How Jim Simons Built the Best Hedge Fund Ever

No surprising, why not to collect 2 percent risk free. It adds up over the years if AUM is big.

 

While generally true about REIF, I wasn't aware thatn Medallion was market neutral? Can you confirm that anywhere? I thought it was just absolute return not necessarily market neutral.

Please correct if I'm mistaken.

 

My understanding is that the equity book is market neutral based on conversations I've had with people in the industry over the years. The only 'hard' evidence is that Alexander Belopolsky ran an equity market neutral book at Millennium when he left rentec and continued when he started Enlightenment. Outside of equities I have no idea what they do.

I'd be very surprised if they run a significant long/short equity book but I don't work there so maaaybe.. but now that I think of it I don't know of any quants that run long/short overnight actually.. easier to model things in residual space and so makes sense to trade that way

 

The biggest enigma is how Simons avoided his massive edge leaking to the outside.

 

Many conspiracy theories turned out to be true. I think Mercer did not believe something without any grounds. He knows how the MSM and people in power will try to 'debunk' something for their own benefit.

 

By paying his team so obscene it made no point for them to branch out on their own, I assume.

 

The return isn’t compounded. Medallion returns capital each year to keep the AUM down.

100bn in dollar profits on (say an average of 6bn) over 30 years is insane.

Bridgewater has earned about that in dollar profits but they needed a lot more AUM.

 

I get it, but still. Humans are greedy. It wouldn't take many leaks - e.g. an employee in the know instructing a couple of ph.d. friends - to start watering down the performance.

But I guess the track record is a testament that this has not happened to a significant extent. By itself impressive.

 

Correct, I heard only of one thing that leaked when few of the Russian colleagues left and there was some law suit, do not recall details, read about years ago. Some of their models holding time was between 15 min to few hours.

Another way to decipher a bit is what kind of jobs they post on their very "outdated" site. For example, couple of years they needed a quaint with specific tax knowledge, pay was specified as obscene. . So part of success is how they avoid paying a penny more than they are required by law.

 

Another cool fact, they developed their own internal computer language to code their algos.