He has two world-renowned titles: a world-class mathematician and one of the greatest hedge fund managers. Together with Buffett and Soros, he called the "three insurmountable peaks" in the investment world.
At a time when the entire Internet is chasing after Buffett's impressive performance with an annualized rate of more than 20%, the average annual rate of return of the "Medallion Fund" managed by his "Renaissance Technology Company" has reached as high as 35%. It is a peak that is still envied by the investment community.
Obtained a doctorate at the age of 23;
At the age of 26, he became an agent who deciphered codes;
At the age of 30, he became the leader of the mathematics department in colleges and universities;
At the age of 37, he won the highest award in geometry;
At the age of 44, he established a legendary hedge fund company that revolutionized the industry;
Founded a series of charitable funds at the age of 56;
At the age of 72, he was selected as one of the world's top 100 richest people by Forbes. In the same year, he made a written commitment to donate most of his life property to charity.
This is not the protagonist of the movie, this is world-class mathematician, most influential hedge fund manager and generous philanthropist - James Simmons.
A world-renowned mathematician Before he became famous on Wall Street, another identity of Simmons has long been affirmed by the world, that is, a mathematician. Simmons, who was only 23 years old, received a doctorate in mathematics from the University of California, Berkeley, and became a lecturer in the mathematics department of Harvard University a year later. During the completion of his personal achievements in mathematics, he created the "Chen-Simons Gauge Theory", which has a profound impact on mathematics and physics. It is proved by mathematical theory that the distorted space described by Einstein's theory of relativity does exist.
Simmons has a very famous childhood story, that is, he thought about why the fuel in the car's gas tank would run out one day since half of it was used up and half was left. This story is called Zeno's paradox in the West, but in the East it is "take half of the day and live forever". Of course, Simmons is not proud of this. From this story, we can see that Simmons's mathematical talent is beyond the table, and he lived up to expectations. He was admitted to the Massachusetts Institute of Technology to study mathematics. It took him four years to complete his undergraduate and master's degrees, and then went to the University of California. PhD student in mathematics at Berkeley, focusing on topology.
This kind of life experience is what our parents often call "other people's children". In 1967, Simmons decided to go to the State University of New York at Stony Brook as the dean of the Department of Mathematics. The reason why he got such a high position at once was because of this The school is newly built. There used to be no mathematics department in this school. However, Simmons himself lived up to expectations, and now the Department of Mathematics of the State University of New York at Stony Brook is already the holy land of mathematics in the United States. In 1976, Simmons reached his peak in the academic world and won the Veblen Prize, which is awarded every five years and is the Nobel Prize in geometry. He was 38 years old this year.
Of course, at this time, Simmons can fully enjoy his life. It would be nice to attend the annual meeting of the academic world every year and make some high-spirited speeches in various forums. He couldn't get out, so he decided to change his career, and the direction was the futures industry that had made him a small profit. Founded Renaissance Technology Company In 1982, Simmons established Renaissance Technology Company in New York. In March 1988, he created the first fund product - Medallion Fund. From 1989 to 2009, the average year of Medallion Fund was The rate of return is as high as 35%. Compared with the average annual return rate of the S&P 500 Index over the same period, it was more than 20 percentage points higher, and the trading performance of Soros and Buffett was more than 10 percentage points higher. Even in the subprime mortgage crisis of 2007, the fund returned 85%. Simmons' company is a very special company on Wall Street. Among the more than 300 employees, none of them has a financial background. Even Simmons himself only considers himself a "mathematician" and rarely participates in financial activities.
For 20 years, Simmons' Renaissance Technology hedge fund has traded in global markets and used complex mathematical models to analyze and execute trades, many of which have been fully automated. Renaissance Technologies used procedural models to predict the prices of easily tradable financial instruments. These procedural models are built by looking for those non-random behaviors to make predictions after a large amount of data is collected. In the 11 years to the end of December 1999, the cumulative return of the Medallion Fund was 2478.6%, which was 25 times the original assets. According to the data of hedge fund watcher Antonie Bernheim, among the offshore funds in the same period, George Soros' Quantum Fund was second only to it, and his rate of return was 1710.1%.
In 2009, the Medallion Fund ranked first among the most profitable hedge funds, with a profit of more than $1 billion. The investment scope of Medallion Fund has strict restrictions, and the products invested must meet three conditions: "It must be traded in the public market, must have sufficient liquidity, and must be suitable for trading with mathematical models." Because of this, Medallion Fund Funds do not include venture capital funds, do not get involved in the shares of unlisted companies, and do not include the stocks of some small companies and GEM stocks. Generally speaking, there are more varieties suitable for trading with mathematical models, and there are more accurate ones. Historical prices, trading volumes, etc.
