Secrets of the Greatest Hedge Fund of All Time

Josh here - we had Greg Zuckerman of the Wall Street Journal up at the Compound to talk about his new book, The Man Who Solved the Market - the first ever deep dive into Jim Simons and his legendary firm Renaissance Technology. Renaissance has pulled over $100 billion in trading profits out of the markets since its founding decades ago, in a highly secretive approach that combines mathematical equations with cutting edge technology.
Zuckerman conducted over 400 interviews with current and former employees of the firm and even spent a few days with Simons himself - despite the fact that he didn't want this story told or the book written.
You can get The Man Who Solved the Market here:
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Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management.
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[@FinanceOptimum]

Excellent Interview - the GOAT of Hedge Funds! They automated their data processing pipeline such that they are able to rapidly back test strategies. They also have arbitrage in the order book with market making (this was revealed in a suit between former employees). Also using basket options with Deutsche and Barclays saved them $6.8bn in taxes over a 15 year period. Overall Simons is just a genius.

[@bestlty]

Finance Optimum Still appealing their case to the IRS in 2019.

[@jonnyfranco7]

Finance Optimum ty

[@FinanceOptimum]

@@bestlty Indeed

[@FinanceOptimum]

@@jonnyfranco7 No problem 👍

[@InvestingEducation]

Nice

[@makedollarsandsense7194]

Incredible book, highly recommend this one to all of those out there interested in learning more about Ren Tech and Jim.

[@djpuplex]

No love for Stevie Cohen. His deposition about his accused "insider trading" was legendary.

[@mobileandroid5299]

???? Link?

[@chethan93]

Jim Simons and Ren Tech story is the most inspirational ever!! You start by trading with few dollars, you try to automate those trades and 3 decades later, you're substantially influencing who becomes the president of the USA!!

[@sfincione2000]

Great book. Pity that Simons wouldn't let them disclose a little more about the actual techniques. But hey, that's Renaissance Tech. Secrecy was paramount. p.s. if they 'did' manage to do a film about this amazing story, the only actor to play Simons has to be Frank Langella - they're almost identical twins.

[@tonybowen455]

So glad this came up on my YT. I'm over halfway through the book, and I've binged on every Simons interview I could find.

[@Aj-gz6tc]

Problem. We are no way able to replicate. To complicate

[@donmcarthur]

I think this was your best interview so far. Well done.

[@TheCompoundNews]

Thank you! Was a really fun interview to do.

[@Andrew_2414]

donmcarthur medium.com/@AJC241469/on-the-apparent-convergence-of-bitcoins-usd-market-value-toward-the-stock-to-flow-valuation-model-7a9275ac2206

[@jgfunk]

Got the book for Christmas, really enjoying it so far.

[@somebody3]

I’ve listened to this book on Audible. Really great stuff.

[@TheCompoundNews]

Such a good fast-paced read/listen

[@scottscriticalmass]

JB & MB... Well done interview as always. I look forward to reading Zuckerman's new book. 66% annually since the late 80's? Phenomenal and kinda scary!

[@InvestingEducation]

Nice, let us know how u like it

[@TheCompoundNews]

Thanks Scott. That track record is phenomenal and scary!

[@jcronanj71]

23 years at WSJ? 17 when he started. I'm having visions of Almost Famous.

[@pppinto97]

Greg's book was an IMPULSIVE BUY when it was my FIRST TIME travelling on a flight, all blame/thanks to this interview. Great book, must say. I had a marathon read and finished it in 2 days. STRAIGHT

[@TheCompoundNews]

It's such a good read, glad you enjoyed!

[@pppinto97]

​@@TheCompoundNews Now that you ve replied, lemme tell u, I wanted to be an Financial Engineer; just so I can get involved with quants. Post some research, and 6 months later; came to know my biz degree wont work; so I am doing Masters in Finance in SJSU & I am coming fall 22. Great Job, guys

[@causeality]

Great book, took me 3 days to finish it. Absolutely flowing.

[@mefirst5427]

When you tell geniuses something cannot be done or impossible, they usually are driven to prove you wrong, that's my takeaway from reading this book.

[@mmagic3534]

You don't have to be a genius to prove someone wrong. The secret: put your goal(s) in concrete; put your plan(s) in sand.

[@JstJaybeingJay]

@@mmagic3534 damn... Probably one of the best lines I ever heard.

[@corydk4834]

@@mmagic3534 nice quote

[@PretentiousStuff]

2:09 I love Josh's reaction. "It's ridiculous, ridiculous!"

[@agigcbo]

Have to get Zuckerman’s book this weekend! So stoked about this episode.

