Would you invest in a fund that charges a 5% management fee and a 44% performance fee? Sounds like an impossibly bad idea, a scam, a fleecing of the sheep by some greedy Wall Street hucksterAccording to performance data cited by Nick Maggiulli of Ritholtz Wealth Management, the Medallion Fund, the flagship offering of Renaissance Technologies, generated a 39% average annual return from 1988 to 2018.
Maggiulli calls it “the greatest money-making machine of all time,” considering a $1 investment in the fund during that period would have hypothetically become $20,000, net of fees, while the S&P 500 SPX, -0.06% would have grown to $20. Not even Warren Buffett could keep pace, with $1 invested in Berkshire Hathaway BRK.A, -0.19% increasing to $100 over those 30 years.
“When you combine its raw performance, its negative correlation with the market, and the agnosticism of its operators toward understanding actual businesses,” Maggiulli wrote, “the Medallion Fund has created a unique track record that is unlikely to be surpassed within our lifetimes.” Renaissance founder Jim Simons, probably the most famous quantitative trader ever, retired from the firm’s day-to-day operations a decade ago, but he’s still involved and earned $1.6 billion in 2017 for his efforts.
Shawn Langlois Shawn Langlois is an editor and writer for MarketWatch in Los Angeles. Follow him on Twitter @slangwise.