Henry Laufer was teaching math at Stony Brook University on Long Island in the late 1980s when he got a call from Jim Simons. A former colleague, Simons had left academia to start Renaissance Technologies a mile down the road, and his hedge fund was struggling. Would Laufer help him find a better way to predict commodity prices?
Three decades later Laufer is a billionaire four times over, and Simons is even richer. Their Medallion Fund, based on models that find signals hidden in the noise of markets, has become probably the world’s most successful money machine. Powered by millions of lines of computer code, it has made about $55 billion over the past 29 years, thanks to average returns after fees of an astounding 40 percent, data compiled by Bloomberg show.
Today, Laufer’s wealth is valued at $4 billion and Simons’s at $15.7 billion, according to the Bloomberg Billionaires Index. Two other owners of Renaissance -- Robert Mercer and Peter Brown -- are on the cusp of joining them in that rarefied realm, according to a person familiar with the firm’s operations who requested anonymity to discuss the matter.
If and when they reach that threshold, Medallion, which manages money for about 300 Renaissance employees, about 100 of them Ph.D.s, will have created more billionaires than any other hedge fund. The four men declined to comment for this story.
Political Divisions
Medallion’s success has vaulted quantitative investing to the forefront of the industry. Even stock-picking hedge funds have changed their recruiting practices, hiring Ph.D.s instead of MBAs in the hopes of boosting returns. But how Renaissance distributes its profits is as opaque as the inner workings of its computer models, making wealth valuations difficult.
More visible are the political divisions that separate the four men. Simons and Laufer, both of whom retired from Renaissance in 2009, were among the biggest donors to Democrats last year, and Simons, through a foundation started by his son Nat, has spent some of his wealth funding organizations that fight climate change.
Co-Chief Executive Officer Brown, 62, also contributes to Democratic Party candidates, and his wife ran the Food and Drug Administration under Barack Obama. He spends many weeknights sleeping on a Murphy bed in his office and drives a Prius, even though he has accumulated a fortune of almost $1 billion.
Mercer, 70, who shares the CEO title with Brown, gave millions of dollars to support Donald Trump’s campaign for president. He backs climate-change skeptics, spends his leisure time on a 203-foot yacht, owns one of the country’s largest collections of machine guns and historical firearms and has a model-train set in his basement that cost him $2.7 million.
A computer scientist by training, Mercer gained recent attention for his ties to Trump. His daughter Rebekah recommended her family’s two closest political aides, Kellyanne Conway and Steve Bannon, be put in charge of the campaign during its final months. The Mercers also are part-owners of Breitbart News and Cambridge Analytica, a data company used by the campaign. After the election, Rebekah Mercer served on Trump’s transition team.