Jim Simons’s Incentives

Why would anybody invest with Jim Simons? Everybody knows where his love and attention and money is concentrated: in the $8 billion Medallion Fund, which charges 5-and-44 but which in any case is closed to outside investment and basically just runs the money of current and former Renaissance employees. It’s up more than 58% this year.

On the other hand, if you’re not a current or former Renaissance employee, your choices are limited to the Renaissance Institutional Equities Fund (down 14.8% this year) and the Renaissance Institutional Futures Fund (down 15.6%): it seems that relatively little of the Medallion stardust has settled on the newer franchises.

The problem of course is one of incentives. When you consider how much personal money he has in Medallion, it’s easy to see how Simons would have every incentive to concentrate on Medallion to the detriment of RIEF and RIFF. People invest in them all the same, much as they buy mass-produced Shun knives when they can’t get a Bob Kramer original. But they can’t be very happy with the results right now.

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