today we're going to talk about this guy the most envied fund manager of all time possibly hated by a few people here's why in 1968 this guy is working for the NSA gets fired from the NSA because he didn't support the Vietnam War he majors in math everybody's like why would you major in math later on starts a fund called a medallion fund it does so well that eventually he's like listen all the other people that put their money in The Medallion fund give it all back to us I'll buy it from you and he only made it exclusive to his employees didn't make it available to the public and just to show you how confident he was with returns comparing if you would have put a dollar in 1988 in the S&P 500 versus Burkshire Hathaway and versus his fund Medallion fund where that dollar would have been in 2021 you ready in the S&P 500 your dollar would have ended up being $40 in 2021 that dollar in Burkshire Hathaway would have been worth $152 in 2021 but that dollar in The Medallion fund from 1988 by 2021 would be worth 42,000 that's a thousand times more than what it would have done in the S&P 500 we're going to talk about his strategies he just passed away earlier this year so then the question becomes what was unique about the technology the Renaissance technology that he built that everybody else wanted to know about we're going to talk about that today if you get value out of this video give it a thumbs up and subscribe to the channel so keep this in mind it is already so hard to try to outperform the S&P 500 it's so hard that even Warren Buffett made a bet saying I'm willing to bet take all these hedge funds you want that you guys brag about and let's compare how they're going to do over 10 years I'm willing to bet I think you put a million dollars that the S SMP is going to beat you in a decade and when he said this this is what he did he chose the Vanguard 500 Index Fund Admiral shares for his side of the bed Ted seeds from the Proto J Partners took the challenge selecting five funds of funds which inherently carry higher management fees due to their structure Buffett announced the results in its 2017 shareholder letter revealing a clear Victory the S&P 500 Index the S&P 500 Index he selected yielded a total return gain of 125.81614610 like Jim Simons who says Nah you know this is the way you guys think how hard it is I'm going to come up with a software technology that's going to do a th000 times better than S&P 500 over a span of 40 years nearly 35 years you guys don't know what you're talking about I'm going to do it better that's pretty crazy to think about now you may say Pat come on give me a break there's got to be somebody that did a better he can't be that good because of this technology he came up with let's take a look at this okay here's comparing him to others Jim Simons Medallion fir from 1988 to 2018 did 39 % rate of return George Soros from Quantum fund did 32% Steve Cohen 30 Peter Lynch 29 Warren Buffett 20 and a half and the great ralo 12% is what he did now let's learn about who this man really was who was Jim Simons here's who he was so by the age of three he was able to figure out all the powers of two up 2024 which is absolutely wild when Simons was 4 years old his family was on a road trip and they stopped to get gas Simons was baffled that the car needed gas and theb what is known as the dichotomy Paradox attributed to the ancient Greek philosopher Zeno is a famous philosophical problem that challenges our understanding of motion and distance example suppose someone wishes to go from point A to point B first they must move halfway then they must go half of the remaining way continuing in this manner there will always be some small distance remaining and the goal would never actually be achieved there will always be another number to add in a series such as 1 plus half plus a/ quar plus an 8 plus a 16 plus plus plus you get the idea so motion from point A to any different point B seems an impossibility going half the distance to destination means you won't ever reach it since you will have to go halfway from wherever you are four years old he's thinking about something like this four were you thinking about that at four years old this guy was thinking about that at four years old let's continue 61 to 64 he worked as a code breaker at the NSA during the Cold War highlevel Russian codes were not able to be broken in the previous 10 years but Simons and his team made that accomplishment learned to create algorithms helped Reserve engineer Russia's encryption technology given Awards by the dod created his own equation was a great listener he eventually gets fired after making an anti-war comment to the media about the Vietnam War Simon taught math at MIT and Harvard University so then 68 he becomes a chair of the math department of the Stony Brook University of New York meets a lot of brilliant math Minds in 74 he co-develops to churn Simon Theory with Shing Shen churn a significant contribution to theoretical physics and Mathematics so at the time he founds mon metrics a small investment firm then in 1982 he renames mon metrics to Renaissance Technologies begins focusing on using mathematical models and data analysis for trading introduction of mathematical models this is when he starts having early experiments with statistical Arbitrage and pattern recognition development of predictive models using historical data application of advanced mathematical techniques and theories and finance role of machine learning