While most hedge funds charged "one and twenty" (1% management fee, 20% of profits), Renaissance eventually charged the highest fees in the industry: five and forty-four. A 5% annual management fee plus 44% of all profits.
Investors complained loudly. Simons's response: "OK, you can withdraw." But what they actually asked was: "How can I get MORE?"
The Medallion Fund's returns were so extraordinary that even after fees, investors made spectacular profits. The fund combined:
- High absolute returns
- Low volatility compared to other hedge funds
- Reduced market risk through sophisticated hedging
- Consistent performance over decades
Eventually, Renaissance bought out all external investors because the fund had capacity constraints. The returns were so good that they preferred to keep all the gains for employees rather than share with outside capital.
This generated enormous wealth for Simons and his team. But Simons maintained perspective: "I think we were pretty smart, but I think luck played a role. I was in the right place at the right time." He credited his ability to assemble talented teams more than his mathematical genius.