | Medallion Fund Net Return | $100 invested in the Medallion Fund (net returns) | S&P 500 Return | $100 invested in the S&P 500 |
|---|---|---|---|---|
| 1988 | 9.04% | $109.04 | 12.40% | $112.40 |
| 1989 | -3.20% | $105.55 | 27.25% | $143.03 |
| 1990 | 58.24% | $167.02 | -6.56% | $133.65 |
| 1991 | 39.44% | $232.90 | 26.31% | $168.81 |
| 1992 | 33.60% | $311.15 | 4.46% | $176.34 |
| 1993 | 39.12% | $432.87 | 7.06% | $188.79 |
| 1994 | 70.72% | $739.00 | -1.13% | $186.65 |
| 1995 | 38.32% | $1,022.19 | 33.56% | $249.29 |
| 1996 | 31.52% | $1,344.38 | 20.26% | $299.80 |
| 1997 | 21.20% | $1,629.39 | 31.01% | $392.77 |
| 1998 | 41.68% | $2,308.52 | 26.67% | $497.52 |
| 1999 | 24.48% | $2,873.64 | 19.53% | $594.69 |
| 2000 | 98.48% | $5,703.61 | -10.12% | $534.51 |
| 2001 | 33.02% | $7,586.94 | -13.05% | $464.75 |
| 2002 | 25.82% | $9,545.88 | -23.37% | $356.14 |
| 2003 | 21.90% | $11,636.43 | 26.38% | $450.09 |
| 2004 | 24.92% | $14,536.23 | 8.99% | $490.55 |
| 2005 | 29.51% | $18,825.87 | 3.00% | $505.27 |
| 2006 | 44.30% | $27,165.74 | 13.62% | $574.09 |
| 2007 | 73.42% | $47,110.82 | 3.53% | $594.35 |
| 2008 | 83.38% | $86,391.82 | -38.49% | $365.59 |
| 2009 | 38.98% | $120,067.36 | 23.45% | $451.32 |
| 2010 | 29.40% | $155,367.16 | 12.78% | $508.99 |
| 2011 | 37.02% | $212,884.08 | 0.00% | $508.99 |
| 2012 | 29.01% | $274,641.76 | 13.41% | $577.25 |
| 2013 | 46.93% | $403,531.13 | 29.60% | $748.12 |
| 2014 | 39.20% | $561,715.34 | 11.39% | $833.33 |
| 2015 | 36.01% | $763,989.03 | -0.73% | $827.24 |
| 2016 | 35.62% | $1,036,121.93 | 9.54% | $906.16 |
| 2017 | 45.02% | $1,502,584.02 | 19.42% | $1,082.14 |
| 2018 | 39.98% | $2,103,317.11 | -6.24% | $1,014.61 |
| Total percentage return (1988-2018) | 2,103,217.1% | 914.61% |
As the above table shows, the value of $100 invested in the Medallion Fund in 1998 would have grown to over $2.1 million by 2018 net of fees.
It’s worth noting these fees were significant. They included a 5% fixed fee and a 44% performance fee after 2002. When accounting for these factors, the fund averaged 39% in annual returns.
Even so, the fund outperformed the S&P 500 by a substantial margin, along with surpassing the returns of many other investing giants of that time, including Warren Buffett and Peter Lynch. As one of the pioneers of quantitative investing, Simons’ investing style was built on sophisticated models that analyzed correlations between investments.
Despite the fund’s success, its investors are exclusively former and current employees of Renaissance Technologies. While the fund was open to outside investors for a handful of years, it privatized in 1993.
How Jim Simons Built a World-Class Fund
While the strategy behind the fund remains veiled in secrecy, Zuckerman points out a number of key factors that underscored its success.
Among them were Simons’ ability to recruit top talent, including math and science professors at leading institutions thanks to his connections in academia. Prior to his success in finance, Simons wrote one of the most cited math papers in modern history, based on the Chern-Simons theory.
Another key factor was Renaissance Technologies’ unique corporate culture. Unlike competitors, Simons’ created a flat structure where employees worked on projects together rather than in silos. Employees were never hired for a specific role, they were instead hired to make the trading system even better.
“The most important thing we did is have an open atmosphere.”
– Jim Simons
Overall, Simons is credited with managing a number of brilliant minds, from quantum physicists to number theorists to achieve superior returns. While Simons’ own mathematical genius played an instrumental role in the fund’s performance, it was patching together the minds of highly accomplished employees that led Medallion returns to reach stratospheric heights.
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