Jim Simons’ Medallion Fund is the greatest hedge investment that Insider Monkey has arrived across. The fund’s returns are incredibly spectacular that Jim Simons became one of many richest men and women on the planet. Medallion Fund uses high frequency trading and exploits inefficiencies inside currency markets. One method they use takes advantageous asset of the inefficiencies within the execution of huge transactions. Certainly one of their algorithms determines whether an extremely big purchase is performed and front side works it. Consequently Medallion experiences high transaction costs and high expenses. That’s why they charge a 5per cent fixed cost. In addition to that they charge performance charge. That charge was 20per cent, but after 2000 it enhanced initially to 36percent and then to 44per cent.
The fund’s people tend to be present and past staff members and their own families. So, the fund’s 44percent performance cost is a bit irrelevant. Jim Simons owns between 25-50 per cent of Renaissance Technologies (RenTec), and then he normally the biggest trader inside Medallion Fund. When Medallion states a 50percent return in certain year, the return is really near 100% for some of fund’s investors. Nevertheless, we’ll use their “net returns” to evaluate Medallion’s alpha.
We received Medallion’s yearly comes back from a few sources so when they weren’t readily available we estimated all of them employing their cumulative returns. The main supply is Rachel and William Ziemba’s situations for danger control and worldwide Investment Strategies. Medallion’s yearly returns since March 1988 are shown inside dining table.
Insider Monkey, your supply for free insider trading information, utilized month-to-month web comes back from January 1993 to April 2005 to determine Medallion’s alpha. Our results indicate that Medallion’s returns weren’t correlated using market, small limits, value shares, or energy stocks. Jim Simons’ Medallion Fund had a monthly alpha of 2.49per cent and a yearly alpha of 34%. We never ever seen a hedge investment achieve these types of a higher alpha, so the Medallion Fund is the greatest hedge investment we've seen to date. Jim Simons’ alpha is even better than ended up being Warren Buffett’s when he had been much more youthful (see Warren Buffett‘s newest stock selections). If Jim Simons started spending two decades earlier than he performed, however happen the wealthiest guy with this planet.