and AI in improving trade Technologies AI 1982 42 years previous to today okay think about that he's doing AI in 82 known as the Quant King Simons pioneered the use of quantitative analysis and algorithmic investment strategies and Finance in 88 he launches The Medallion fund Renaissance Technologies Flagship fund which becomes known for its extraordinary returns and then he ships from discretionary to systematic trading hires elwin Burl Camp a prominent game theorist to redesign the firm's trading system there was a leld belief in Wall Street that the more trades you made the more money you would lose but he disagree this is when they were talking about the two different hypothesis one of them was the efficient market hypothesis and the other one is the anti-e efficient market hypothesis the efficient one or theory that states share prices reflect all information the EMH hypothesizes that stocks trade at their fair market value on exchanges proponents of EMH posit that investors benefit from investing in a lowcost passive portfolio opponents of EMH believe that it is possible to beat the market and that stocks can deviate from their fair market value so then you have the anti- EMH this is burl cam disagreed with that narrative created a system that tracked historical patterns to highlight intraday anomalies in a market believed in the law of large numbers that like a casino if they were right at least 51% of the time while making a high volume of Trades it would be successful it was in fact highly successful the high-speed computers they were using generated data that showed predictable patterns for certain assets The Firm went from holding their average trading position for 1 and 1/2 weeks to 1 and half days and the profits went from -4% in 1989 to 55% in 1990 here's what's Wild from 1988 to 2021 you know what their annual returns were for Medallion fund 62% before fees and their fees everybody always criticized how high their fees were forget about the fees after fees you know what your net return was if you had money in this fund 37% after fees who the hell the 37% after fees net net to you net net to you so then in 199 93 he brings on board Robert Mercer and Peter Brown who later become co- seos builds a team of some of the best math mins in the world mocked by Wall Street for the first few years in 1994 Medallion achieved a 70% return and in 2000 it hit a record 98 and a half% return in one year let me say that one more time 98.5% in one year and it's a fund in one year in 2000 he steps down as a COO of Renaissance technology but remains involved as a chairman 2004 he establishes the Simons foundation with his wife Marilyn Simons to support research in mathematics and the basic Sciences Renaissance Technologies and its Flagship Medallion fund became known for their blackbox strategy relying solely on quantitative models as of 2024 Renaissance manages roughly $16 billion with The Medallion fund value at $10 billion and by the way even though I give you the example at the beginning that if you would to put a you know dollar within 40 bucks I'll just show you this one here as well this is $100 in 1988 in the S&P 500 versus The Medallion Fund in 1988 if you would have put your money in the S&P 500 30 years later would have been worth $1,082 but if you would have put in The Medallion fund that $100 alone not $100 every month not $100 every year just $100 one time that $100 would be worth $2.1 million if you would have had your money Medallion fund so you know what this guy decides to do so most of these funds are always begging people to put more money there because they have the best program and they have the best theories and they're going out there raising money this guy does the weirdest thing this says yeah you know what um we're not doing this anymore what what do you mean there's going to be an exclusivity to have money in this fund I I I don't understand I I like the fund I totally get it but we're going to we're going to buy your money and you know we're going to wish you the best go somewhere else no no I don't want to go anywhere so the fund suddenly shifts to only being open to you ready to current and former employees of Renaissance Technologies think about it the only way you can have access to the fund is you either work there or you used to work there they took all the money from Medallion fund they're like don't worry about it we don't want to sell it to the public we're okay do it are they have four funds The Medallion fund becomes private the other three they're willing to sell to the public but the one that's private is the one that's using the technology that they support the Hedge Fone became an Insider only portfolio in 1993 and eventually bought out its last remaining investors in 2015 hey John I know you got $42 million in this thing we'd like to buy your fund from you uh Jim what are you talking about yeah I mean listen it's been a great ride but can we buy we'll give you the 42 million let's just cash you out then you're serious yeah it's totally fine we can we wire you the money can we just you know are you serious yes I've never heard of anything like this I know I get it but look we just we're we're we're in a good place we don't need to take money anymore for this specific crate have you ever heard of something like that before that's what this guy does think about how crazy that is we're so confident what we're doing we're going to make it exclusive it's like the restaurant cross stations