Both a quantitative trading genius and a trader who recently stopped managing client money top Forbes’ list of the 25 highest-earning hedge fund managers and traders of 2016. James Simons and Michael Platt each personally made an estimated $1.5 billion last year and the way they did it speaks volumes about where the struggling hedge fund industry is these days.
Simons is chairman of the hedge fund firm he founded, Renaissance Technologies, which manages $36 billion. He continues to benefit from Renaissance’s funds, particularly the secretive Medallion that is not open to outside clients. Renaissance’s biggest hedge fund, the $15 billion Renaissance Institutional Equities fund, was up 21.5% net of fees in 2016.
Simons helped usher in the quantitative trading wave that has been building for decades and is now dominating the hedge fund world, leaving most of the firms that rely primarily on human decision-making in the dust. The majority of the 10 top-earning hedge fund managers and traders of 2016 to a greater or lesser extent use computers and systems-based approaches to trading financial markets.
Meanwhile, Platt has dozens of humans organized into professional trading teams working at his London-based BlueCrest Capital Management. But last year the teams were only trading Platt’s money after the billionaire returned all $7 billion of outside cash BlueCrest managed to clients and turned his firm into a super-sized family office.