market folly

Few investment managers garner the label 'hedge fund royalty'. Jim Simons and Renaissance Technologies' Medallion Fund certainly do. While founder and CEO Jim Simons retired at the end of last year, the fund and his legacy certainly live on. It's a known fact that almost all things about this secretive hedge fund are, of course, secret. However, despite not knowing the specific trading methodologies or algorithms, it's common knowledge that the fund is successful. Very successful according to Rachel E.S. Ziemba and William T. Ziemba's book, Scenarios for Risk Management and Global Investment Strategies which reveals Medallion's performance numbers.

Renaissance Technologies (commonly referred to as Rentec) houses one of the most prominent hedge funds in the world under their roof. Yet, practically no one knows anything about it due to the high levels of secrecy. What we do know, though, is that the fund's investor base is limited to employees of the firm and is closed to outside investors (except for around six people apparently). Medallion charges an obscenely high 5% management fee and 44% performance fee. But, when you're generating the kind of returns Rentec's Medallion is, you can get away with that.

For a closer look at Medallion's performance numbers, we reference Ziemba's Scenarios for Risk Management and Global Investment Strategies. Astonishingly, out of the 148 months that elapsed between January 1993 and April 2005, Medallion only had 17 monthly losses. Out of 49 quarters in the same time period, Medallion only posted three quarterly losses. Additionally, it has seen a yearly Sharpe ratio of 1.68. In twelve plus years of trading, Rentec's Medallion Fund has never had a down year.

Embedded below is an excerpt from Scenarios for Risk Management that illustrates Rentec's Medallion Fund returns:



You can download a .pdf copy here.

And that's not all. Medallion's magnificent march upward has continued in recent years. As we detailed previously, Medallion returned 80% in 2008 in a year where many hedge funds stumbled and some completely crumbled. Additionally according to Barron's, Medallion returned 39% in 2009 and has a 3 year annual compound return of 62.8%. While it's cheesy to say, Medallion certainly holds the gold medal in the land of hedge fund lore. For more on Medallion's performance and an in-depth look at hedge fund strategies, be sure to check out Ziemba's Scenarios for Risk Management and Global Investment Strategies.