The Rich List’s Losers

Nearly half of the managers in last year’s ranking of the 25 highest-earning managers fell off the list this year.

Illustration by II

Illustration by II

The stock market’s brutal sell-off in the fourth quarter of last year plunged many hedge fund managers into losing territory for 2018 — and wreaked havoc with Institutional Investor’s annual Rich List ranking of the 25 highest-earning hedge fund managers.

Twelve individuals who qualified for the list in 2018 dropped off this year’s ranking, even though the minimum required was just $50.8 million — the lowest threshold to make the list since 2003. Several of the top earners a year ago were in good shape for most of 2018, until they suffered huge losses in the fourth quarter. Some were felled by their December performances alone.

Not every manager in this group lost money last year. And only two of the 11 highest-earning managers in 2018’s ranking failed to qualify for this year’s: Appaloosa Management’s David Tepper and Third Point’s Daniel Loeb.

Tepper, the eclectic investor who placed second on last year’s list after earning a cool $1.5 billion in 2017, posted slight losses in his firms’ main funds in 2018. As a result, Tepper failed to make the cut for the first time since the 2012 ranking. Even so, his funds lost less in 2018 than the Standard & Poor’s 500 and most other major stock market indexes.

Appaloosa’s total assets under management also plunged by about 30 percent over the previous year, according to a recent regulatory filing. The bulk of this decline came from Tepper’s voluntarily returning capital to investors, although performance losses and redemptions also played a role.

Third Point’s Loeb, who ranked seventh last year with $625 million in earnings, fell off the list after his firm’s Third Point Offshore fund lost 11.3 percent in 2018.

Three of the five so-called Tiger Cubs — descendants of Julian Robertson Jr.’s legendary hedge fund firm Tiger Management Corp. — who qualified a year ago also slid off the list after some of their funds posted losses for the year. One is Lone Pine Capital founder Stephen Mandel Jr., who earned $325 million in 2017 and ranked No. 17 last year. He failed to qualify for the Rich List in 2018 — his final year running Lone Pine’s funds on a day-to-day basis — after his long-short equity hedge funds lost between 13 and 14 percent in the fourth quarter. They finished the year with losses of 4 to 5 percent, according to an investor in the funds. Lone Cascade, the firm’s long-only fund, also lost between 4 and 5 percent in 2018, after plummeting 17 to 18 percent in the fourth quarter.

Another Tiger Cub who tumbled from the ranking this year, Coatue Management’s Philippe Laffont, suffered a 1.2 percent loss in his Coatue Qualified fund last year. Laffont earned $550 million in 2017, placing 12th on last year’s list.

Viking Global Investors’ O. Andreas Halvorsen, also a Tiger Cub, ranked No. 18 last year but dropped off the list this year. Viking Global Equity, his firm’s long-short equity fund, eked out a 1 percent gain in 2018, and the Viking Long Fund lost 9.3 percent for the year.

Glenview Capital Management’s Larry Robbins — who has no ties to Tiger — also failed to qualify this year after earning $230 million in 2017 and ranking No. 23 last year. His firm’s flagship fund, Glenview Capital Partners, lost more than 16 percent in 2018, with most of those losses suffered in December, according to a document from investment bank HSBC that tracks hedge fund performance.

Not everyone who fell off the Rich List is a stock picker.

King Street Capital Management co-founders Brian Higgins and O. Francis Biondi Jr. failed to make the list after their flagship fund returned just 0.35 percent last year. The pair tied for 24th place the previous year, earning $225 million apiece.

King Street is a global long-short credit and event-driven firm that had roughly 50 percent of its assets in cash for several years, although its cash position has fallen below that level more recently.

Michael Hintze, who heads credit-focused hedge fund firm CQS, also failed to qualify after the CQS Diversified fund, a credit-oriented multistrategy fund, suffered a 1.7 percent loss, according to HSBC. In 2017, Hintze earned $290 million, landing him at No. 19 in last year’s ranking.

The three other individuals who qualified for the Rich List last year but not this year are Perceptive Advisors’ Joseph Edelman ($525 million in 2017 earnings), Omega Advisors’ Leon Cooperman ($500 million), and York Capital Management Global Advisors’ Jamie Dinan ($350 million).