Medallion Fund – The Best Fund In History!!

In our last article, while discussing the history of AI and the stock market, we have touched upon Renaissance Technologies. If you have studied stock market returns of the popular indexes in India or the US, the details of this article will stun you.

The investment fund, we will discuss is US-based – hence our discussion will be in the dollar, and we will use the S&P 500 index for comparison.

Who is Jim Simons?

You have heard of Warren Buffet and the returns he made for himself and his investors. Jim Simons is the greatest trader on Wall Street. Have you heard of him?

 He was born in 1938 and studied mathematics at MIT. In 2014, for his contribution to finance and maths, he was elected to the National Academy of Sciences of the USA. 

More than his mathematical contribution, he was known for his track record as a hedge fund manager. During his working career, he has spent years creating quantitative models to predict the markets.

In 1978 he founded a hedge fund – Monemetrics, in which he applied both fundamental and technical approaches. However, the fund was not too successful. He was not able to overcome the emotional swings in the market. 

Simon then decided to use a purely systematic approach instead. He formed a company called Renaissance Technologies. The company managed four funds – one of them is the Medallion Fund. This fund has created a unique track record that is unlikely to be surpassed within our lifetimes.

Medallion Fund’s Return

Before we talk about the fund and its strategy, we come straight to the point – the returns. Its stunning returns will make you read till the end.

As per the records available, Renaissance’s Medallion Fund generated 66% annualized returns (before fees) and 39% annualized returns (net of fees) from 1988-to 2018. How good is it? Let us run some comparisons to help you understand how lucky investors were who invested in it.

Assume you invested $1 in the Medallion Fund in 1988. The amount would have grown to $20000 (net of fees) in 2018, 30 years. 

However, if you had invested the same $1 in the S&P 500 index, it would have grown to $20 in 2018. Warren Buffet’s Berkshire Hathaway would have turned your $1 to $100 in the same period. The Medallion Fund outperformed one of the best performing index and asset classes of the last few decades by 1000X and one of the best investors of all time by 200X. Amazing, right?

More on Medallion fund’s Return

You now know that the Medallion fund outperformed the S&P 500 fund by a significant margin in the long run. How about year-wise returns compared to S&P 500? 

The Medallion Fund has only lost money in a single year net of fees. The year was 1989. You must be wondering – how about 2008? 

Everyone lost money that year – not everyone – there are always some geniuses who make money in the market. In 2008 when the S&P 500 lost 37%, the Medallion Fund posted a gain of 82% net of fees. Look at the below image for year-wise returns.

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How Did the Medallion Fund Make Money?

What is the secret behind the Medallion fund’s success – not occasional success but every year? You will be amazed to know that the people who created the fund knew nothing about companies, their business, etc – they were mathematicians.

The Medallion fund was too reliant on its quantitative model as opposed to underlying business fundamentals. Simons decided to dig through mountains of data, employ advanced mathematics, and develop cutting-edge computer models in the early days. 

Others were still relying on intuition, instinct, and old-fashioned research for their predictions. He inspired a revolution that has since swept the investing world.  

How does it make money – It finds individual patterns in data and exploits each pattern enough to turn a small profit. When you add up all of the small profits, you end up making money – a lot of money.

A bit on the fee they charged – Back in the day, most hedge funds used to charge 2 and 20 (2% annual management fee and a 20% performance fee). However, the Medallion fund generated arguably the greatest track record in investment history while charging 5 and 44. 

How Can You Invest in the Medallion Fund?

With all the information shared above, we are 100% sure – the next thing you want to do after reading this article is – invest in the Medallion Fund. Sorry to break the bad news – you cannot invest in the Medallion fund. 

The fund has been closed to outside investors since 1993. All the fund’s profit and underlying capital are owned by the founder, Jim Simons, and other employees.

Is there an alternative?

If you have read the article carefully, you would have figured out the secret – unless there are emotions in investing, the returns will never be high. You cannot invest in the Medallion fund, but you can invest in stocks through Jarvis Invest. The underlying principles of Medallion fund and Jarvis are the same – Quantitative analysis. 

Just like the Medallion fund, we scan stocks on data pointers. Precisely, Jarvis scans stocks on 1.2 crore data pointers to find the best companies for you. We have a risk management system that will minimize your losses. Check this article to compare our returns with NIFTY50 – we deliver returns to our investors even in tough times.There is no reason not to invest in the stock market. Even if you do not understand the business, you can still invest in stocks and create wealth – Get started with Jarvis Invest today.