Since the works of Fisher Black and Myron Scholes and the creation of the first derivative markets in Chicago 1973, the financial markets saw an exponential growth in mathematicians. If nothing predestined a good number of them to work in this industry, a few over-talented ones succeeded in blazing a trail and finding their niche. Dr James Harris Simons forms part of this small elite
Rather unknown to the general public (unlike Warren Buffet or George Soros), Jim Simons still remains the 278th richest man in the world and is the manager of Medallion Funds, investment funds belonging to the company Renaissance Technologies. These funds have had a 34% net performance per year for almost 20 years.
Yet, nothing let one believe that this mathematics genius would become a billionaire.
Jim Simons always had a keen interest for maths: I already dreamt of numbers at the age of 3. After his baccalaureate at the Boston Newton High School of Boston, he obtained a Bachelor degree in mathematics at the prestigious MIT in 1958 at the age of 20, before going on to follow his studies at the University of Berkeley in California and finally earning a doctorate in mathematics in 1961. During the following three years, he worked as a teacher first at MIT then at Harvard. He left to work for the American Defense department in 1964 but was fired four years later due to his public standing position against the war in Vietnam. He therefore re-entered into the academic world.
Returning from the head of the mathematics department at the University of Stony Brook, Simons asserted his genius qualities with the publication of an article entitled “Characteristic Forms and Geometric Invariants” (in collaboration with Chinese Shiing-Chen Chern) which marked a considerable advancement on geometry and gained popularity in domaines as diverse as physical sciences and biology. Thanks to his abstract aptitudes and his talents in differential geometry (his favourite domaine), Simons won the American Mathematical Society?s Oswald Veblen Prize, which is rewarded to researchers of less than 35 years for exceptional work. During this same period (mid 1970?s) he began to deal in currency markets part-time. Confident from his success, he decided to leave the university circles and start his own business.
In 1978, he also founded a private investment fund named Limroy, using the fundamental analysis which predicts movements in the interest rate. Following this success, he broke away from Limroy and in 1982 decided to create the company Renaissance Technologies. In March 1988, he launched his star investment fund The Medallion Funds which succeeded in a net performance of 8.8% in its first year by negotiating on future markets.
After a difficult 1989, his success did not stop growing. On the basis of mathematical algorithms secretly thought up by the most brilliant minds from the most prestigious universities, automatons of trading indicate abnormalities in the markets and then take positions to generate micro profits which, together can rake in millions of dollars. This formula, which combines sophisticated trading techniques and recruiting the best scientists in the world, added to a secret cult who is uncompromising on its research, will allow Dr Simon and the Renaissance Technologies to remain on a net average performance of more than 30% during more than 15 years, and to make of him one of the most prolific fund managers in the world.
His exceptional success earned him the recent title IAFE/Sungaed Financial Engineer of the Year 2006, placing him among important names in financial mathematics such as Oldrich Vasicek, Emanuel Derman, Mark Rubinstein or Robert Merton, who together and in a few years became worth a fortune of around 2,6 billion dollars, as estimated by Forbes Magazine.
From what do such ideas stem? Who ever said that mathematics, money and success were not compatible?
