Hedge Fund - Renaissance Technologies

Jim Simons’ Medallion Fund is the best hedge fund that Insider Monkey has come across. The fund’s returns are so spectacular that Jim Simons became one of the richest people on the planet. Medallion Fund employs high frequency trading and exploits inefficiencies in the stock market. One strategy they use takes advantage of the inefficiencies in the execution of large transactions. One of their algorithms determines whether a very large order is executed and front runs it. As a result Medallion experiences high transaction costs and high expenses. That’s why they charge a 5% fixed fee. On top of that they charge performance fee. That fee had been 20%, but after 2000 it increased initially to 36% and then to 44%.

Currently the fund’s investors are current and past employees and their families. So, the fund’s 44% performance fee is a little bit irrelevant. Jim Simons owns between 25-50 percent of Renaissance Technologies (RenTec), and he is also the largest investor in the Medallion Fund. So when Medallion reports a 50% return in a given year, the return is really close to 100% for most of the fund’s investors.