Way Beyond Hedge Fund Hotshot -

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Feb.06

2:10 PM ET

Tuesday, 6 Feb 2007

Way Beyond Hedge Fund Hotshot

Topics:Hedge Funds | Private Equity

James Simons
James Simons, Renaissance Technologies founder
James Simons, the founder of Renaissance Technologies, is one of the most interesting people I've interviewed -- ever.

It's not just because he is a veritable legend in the world of investing. His flagship Medallion fund posted returns in the high 40-50 percent range in 2006. Since 1989, it's posted average annual returns of 35%, topping hedge fund luminaries Paul Tudor Jones and George Soros.

It's not just because he created what could be the world's biggest hedge fund. Renaissance Institutional Equities, launched just 18 months ago, has the capacity to handle $100 billion.

It's not just because his fees are the fattest in the industry-- a sign that investors have faith in Renaissance and are willing to pay up for the staggering returns his funds deliver. You know the industry standard 2% of assets and 20% of profits? Forget that. Renaissance charges 5 and 44%.

It's not because he was the highest paid hedge fund manager in the world, according to Alpha Magazine's latest survey. He pulled in $1.5b in 2005.

And it's not just because he blazed the trail in blackbox trading. He leveraged his expertise in math (he earned the first PhD under the National Defense Education Act, which was born out of Sputnik, and he was a college math professor who discovered his own quantum physics theory) and harnessed algorithms and computer models to exploit patterns in the financial markets. Here's what he said on blackbox trading: "We take the view that we are being pursued by a pack of wolves, and have to run fast just to stay in place, which is absolutely true. If I used the system in one of our areas 3 or 4 years ago, if I used it this past year, we would have made roughly half the amount of money that we actually made." Talk about competition.

It's because Jim Simons looks well beyond Jim Simons.

He started to notice that all the scientists he was hiring at Renaissance were foreign born. He told me he's got a database group of about 30. Almost all, with maybe the exception of one, are from China. He doesn't really care what country his employees call home. He says he's happy to have people from Italy or Belgium or China. But what he does care about is America and how it will be able to compete in math and science into the next century. He's got the talent he needs to keep running his fund successfully-- obviously. But America as a nation might not have the talent it needs to compete. "As a country," Simons told me, "we ought to care. We can't depend on imports of quality people."

So being the consummate mathematician, Simons figured out a solution. He started Math for America, which aims to improve math education by giving stipends and tuition for masters degrees to select teachers. That way, math experts who may have opted for more lucrative Wall Street careers may instead opt for the classroom.

Sound simple? Well, it is. But Simons is the one who is actually making it happen.

Look for more on Simons' legendary funds today on CNBC TV... And much more on Math for America on Wednesday...

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