James Simons, a mathematics professor who became one of the best paid hedge fund managers in the world, is retiring as chief executive of his Renaissance Technologies firm on Jan 1, according to an investor letter.

The 71-year-old's retirement has been long rumored. Simons will remain as a nonexecutive chairman, and will keep his money in the funds, according to the letter obtained by Reuters. Current co-Presidents Bob Mercer and Peter Brown will become co-CEOs in January, the letter said.

I have led the organization and its predecessor for thirty one years, and it is definitely time to pass the torch, Simons wrote.

Simons has been extraordinarily successful at generating mathematical algorithms to predict market movements. He built Renaissance into a fund manager that once had more than $35 billion of assets, and earned a good deal of money for himself along the way.

Forbes estimated his net worth at $8 billion in March, making him the 55th most wealthy person in the world, and according to Institutional Investor's Alpha Magazine, he earned $2.5 billion in 2008, making him the top earner among hedge fund managers.

But in recent years, his funds' performance weakened as the broader market declined. Renaissance manages about $17 billion now, after fund declines and redemptions.

The $5.5 billion Renaissance Institutional Equities Fund is down about 9 percent for the year, and fell 16 percent last year. The $2.5 billion Renaissance Institutional Futures Fund is up about 1.6 percent this year, but fell 9 percent last year. Renaissance's remaining assets are in the Medallion fund, which only manages money for employees.

Simons' departure is not performance related, a person briefed on the matter said. Simons plans to focus on charity work when he retires, the person added. Simons has historically focused on charities related to math education and autism research. Renaissance declined to comment.

Simons worked as a code cracker for the U.S. National Security Agency and taught math at Harvard University

and the Massachusetts Institute of Technology before heading the math department at the State University of New York at Stony Brook.

In the late 1970s, he set up a company in Long Island that would eventually become Renaissance. He hired computer programmers, engineers and professors to help build quantitative models designed to solve the mystery of financial markets.

Simons is secretive about how his firm makes money. The firm focuses on liquid financial instruments, and avoided credit default swaps and collateralized debt instruments.

(Reporting by Dan Wilchins, editing by Leslie Gevirtz and Carol Bishopric)