From the end of 2002 to the end of 2005, the $5 billion Medallion Fund has paid investors more than $6 billion in returns. Medallion's net return was 55.9% in 1990; 39.4% the following year; and 34% and 39.1% the following two years. In 1994, the Federal Reserve raised interest rates six times in a row, and the Medallion Fund made a net profit of 71%. In 2000, the technology stock market crashed, and the S&P Index fell by 10%. In 2010, the global financial crisis, all kinds of asset prices fell, most hedge funds lost money, and Medallion earned 80%.
It was reported in April this year: This year's global market has suffered a huge shock, and many funds have performed tragically. The Medallion quantitative hedge fund under Renaissance Technologies has risen 39% this year. On October 10, 2009, Simmons announced that he would retire on January 1, 2010, but retain the chairman emeritus of Renaissance Technologies. Gecko-style investment method The so-called "Gecko-style investment method" refers to making short-term directional forecasts when investing, trading many varieties at the same time, and relying on a large number of transactions completed in a short period of time to make profits.
In the words of Simmons, "Trading should be like a gecko, usually lying on the wall motionless, once the mosquito appears, it will be eaten quickly, and then calm down, waiting for the next opportunity." Whether it is the Russian bond crisis in 1998, or During the Internet bubble at the beginning of this century, Medallion Fund has survived several financial crises and has always stood firm, eclipsing the efficient market hypothesis. People in the industry generally believe that Simmons' undefeated myth is mainly due to his "gecko investment method".
Twenty years after he moved to the "second battlefield" in the investment world, Simmons used a series of data to prove his success: from 1989 to 2009, the average annual return rate of the medallion fund he traded was as high as 35%, which was higher than that of the S&P in the same period. The average annual return rate of the 500 Index is more than 20 percentage points higher, more than 10 percentage points higher than the trading performance of "financial tycoon" Soros and "stock god" Buffett. Even in 2007, when the subprime mortgage crisis broke out, the fund's return rate was still as high as 85%.
Simons' Ten Rules of Trading:
1. Although our strategy will hold the investment target for a long time, we will conduct an average of more than 10,000 transactions per day. In fact, each stock in our investment portfolio will have an increase or decrease in the position on average every other day. The method of diversification we use is to allocate as many types of assets as possible. On average, we will hold There are 2500 to 3000 different stocks.
2. Renaissance has a very good working environment and first-class employees, including PhDs in mathematics, statistics, physics, astronomy and computer science. I don't know how to hire fundamental traders because they sometimes make money and sometimes lose money, but I do know how to hire scientists because I have some feel for the field.
3. If you do fundamental trading, then one day when you wake up, you may find that you are a genius, your position always develops in your favor, you think you are very smart, and you will see yourself overnight Make a lot of money in between. Then the next day, all the positions are going against you, and you feel like a fool.
4. Since we can make models, we might as well follow the models. So, in 1988, I decided to rely 100% on model trading. And we've been doing it ever since.
5. Some companies also use models, but their purpose is that they have a model, and the conclusions drawn from this model provide traders with reference opinions. If they agree with this conclusion, they will follow it. If they do not agree, then they will Not implemented.
6. This is not science. You cannot simulate the feeling you felt when you saw market data 13 years ago. Backtesting is a very difficult thing. If you really rely on the model to trade, then do exactly what the model says, no matter how smart or stupid you think the model is, it turns out to be a very correct decision. So we established a company that relies 100% on computer models for trading. The business we do has gradually developed from the foreign exchange and financial instruments I mentioned earlier to stocks and everything else that can be traded and has strong liquidity.
7. We are buying, selling, selling and buying all the time, and we make money by being active. I am Mr. Model, and I don’t want to conduct fundamental analysis. One of the advantages of the model is that it can reduce risks. However, relying on personal judgment to choose stocks, you may get rich overnight, or you may lose everything the next day.
8. Some trading patterns are not random, but traceable and predictable. Those small trades, even as few as 100 shares, can have an impact on this huge market, and thousands of such trades happen every day. In fact, everyone has a black box, which we call the brain.
9. Trading should be like a gecko, usually lying on the wall motionless, once the mosquitoes appear, they will quickly eat them, and then return to calm, waiting for the next opportunity. We focus on those small opportunities that may be fleeting. When these opportunities arise, we will make predictions and then make corresponding transactions. After the transaction, we will track and judge the new market situation, the forecast will be adjusted accordingly, and the investment portfolio will also change accordingly.
10. I'm not the sharpest person in the world, and I wouldn't do particularly well in a Math Olympiad. But I like to ponder, to ponder things in my mind, that is, to think about something over and over again. As it turns out, that's a great way to do it.
I wish you a smooth transaction
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