We got our hands on the latest investment tome by Gregory Zuckerman titled The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution. The book is good but we can’t help but cut to the data to get a better sense of perspective.
Below is a comparison between Jim Simons and Warren Buffett in the first 12 years of published investment performance.
The charting of the first 12 years shows that Simons had skyrocketing performance early on with “moderate” gains in the last half of the 12-year period. Alternatively, Buffett experienced “moderate” gains that trended slightly higher with a jump in the last three years. Is it possible that Buffett could have matched or exceeded Simons if he continued his original partnership?
Aside from the performance numbers, there is something that stands out about the numbers for both Simons and Buffett, they both did best when the markets were in decline. Buffett said the following in 1959.
"Our performance, relatively, is likely to be better in a bear market than in a bull market so that deductions made from the above results should be tempered by the fact that it was the type of year when we should have done relatively well. In a year when the general market had a substantial advance, I would be well satisfied to match the advance of the averages (Warren Buffett. Letter to Partners. February 11, 1959. page 1.)."
We found that when looking at the data for both individuals, their investment performance surged (relative to prior years) during the moderate or declining years in the Dow Jones Industrial Average.