A Jim Simons Market Mystery — Solved?
A secretive investment fund backed by the legendary quant displays a penchant for biotech stocks. There’s a good reason for that.
Is Jim Simons, founder of Renaissance Technologies and quant whiz extraordinaire, really a closet stock-picker?
The question springs to mind on account of an investment fund backed by Simons called Euclidean Capital, which is widely reported to be his family office. The fund reports at least some of its public stock holdings quarterly in Securities and Exchange Commission filings.
That’s catnip for Simons-trackers who scrutinize his market moves in hopes of gleaning insight into Renaissance investment tactics. In the case of the flagship Medallion Fund, those have generated annualized after-fee returns of 39 percent for decades, making Simons the veritable overlord of quant-based investing.
“Simons is one of a kind,” said Theodore Aronson, partner at quantitative money manager AJO Vista, in an email. “He’s made more money than God, and has made more money than God for others.”
Euclidean itself is a cipher — with no ready information on its assets, strategy, or how closely Simons is involved. He launched the fund as he stepped down as CEO of Renaissance in 2010, according to one person close to the firm.
An email to Simons seeking comment was not returned. A spokesman for Renaissance declined to comment on the record.
The fund has disclosed ownership of ten stocks — mostly biotechnology companies and many lacking revenues.
Biotech is a curious sector to trawl from a quantitative investing standpoint, according to Charles Lee, former global head of equity research at Barclays Global Investors and a finance professor at Stanford Graduate School of Business.
“They are typically among the worst in terms of quant rankings. And for good reasons,” Lee wrote in an email. “Historically small biotech startups are among the worst performers in public equity.”
The ten positions as of October 30 totaled just $107.7 million, though that is likely only a part of the fund.
That’s small beer for Simons, whose net worth is estimated by Bloomberg Billionaires at $25 billion. Euclidean Capital’s positions ranked by valuation on October 30 were:
- 23andMe Holding. Markets direct-to-consumer genomic testing services. (Euclidean Capital’s investment: $29,295,000)
- PMV Pharmaceuticals. Developing oncology therapies to eliminate cancer cells. ($27,809,000)
- Foghorn Therapeutics. Focuses on treatments in oncology, virology, autoimmune disease, and neurology. ($10,822,000)
- Rapt Therapeutics. Developing treatments for cancer and inflammatory diseases. ($10,416,000)
- NGM Biopharmaceuticals. Focuses on therapeutics to treat cardio-metabolic, liver, ophthalmological, and other diseases. ($9,766,000)
- Alector. Developing therapeutics for neurodegeneration. ($9,279,000)
- First Financial Bancorp. An outlier, this is a midsized Cincinnati-based regional bank holding company. ($3,659,000)
- Tenaya Therapeutics. Seeks cures for heart disease and its underlying causes. ($2,656,000)
- Oric Pharmaceuticals. Focuses on therapies to counter resistance mechanisms in cancer. ($2,392,000)
- Surrozen. Develops biologics to treat disease-related tissue injuries. ($1,622,000)
Unlike Medallion, known for rapid fire trading, Euclidean turnover appears low, with no entries or exits in the portfolio since the previous June. Euclidean sold only two of its ten holdings during the nine months and stood pat in its eight remaining positions, while adding two.For the record, the biotech holdings’ nine-month losses as of September 30 ranged from 26.14 percent to 78.23 percent, versus a drop of 19.75 percent for the Invesco Nasdaq Biotechnology ETF.
Investors would be wise not to blindly pile into these names, according to a person familiar with Euclidean. This person described the stocks as “residuals” from the fund’s venture capital investments, which it made when the companies were private and held on to after they went public. The stocks represent just a small part of Euclidean’s portfolio, this person says.
Still, scrutinizing the technologies and businesses that Euclidean invests in makes sense, given Simons’ scientific bonafides. He worked as a National Security Agency codebreaker, founded Stony Brook University’s renowned math department, won an Oswald Veblen Prize for his work as a geometrician and co-authored the Chern-Simons Theory, a building block for string theory.
And Simons has serious cred as a technology investor, having helped to found or fund such one-time prominent companies as Franklin Electronic Publishers, Cylink, and Segue Software, as well as serving on the board of Symbol Technologies.
In filings, Euclidean’s address is in the same building as the Simons Foundation, which supports basic and discovery-driven science, and across the street from Simon’s Flatiron Institute, which bankrolls computational research in astrophysics, biology, mathematics, neuroscience, and quantum physics. Somewhat curiously, given its secrecy, the fund has a LinkedIn profile, including the names of its president and some of its 23 employees.
These include analysts, a scientist, as well as technology, legal, compliance and risk officers.
Most prominently, Ashvin Chhabra is president and chief investment officer. A former head of quantitative research at JPMorgan Chase, he served as chief investment officer for Merrill Lynch Wealth Management as well as the Institute for Advanced Study in Princeton, New Jersey.
“I suspect Simons, who is affiliated with that prestigious organization, got an opportunity to see Ashvin at work and liked what he saw,” wrote Andrew Lo, a finance professor at MIT’s Sloan School of Management, in an email. “There’s a reason Simons recruited him, among all the potential CIOs that would have jumped at the chance to work for one of the most successful hedge fund investors in the world.”