Simons at Renaissance Cracks Code, Doubling Assets

Certainly not the Graham/Buffett/Munger type of value investor (Renaissance is all quant), but an interesting story nonetheless. What is also interesting is that if you search for RENAISSANCE TECHNOLOGIES CORP on the NASDAQ web site, it appears Renaissance's biggest purchase during the third quarter was Berkshire Hathaway (when you add up the A and B shares)!

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Renaissance is on fire: Its Medallion Fund -- which uses computers and trading algorithms to invest in world markets -- returned more than 50 percent in the first three quarters of 2007. It had about $6 billion in assets as of July 1.

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Medallion's returns are no anomaly. The fund, which trades everything from soybean futures to French government bonds in rapid fire, hasn't had a negative quarter since early 1999. From the end of 1989 through 2006, it returned 38.5 percent annualized, net of fees.

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In quant funds, mathematicians and computer scientists mine enormous amounts of data from financial markets looking for correlations among stocks, bonds, derivatives and other instruments. They search for predictive signals that will foretell whether, say, a palladium futures contract is likely to rise or fall.

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"There are just a few individuals who have truly changed how we view the markets,'' says Theodore Aronson, principal of Aronson + Johnson + Ortiz LP, a quantitative money management firm in Philadelphia with $29.3 billion in assets. "John Maynard Keynes is one of the few. Warren Buffett is one of the few. So is Jim Simons."