Largest Top Hedge Funds – Managers, Companies, Strategies and News
Hedge funds have proliferated in recent years, growing in number and become increasingly popular despite – and perhaps because of – the financial crisis. Estimates suggest that there are now over 11,000 funds in the world, with over $3 trillion under management, operating in a wide range of markets and asset classes and using many different strategies and techniques to generate returns. Hedge funds are not subject to the same kind of regulation that mutual funds and other investment vehicles are, because they are not offered to the general public, only to particular private or accredited investors. Although this has changed a little since the financial crisis, as governments have sought to bring tougher regulation to the sector, it still means they have far greater flexibility and autonomy than other investment vehicles.
Because hedge funds differ markedly in their size, approach, fees and other aspects, direct comparison is often difficult. Their returns also vary considerably over time, and past performance is not always an indication of their future potential. Thus there are different ways of ranking them. Larger hedge funds tend to attract further investors due to name recognition and perceived safety, but they are not always the most profitable; smaller funds are often more agile and can adapt to changing market conditions faster. Also, the previous year’s returns alone may not provide enough data to learn whether they are a safe option for the future; a three- or five-year history gives a better long-term picture, but many hedge funds do not have this track record – the average lifespan of a hedge fund is around five years. A final way of ranking them is by managers’ remuneration, since the fee structures generally mean the most profitable funds also pay their managers the most. The following list details the highest-earning hedge fund managers and traders.
Top funds and their managers
Point72 Asset Management is run by Steve Cohen, who was paid a staggering $1.3 billion in 2014, making him one of the most successful hedge fund managers ever. His original fund, SAC Capital, was shut down due to charges of insider trading by the US government (no charges were brought against Cohen himself), but after returning investors’ money and paying a $1.2 billion fine, Cohen now manages his own money and that of eligible employees in a reduced and renamed form of the same organisation. With 850 employees and more than 350 investment specialists, ‘Point72 primarily invests in discretionary long/short equities and makes significant quantitative and macro investments.’
Bridgewater Associates’ manager Ray Dalio took home a huge $1.2 billion last year. Dalio himself founded the firm in 1975, making it one of the more long-running and consistently successful hedge funds in the world – though it has evolved over the years from its beginnings as an investment advisory service. At one point in 2011 it was the world’s largest macro hedge fund, with over $120 billion under management. It serves a wide range of institutional clients, including foreign governments, central banks and pension funds. Bridgewater takes a global macro investing style, looking at long-term trends including interest rates, inflation, exchange rates and political developments.
Soros Fund Management LLC. Managed by the legendary George Soros, who earned $1.2 billion in 2014, the fund should need little introduction. Strictly speaking the fund is a family office, meaning that it is a private company that manages funds for a single family, though it was formerly a hedge fund. It was founded in 1969 by Soros and over the course of the next 40 years achieved incredible returns averaging 20 percent per year, making it one of the most successful funds of all time. Soros invests in a wide range of equity, currency and commodity markets. Soros, of course, won the title of ‘The Man Who Broke the Bank of England’ after short-selling sterling against German marks in 1992. The pound crashed to a level at which the British government had to withdraw it from the European Exchange Rate Mechanism, earning Soros $1.8 billion.
Pershing Square Capital Management, L.P. is run by William Ackman, who was paid $1.1 billion last year. Ackman started Pershing in 2004 with $50 million of his own and a business associate’s money. He has built it up into an $18 billion business by investing in value stocks, taking both long and short positions. Pershing is known for seeking to influence the strategies of those companies in which it makes an investment, taking an activist role to benefit the hedge fund.
Citadel LLC, run by Ken Griffin, is a multistrategy hedge fund and asset manager. It makes a substantial proportion of its revenues from order flow internalisation – fulfilling stock orders from its own inventory, thereby benefiting from the spread. Griffin earned $1.1 billion for his role in managing around $26 billion of capital, and its strong returns of over 20 percent in two years during the financial crisis, when other hedge funds averaged a 5 percent loss, makes it one of the most successful funds in existence. Citadel is a large market-maker, operating in thousands of different securities worldwide.
Renaissance Technologies Corp is managed by James Simons, who earned $1.1 billion last year. Renaissance operates three funds with over $22 billion under management. Because these funds have been incredibly successful (the Medallion fund returning an average of 35 percent per year after funds over a ten-year period), Renaissance’s fees are significantly higher than other hedge funds. Whereas the industry standard is a 2 percent management fee and 20 percent of profits, Renaissance charges 5 percent and 44 percent. The firm uses quantitative analysts (‘quants’) and complex mathematical modelling to achieve returns in a number of key markets.