[@TheCompoundNews]

It's a great read for sure!

[@wileyfisheriii]

Greatest interview on the internet. Amazing story and guest.

[@TheCompoundNews]

High praise, thanks for watching!

[@swingtrade2]

Hey Compound guys, do you look at outside trading programs?

[@Drhuntley]

Incredible!

[@ThaboHermanus]

First time I see the old Compound video production (I am well familiar with Josh and his solo podcasts but never seen Batnick and Josh on set in “interview” mode. TCAF has really come a long way 💪🏾

[@royreyes8422]

buy low sell high ... higher lows... jim found the pocket of life and great for those who figured it out.

[@infiltr80r]

His strategies are quite different from that.

[@jfinca]

Brilliant interview guys!! I loved the book on Edward Thorp (original quant) as well as Jim Simons

[@TheCompoundNews]

Thank you Jim! Both are great books, agreed.

[@Andrew_2414]

Jim Fincannon medium.com/@AJC241469/on-the-apparent-convergence-of-bitcoins-usd-market-value-toward-the-stock-to-flow-valuation-model-7a9275ac2206

[@abyteuser6297]

Ed Thorp was friends with Claude Shannon the "Father of Information Theory" and they worked together making the first wearable computer tech.winton.com/2018/07/ed-thorp-claude-shannon/

[@eyalgolan26]

Just ordered on Amazon, great interview, Thank you 🙏

[@nassersaazi6980]

ganz toll.ich liebe und immer jedes von Herr Zuckerman gern lese

[@sunday3237]

I cannot wait to do this.

Cool cheers from Portugal 🇵🇹

[@truthaboveall7988]

Paused to buy this book & can’t wait to dig in👏🏼

[@TheCompoundNews]

It's a fascinating book!

[@erlendtre4437]

Arguably maybe definitely

[@leanalcantara4976]

Erlend Tre , Hahahaha-what’s the story morning glory?

[@bendavenport5306]

Great content!

[@TheCompoundNews]

Thanks Ben! Help us spread the word!

[@Play_Streams]

After watching this, I bought the book. It's quite good 👍🏾

[@chewie1355]

William Mucheru in the book, was there a model Or two that one can use as a retail trader

[@Play_Streams]

@@chewie1355 there's a lot of mention of statistical arbitrage but you need a lot of computing power to get proper signals to trade

[@djhottok]

Is there a lot of practical advice that you can use in the real world? Or is it more theoretical / impossible to really put to use?

[@okami3790]

great to know, bought right now, thank you Jim is so inspiring to me

[@rickgraham7641]

Holy shit, you guys look hilarious back in the day 😂

[@6848811]

Any spark notes?

[@abhishekbal399]

Read through Kindle. Enjoyed. Expected a few more deep dive into the Quant Models but can understand the iron clad. The mysticism add to charm.

[@pelckarol]

Stopped at 1:38 and bought the book

[@benndanny12]

Thanks that was fascinating.

[@werunguns]

Interring conversation, great video

[@TheCompoundNews]

Thank you for watching!

[@Andrew_2414]

We Run Guns medium.com/@AJC241469/on-the-apparent-convergence-of-bitcoins-usd-market-value-toward-the-stock-to-flow-valuation-model-7a9275ac2206

[@TheInvestmentCircle]

Love your work guys! Hope to one day have a channel that teaches as much about investing as you guys!

[@TheCompoundNews]

Thank you! We will check out your channel.

[@TheInvestmentCircle]

The Compound it’s a work in progress but in a week we’ll have Tom Basso on to discuss his career investing! ☺️

[@williammcelleney1060]

Great!

[@RedCandles_]

This guy sounds like Tony Hawk's brother

[@richardkrohley8921]

Enjoyed the discussion.

[@Rich65501]

Zuckerman's book on Jim Simons is awesome. Another must read book is A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market by Ed Thorp. Thorp is on the same level as Jim Simons.

[@qs6085]

Saw a documentary on Ed Thorp, about him cleaning up at casinos. Incredibly smart man.

[@frankmathews1358]

Josh doesn't look dressed up. Even when he is dressed up.

[@klaussamer5113]

Obviously Mr. Zuckermann can read, maybe he read the book "The physics of Wall Street" published 2014

[@Akash.Chopra]

Shhh, don't ruin the secret. 🙊

[@erichammond2466]

William J Oneil and Michael Covel great mentors

[@ARS74499]

Eric Hammond mate they’re book sellers. Nothing compared to Simons.

