Renaissance's Golden Perk: Tax-Free Piece of Killer Hedge Fund

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June 16 — It's one of the sweetest employee perks in the hedge-fund world: a chance to invest in Medallion, the wildly profitable fund created by market legend James Simons.

Now, with deft legal maneuvers and a blessing from Washington, the firm Simons started is giving its employees an even richer opportunity—a tax-advantaged, fee-free ticket to one of the world's top-performing hedge funds.

In a series of unusual moves, Renaissance Technologies abolished its 401(k) plan and won the government's permission to put pieces of Medallion inside Roth IRAs. That means no taxes—ever—on the future earnings of a fund that averaged a 71.8 percent annual return, before fees, from 1994 through mid-2014.