Postscript: The Renaissance Medallion Fund

R. E. S. Ziemba and William T. Ziemba

Chapter 53 in The Kelly Capital Growth Investment Criterion:Theory and Practice, 2011, pp 785-788 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The Medallion Fund uses mathematical ideas such as the Kelly criterion to run a superior hedge fund. The staff of technical researchers and traders, working under mathematician James Simons, is constantly devising edges that they use to generate successful trades of various durations including many short term trades that enter and exit in seconds. The fund, whose size is in the $5 billion area, has very large fees (5% management and 44% incentive). Despite these fees and the large size of the fund, the net returns have been consistently outstanding, with a few small monthly losses and high positive monthly returns; see the histogram in Figure At. Table Al shows the monthly net returns from January 1993 to April 2005. There were only l7 monthly losses in 148 months and 3 losses in 46 quarters and no yearly losses in these 12+ years of trading in our data sample. The mean monthly, quarterly and yearly net returns, Sharpe and Symmetric Downside Sharpe ratios are shown in Table A2…

Keywords: Kelly Criterion; Dynamic Investment Analysis; Capital Growth Theory; Sports Betting; Hedge Fund Strategies; Speculative Investing; Fortune 's Formula (search for similar items in EconPapers)
Date: 2011
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