in Beverly Hills they got two kitchens one kitchen is for the public if you work there you can go into that kitchen but the other kitchen you can only go into that kitchen if you're part of the on family if you're not part of the on family you are not allowed to be in that kitchen this is all the other employees this is only the on family you want to participate in The Medallion fund you better be a current or former employee of freaking Renaissance Technologies or Medallion pretty wild to be thinking about so look even when Warren Buffett and Charlie Munger were asked about them in an interview they said well their fees are higher and you know the criticism was always these guys' fee is so high the fees they took on the back end after your net so a lot of people to Market like why would you want to put your money there look how high their fees are they're like look even with the fees I make more money with them than I make with you oh my God I can't believe you just said that we never we're more noble we don't charge you that kind of fees yeah but I'm making better returns with those guys what do you going to do I'm willing to pay the fee I don't care about the fee I care about the net returns boom so he applies Ai and massive data assets to build an automated trading system that detects price patterns in the 80s The Medallion fund is a highly successful and secretive hedge fund managed by Renaissance Technologies so what were the six key features of The Medallion fund number one it was quantitative approach the fund uses complex mathematical models and algorithms to identify and exploit Market inefficiencies these models analyze vast amounts of data to predict price movements and execute trades with Precision so remember don't make a trade but you know let it stay for one and a half weeks he like no a one and a half days is what we're going to be doing go go go go but it's all AI driven number two is exceptional performance we know how they did during the years number three is high fees the fund charges substantial fees including a management fee and a performance fee that can reach up to ready 44% of the profits is their fees and people agree and they're glad and they would be glad to be back in it today but they can't despite these high fees the funds net returns to investors remains impressive number four close to outside investors now due to its success and proprietary strategies The Medallion fund has been close to outside investors since the early '90s only Renaissance technology employees and partners can invest in the fund creating a closely nit group of beneficiaries number five short-term trading Focus to fund primarily engages in short-term trading holding positions for short periods to capitalized on small price movements and number six secrecy the exact methods and algorithms used by The Medallion fund are closely guarded Secrets Renaissance Technologies goes to Great Lengths to protect its intellectual property contributing to the funds mystique and a lower so you know what's crazy about this guy that should give a lot of people watching this hope maybe even parents have or kids watch this video this guy never took a class in finance never got a degree Finance from Georgia Tech Finance from you know a certain School pan or Wharton or no and this guy didn't get into the financial industry till his age started with the number four and then you kick everyone's tail because your background is math what NSA math you're teaching then you get into this then you break the code then you use AI in 1982 and then boom dies earlier this year net worth $30 billion crush the market what does it tell you anytime I see a young kid I'll go up to him and I'll ask him and I'll say so uh what's your favorite subject biology you like dissecting frogs yeah okay that's good what else do you like uh you know English how do you feel about math I don't like math really yeah okay do you not like math because of your teacher or do you not like math well maybe because of my teacher I said look whatever you do don't let the teacher discourage you from not liking math fall in love with math because the future it's all going to be run math literally every industry is going to need people who understand math everything we're doing right now is also data driven on the back end want to cut the clips how you open open it up what exact place do you start what days do you upload what time do you upload people right now that are dominating the podcast space there's a lot of guys that don't even have a personality they just sit there and they go and they do what they do but they know the numbers on the back end when to do all this stuff there's math in every single industry everything Health Finance business you name it in every industry it's becoming all maten so if your parents and you're somebody that always talks down about math in front of your kids bite your tongue let that be you don't pass that fear and hate of math towards your kids encourage them to fall in love with math and if you're a kid watching this right now and you're good in math but maybe nothing crazy's happened to your life yet be patient find your space and then all of a sudden God knows what could happen to you if you got value out of this video give it a thumbs up and subscribe to the channel and if you enjoyed this video there's another video to watch Jamie Diamond story great story if you've never seen it click here to watch it take care everybody bye-bye bye-bye [Music]