James Simons

Net Worth

$21,000,000,000

Born in (City)

Newton, Massachusetts

Born in (Country)

United States

Date of Birth

20th December, 1938

Date of Death

Mother

Marcia Simons

Father

Matthew Simons

About

James Harris Simons is an American mathematician, billionaire hedge fund manager, and philanthropist. He is the founder of Renaissance Technologies, a hedge fund based in Setauket-East Setauket, New York. He and his fund are known to be quantitative investors, using mathematical models and algorithms to make investment gains from market inefficiencies. Due to the long-term aggregate investment returns of Renaissance and its Medallion Fund, Simons is described as the "greatest investor on Wall Street". As reported by Forbes, his net worth is estimated to be $23 billion, the 21st-richest person in the US. James Harris Simons was born on April 25, 1938, to an American Jewish family, the only child of Marcia (née Kantor) and Matthew Simons, and raised in Brookline, Massachusetts. His father owned a shoe factory, and his mother was a distant relation of Georg Cantor. When James Simons was a teenager, he worked a job in the basement stockroom of a garden supply store. His inefficiency at the job resulted in his demotion to a floor sweeper. He received a bachelor’s degree in mathematics from the Massachusetts Institute of Technology in 1958 and a Ph.D., also in mathematics, from the University of California, Berkeley, under the supervision of Bertram Kostant in 1961, at the age of 23.

Early Life

Simons’ mathematical work has primarily focused on the geometry and topology of manifolds. His 1962 Berkeley Ph.D. thesis, written under the direction of Bertram Kostant, gave a new proof of Berger’s classification of the holonomy groups of Riemannian manifolds. He subsequently began to work with Shing-Shen Chern on the theory of characteristic classes, eventually discovering the Chern–Simons secondary characteristic classes of 3-manifolds. Later, a mathematical physicist Albert Schwarz discovered early topological quantum field theory which is an application of the Chern–Simons form. It is also related to the Yang-Mills functional on 4-manifolds and has had an effect on modern physics. These and other contributions to geometry and topology led to Simons becoming the 1976 recipient of the AMS Oswald Veblen Prize in Geometry. In 2014, he was elected to the National Academy of Sciences of the USA. In 1964, Simons worked with the National Security Agency to break codes. Between 1964 and 1968, he was on the research staff of the Communications Research Division of the Institute for Defense Analyses (IDA) and taught mathematics at the Massachusetts Institute of Technology and Harvard University, ultimately joining the faculty at Stony Brook University. From 1968 to 1978, he was appointed chairman of the math department at Stony Brook University. Simons was asked by IBM in 1973 to attack the block cipher Lucifer, an early but direct precursor to the Data Encryption Standard (DES). Simons founded Math for America, a nonprofit organization, in January 2004 with a mission to improve mathematics education in United States public schools by recruiting more highly qualified teachers. In 1996, his son Paul, aged 34, was riding a bicycle, when he was killed by a car on Long Island. In 2003, his son Nicholas, aged 24, drowned on a trip to Bali, Indonesia. His son Nat Simons is an investor and philanthropist.

Road to Success

Despite already having successful careers as a prize-winning mathematician and a master code breaker for the IDA, Jim Simons decided to pursue a career in finance. In 1978, the mathematician started the hedge fund Monemetrics, which was the predecessor to the highly successful Renaissance Technologies. Simons didn't think to apply mathematics to his hedge fund at first; however, over time, he realized he could use mathematical and statistical models to interpret data by looking for non-random movements in financial data to predict future returns. By 1988, Simons decided to solely use quantitative analysis to decide which trades to enter. Simons only sought experts in mathematics, data analysis, and many other scientific-related fields to work with him at the fund. The Quant King filled the fund with programmers, mathematicians, physicists, and cryptographers. The company thrived due to the complex mathematical formulas these scientists developed. Since its inception, Renaissance Technologies' flagship fund, the Medallion hedge fund, has generated over $100 billion in trading profits with an average annual return of 71.8% before fees between 1994 and mid-2014.2 Unfortunately, the Medallion fund is only available for its employees and family members. Simons owns a motor yacht, named Archimedes. It was built at the Dutch yacht builder Royal Van Lent and delivered to Simons in 2008. In 2014, Simons reportedly earned US$1.2 billion including a share of his firm’s management and performance fees, cash compensation, and stock and option awards. According to Forbes magazine, Simons had a net worth of $18 billion in 2017, making him 24 on the Forbes 400 richest people list. In 2018, he was ranked 23rd by Forbes, and in October 2019, his net worth was estimated to be $21.6 billion. In March 2019, he was named one of the highest-earning hedge fund managers and traders by Forbes.

Challenges

According to The Wall Street Journal in May 2009, Simons was questioned by investors on the dramatic performance gap of Renaissance Technologies’ portfolios. The Medallion Fund, which has been available exclusively to current and past employees and their families, surged 80% in 2008 in spite of hefty fees; the Renaissance Institutional Equities Fund (RIEF), owned by outsiders, lost money in both 2008 and 2009; RIEF declined 16% in 2008. On July 22, 2014, Simons was subject to bipartisan condemnation by the U.S. Senate Permanent Subcommittee on Investigations for the use of complex basket options to shield day-to-day trading (usually subject to higher ordinary income tax rates) as long-term capital gains. "Renaissance Technologies was able to avoid paying more than $6 billion in taxes by disguising its day-to-day stock trades as long-term investments," said Sen. John McCain (R., Ariz.), the committee’s ranking Republican, in his opening statement.

Failures

An article published in The New York Times in 2015 said that Simons was involved in one of the biggest tax battles of the year, with Renaissance Technologies being "under review by the I.R.S. over a loophole that saved their fund an estimated $6.8 billion in taxes over roughly a decade." During the stock market crash of 1987, investors were failed by sophisticated models. In 1998, Long-Term Capital saw historic losses. Algorithmic traders braced for their latest fiasco.

Achievements

He won the 1976 AMS Oswald Veblen Prize in Geometry for his contribution to geometry and topology.|Simons was named Financial Engineer of the Year by the International Association of Financial Engineers in 2006.|In 2014, he was elected to the National Academy of Sciences of the USA.|He was named by the Financial Times in 2006 as "the world's smartest billionaire".|In 2011, he was included in the 50 Most Influential ranking of Bloomberg Markets Magazine.

Quotes

Everything is to some extent a compromise. Not everything can be perfect.
Past performance is the best predictor of success.