This guy beat the market. You still can’t

Jim Simons disproved the textbooks that said the markets can never reliably be beat, but “the rules still apply to everyone else,” said Noah Smith. Simons’ exit last week as the chairman of Renaissance Technologies “marks the end of an era.” The core of basic finance theory suggests that in competitive markets no trader can hold on to a winning strategy for long. But Simons and his “merry band of math whizzes” did. From 1988 through 2018, “Renaissance’s flagship Medallion Fund had an average annual return of about 40 percent after fees” (or 66 percent before fees), without a single money-losing year. That staggering performance has earned Simons an estimated

fortune of $22.9 billion and Renaissance its reputation as “the most successful quant hedge fund in history.” Simons’ record, though, will remain “out of reach” for almost all other hedge funds. That’s not just because beating the market is hard, but because, even for Simons, “Medallion’s strategies don’t scale up.” The Medallion Fund has long been closed to new investors, and most of the profits it earns are redistributed to keep it at a manageable $10 billion. Bigger funds just can’t generate those kinds of gains for years on end. Renaissance has other funds with strategies that scale better, but they “lack Medallion’s special sauce”—and its spectacular returns.