Mathematics, Common Sense, and Good Luck: My Life and Careers

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Pioneering Fund Stages Second Act

The founder of Renaissance Technologies LLC, one of the most successful hedge-fund companies ever, is trying to pull off a feat few other investment impresarios have managed: passing the torch.

James Simons, the secretive mathematician and Cold War code breaker who founded the firm in 1982, stepped down as chief executive in January. A pioneer in utilizing powerful computers to comb markets for trading opportunities, Mr. Simons has long received credit for the firm's hefty returns.

Now Peter Brown and Bob Mercer, two lieutenants of Mr. Simons all but unknown to the investing world, must steer the firm through challenging waters. The firm's main funds open to outside investors have posted mediocre results, and Messrs. Brown and Mercer, who are co-CEOs, say they are mulling whether to shut them down.

Mr. Simons made his reputation on his signature fund, called Medallion, which has posted average returns of about 45% a year, after fees, since its inception in 1988. Since 1995, it has had only one money-losing quarter, slipping 0.5% in the first quarter of 1999, according to documents reviewed by The Wall Street Journal. Medallion's returns have outpaced those of Warren Buffett, whose Berkshire Hathaway Inc. has gained roughly 20% a year since Mr. Buffett took over in 1965.

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SEED INTERVIEW: JAMES SIMONS

James Simons is sometimes referred to as 'Elvis' within hedge fund circles. He's the king, and you always know when he's left the building.

If you haven't heard of him, it's because he deliberately maintains a low profile. In Simon's business, secrecy is the key to abiding success. But, when rumors spread in 2005 that he was starting a new $100 billion hedge fund, people outside of his field also began to take notice of him.

Complete Interview