[@erichammond2466]

@@ARS74499 no kidding. Using Oneil's Investors Business Daily and Covel's Trend Strategy along with a strict risk management system will also generate solid returns especially if you do not have access to computer algorithms and mathematicians.

[@lancestabler7650]

The amount of conspiracy pushing lunatics in the comments section with zero understanding of finance or economics is disturbing.

[@lancestabler7650]

@K. DV your command of English is pathetic try harder

[@lancestabler7650]

@Raymond Spicer I think your the one probably crying that people don't agree with whatever warped worldview you hold. I'm sure its a funny topic for the rest of your family on holidays unless they are divorced from reality as well.

[@jevster680]

Lance Stabler *you’re

[@dogestranding5047]

They do this with any billionaire who doesn't align with their political views. It's insane and delusional.

[@dogestranding5047]

@Raymond Spicer Since when was anyone crying, boomer? What's up with boomers and caps lock anyways?

[@GodsNode]

It's a light read that, expectedly, reveals very little. It is more a collection of stories about many of the different people, keyword people, that built the company over its history.

[@rowland5951]

FACTS!!! Some real nutters in there

[@pppinto97]

So, you wanted just the code of MEDALLION Fund. What luck?

[@amgineco]

NOBODY will reveal their most powerful secrets.. BUT a smart person can gain "nuggets"that can propel a determined Trader, Investor forward..

[@pppinto97]

@@amgineco Read & then SPEAK. It talks him DEALING & APPOINTING people. No nuggets or anythin

[@user-or7ji5hv8y]

What was the twitter handle?

[@Scoobe01]

A good interview worth debute. Jim Simon's.

[@mfirejutsu]

Hi guys, First of all, great video and great interview. Second, sure its debatable whether Jim is the greatest investor/trader of all time, but why do you say Buffett doesnt compare in terms of returns? Of course Buffett doesnt have 66% return on average, but he certainly did pull more than 100 billions out of the market. Or am I wrong? Additionally, Buffett manages around 400 billions, which it makes harder to get a 66% of return compared with Medallion Fund which is capped with 10 billions. Let me know your thoughts. Thanks in advance.

[@lawrencefinch-hatton6231]

Nice hair piece.

[@voulieav]

I like Lloyd blankfeins pen

[@actuarialtrader2419]

I'd like to read it.

[@in_neerajpandey]

8:00 Dichotomy is a human thing, even the giants face it.

[@Wishmegoodluck]

oh yea

[@markchen3849]

good

[@jabeez1010]

back when suits wore suits :)

[@chenguangling4603]

great video. in addition to reading books and watching videos i firmly advice anyone going to the financial market to seek for professional guidance.

[@davidhudson3001]

i have also advise folks on that. thats the best decision i have ever made. since my investment with JULIANA GUNAWAN LEE i have never suffer any lose. my profit keeps increasing and make withdraws at the end of the month. i advise you all to give it a try. she is license and professional portfolio manager. you can search her on the web.

[@chenguangling4603]

@@davidhudson3001 thanks alot

[@julieta203]

398 of the interviews involved staff telling him to get lost.

[@drmodestoesq]

And then they met him in a diner the next day.

[@etienne7774]

Does the algorithm still work?

[@nareshsaklecha]

I didn't really understand the part of finding the bug

[@justins5756]

Where the function wasn’t right? And how they set in a room forever and looked over the code

[@DP-dc2vv]

Only people I've ever heard pronounce his name 'Sigh-mons" rather than "Sim-ons"...even Jim himself uses the later pronunciation

[@infiltr80r]

Yeah, double n vs single n. Like "winner" and "winer".

[@JabariNuruddin]

@@infiltr80r just not how English works, spelling/pronunciation is basically the result of random luck.

[@BtM4G]

I hope that book will be published in german at some point

[@tmendoza6]

think most people who trade are aware of Renaissance. the min i started seeing quant finance master degrees and now the book i wounder if its over. or i should say now you are stepping into a crowed market. Any thoughts!

[@george3737]

The Medallion was remarkable, these same Renaissance guys could not create another fund like this. Outside money was kicked out in 2006 after years of forced redemptions. They closed to taking new money in June 1993

[@brandonderrick006]

Three minutes in and I’m searching for what Renaissance’s holdings lol

[@jonnes__4657]

The holdings cannot help you. You need that timing! .

[@somebody3]

They do not hold anything for more than a few minutes to two weeks max. Only their other/public fund holds longer-term but doesn’t have amazing returns.

[@IsraelMejiaJr]

? You not that dull....its not their holdings thats the sauce but their implementation.....Entry, Exit, Filter....the instrument matters little apart from sufficient liquidity

[@bestlty]

Their medallion fund is not operated by human traders and thus it has no “holdings”. Its algorithms trade a basket option that contains a variety of financial products.

[@brickstunram9391]

It’s pointless. They are hft that shit changes in less than a blink of an eye lmao

[@pranjayarora8115]

66% before charging fees since 1988

[@austinbenner]

Has anyone found any clues online how Jim Simons trades? I’ve had back to back 70% return years but not any where near the number of years he’s done it

[@toukka4]

😂😂😂😂 pathetic

[@somebody3]

The book specifically states when they created medallion fund and started making those returns - 1988. Initially they’ve put a lot of effort into selecting and switching between brokers and clearing houses to make sure no one can fully track their trades. But the book does provide specific clue: it states they make 300,000 trades per day, with each one having some chance of winning better than a casino. They have a team of mathematicians and scientists responsible for various strategies/formulas/indicators, so each trade is made using one of thousands of strategies, while their supercomputer also discovers some and optimizes them, so even Jim Simons couldn’t always get answers on how each strategy works - they simply mine the data and the computer finds repeatable patterns. Looking at all their trades would give you absolutely nothing. This is similar to how AI or machine learning like @deus_trader on Twitter trades. Good luck hiring 3000 scientists to figure this out.

[@franciscoromero3004]

He should check out r/wallstreetbets !! lots of content for a book

[@rubenrodriguez6201]

🙏🙏🙏

[@zacharycedeno6638]

R.I.P Sean Connery

[@jonnes__4657]

If many or all investors become Quants. Who will be the winners ??

[@IsraelMejiaJr]

A limiting understanding of a limitless concept...work on yourself you must first do.

[@jonnes__4657]

@Jim Raza Wenn die menschlichen Emotionen nicht mehr im Markt aktiv sind, wird es kaum noch starke Schwankungen geben. .

[@lionlegal2018]

Dude, don't give the whole book away

[@furself114]

go back to 1/8s and quarters and watch those returns plummet..

[@andresg297]

Dude on the right looks like Casper

[@colevidmar1191]

Batnick looks dangerous in that shirt

[@user-gy7cy7os7g]

Renaissance Technologies is the biggest bookie in the markets.

[@shirtdirt5673]

hmmm

[@johnofmalta]

So the really good, successful hedge funds give you your money back even if you don’t want your money back and all you’re left with are the bad and unproven hedge funds trying to get your money. What a predatory, asymmetrical relationship. JoM

[@AlexWinkler]

5% and 44% what!!! ha

[@laneallen3691]

And even at that rate, they are still having to turn people away! XD

[@AlexWinkler]

@@laneallen3691 madness

[@user-pn9un3dc8y]

You can charge that when you’re pulling in 66% a year avg

[@laneallen3691]

@@user-pn9un3dc8y so it would seem

[@MrMawnster]

lol Edward Thorps was/ is not this one

[@radomillion]

Sounds like more of a Proprietary Trading firm than a Hedge Fund

[@somebody3]

They were a hedge fund for most of the time, but indeed now it’s a prop firm. Still amazing either way.

[@Mr123muhsin]

Where is the secret?

[@jaybunden4342]

Didnt learn anything from this video! How did he make his billions?

[@zzhughesd]

Thanks, Twits Stocktwits 100k to 5m in 256 business days one guy CAM says done this year

[@truthaboveall7988]

U guys look so nerdy back then… so funny

[@lopezb]

I want to read the book, sounds fascinating. It's notable that near the end he says it is short-term but NOT high frequency! I always wondered that. (So this is not "Flash Boys!) But this interview makes me wonder if the author honestly deals with Robert Mercer's politics. Mercer brought us Kelly Anne Conway, Steve Bannon, Cambridge Analytica, Brexit, and Donald Trump. In other words, nearly single-handedly he has destroyed the UK and the US and NATO and the EU (for the benefit of himself, and also of Putin)... Jim Simons has given a lot of $$ to environmental causes (he built a beautiful park I visited near Stony Brook, NY in memory of a son who tragically died in a bike accident) and to mathematics and physics research, and also to the (establishment as far as I know) Democratic party (like Hillary unfortunately, again as far as I have read). But Mercer's money invested in far-right politics and paranoid conspiracy theories has had a negative impact on politics, the environment (he denies climate change) and vicious social and tax policies (augmenting income and wealth inequality and hurting education and science in general) that far far far outweighs all the good Simons has done. It's an enormous tragedy and affects all of us. It's not just Mercer's doing; somehow Bannon got in his ear. I wonder how much Putin may have gotten influence there too....because Brad Parscale and Cambridge Analytica (thru Facebook) and the FSB/GRU were all pursuing similar data-and algorithm-driven disinformation and vote suppression strategies. Since Mueller didn't look at a lot of that, and since a lot is redacted or still secret, we still have no real idea. Moreover, that is ongoing , is extremely effective and very well could give Trump another 4 years....

[@f.p.5410]

I finished the book yesterday and yes, I can confirm it's an amazing book and I would strongly recommend reading it. It does talk about Mercer's politics, it's the central point of the second half of the book.

[@alonamaloh]

I just finished the book. And yes, the book does cover Bob Mercer's influence in politics in quite a bit of detail.

[@lopezb]

@@alonamaloh thanks! just got the book.

[@Camperlife4ever]

This is besides the point, but if I were Czar of the Russians. I would prefer if all these PhD's hired at Renaissance would have built things; medicine, technologies, government, and engineering stuff. It is a cool story.

[@alonamaloh]

Thankfully the U.S. is a free country, so we get to do what we want, regardless of the Czar's preferences.

[@Camperlife4ever]

@@alonamaloh Amen.

[@jefffawcett]

That’s actually good point because these guys create nothing and they cost the rest of us money. They contribute nothing to society whatsoever. They make themselves rich by essentially becoming an extra layer of costs in the buying and selling of stocks that WE pay for. These are not people to be praised

[@Camperlife4ever]

@@jefffawcett I agree with you, that is why I like people like Drunkenmiller, who has billionaire and successful acknowledges he gets paid multiples more than what he contributes to society. I also agree with the first person who is thankful we don't have Czars telling people what to do, but a little razing doesn't hurt.

[@miaa7097]

I'm a public health nurse and I love picking stocks I picked all the tech companies back in 2018. It paid off big I wish I learned more about finance growing up

[@benb2856]

Is this video sponsored by Poland Spring water?

[@enevision6101]

is very simple. he puts stock's behavior into algorithms. so all market decisions become a formula so everything can be predicted. AI

[@pranjayarora8115]

2:30min after fees 39%cagr per annum

[@kidze31]

does quant mean they day trade?

[@jfinca]

Quant is short for quantitative analyst mathematician

[@kidze31]

I’m just curious on the execution of their methods. Do they do quants to quantify a company and buy and hold like buffett? Or do they just look at price data and buy and sell data and consumer data to day trade or swing trade. In other words what is their trade window/horizon?

[@unfair17]

@@kidze31 It is complicated but they utilize multiple algorithms and troves of data to generate a model that maximizes returns. Holding period for a fund like that would be quarter to quarter & maybe a bit quicker than that bc if a model/strategy says it's time to sell they sell. Medallion Fund which is much smaller (by design) can move more nimbly than a larger fund.

[@somebody3]

Kidze The interview specifically talked about Jim Simons not knowing anything about companies, or their finances. They only looked at stock price data. Their average holding period is 2 days and the book specifically talks about this short holding period being their most important breakthrough. They were first to do this while it was common assumptions that all funds most hold their positions for months.

[@Andrew_2414]

Kidze medium.com/@AJC241469/on-the-apparent-convergence-of-bitcoins-usd-market-value-toward-the-stock-to-flow-valuation-model-7a9275ac2206

[@s4sunshine01]

Jim is 81 after some years he will be gone so his knowledge, he should teach some one.

[@louisaparker]

What "bug" are they talking about?

[@IsraelMejiaJr]

The interest in financial markets,,,,

[@alonamaloh]

There's a story in the book about David Magerman finding a critical bug in Renaissance's equities system.

is this an ad?

[@saywhat4229]

yes

[@TheCompoundNews]

absolutely not.

[@ramaniyeruva2221]

I might become a hedge fund manager maybe

[@toukka4]

Xd

[@MP-zv6fm]

People claim Technical analysis is bogus. If this video doesn't smack Fundamentalists over the head and make them realize that Technical analysis (Science) Trumps.

[@Bonescratcher]

How can they be the greatest hedge fund of all time when Bridgewater is the largest hedge fund of all time that started from scratch

[@InvestingEducation]

R there things the average man can implement?

[@InvestingEducation]

@Keep Rocking! I meant from jim Simons' strategies

[@Blaze098890]

If there was it wouldn't be profitable anymore.

[@alonamaloh]

The average man should buy a capitalization-weighted index fund. Ideally one that invests globally, like Vanguard's VTI.

[@InvestingEducation]

@@alonamaloh I love ETFs and did a video on it some time back

[@InvestingEducation]

@@Blaze098890 maybe