Bridgewater’s Year May Have Been Bad – But There’s More to That Story

Despite a subpar 2019, Ray Dalio’s firm has still returned a whopping $58.5 billion to investors over its lifespan, according to recently released data detailing the net gains of the top hedge funds in the world.

Illustration by II (Photos by Jason Alden, Patrick T. Fallon, Simon Dawson/Bloomberg)

Illustration by II

(Photos by Jason Alden, Patrick T. Fallon, Simon Dawson/Bloomberg)

Ray Dalio’s Bridgewater and Chris Hohn’s TCI Fund Management are the reigning kings of hedge funds, according to data released by London-based asset management firm LCH Investments.

In LCH’s annual list of the 20 hedge funds that made the most money for their investors, Bridgewater remains at top of the all-time list, with $58.5 billion in net gains since its inception in 1975. This is despite its major macro fund, Pure Alpha 18, being down 0.5 percent in 2019 – a year that saw equity markets skyrocket.

This far exceeds George Soros’ Soros Fund Management, which retains second place in history with total gains of $43.9 billion, all of which was generated when it still managed outside money. The legendary Hungarian investor returned the small amount of outside capital that it still managed at the end of 2011 to avoid complying with requirements of the Dodd-Frank legislation.

Multistrategy specialist Citadel remained third overall, sitting at $35.6 billion net gains since inception after making $4.9 billion for investors last year, when its flagship Wellington fund was up 19.4 percent.

For 2019 alone, however, both Citadel and Bridgewater were bested by TCI Fund Management. Last year, TCI led all hedge funds with $8.4 billion in net gains. This was the result of a 40.6 percent return, according to an investor. TCI manages about $28 billion and is essentially a long-only manager.

Since its 2004 inception, TCI has generated $22.8 billion in net gains, ranking number 14 historically, according to the report – marking its debut on the historic top-20 list.

Stephen Mandel’s Lone Pine Capital produced the second largest net gain last year, at $7.3 billion. Since its inception, it has produced $33.2 billion in gains, ranking fourth overall, up from number seven last year.

James Simons’ Renaissance Technologies produced $5.6 billion in gains last year, bringing its all-time total to $22.3 billion. As a result, it now ranks 15th historically, up from number 17 last year. However, LCH stresses that this data does not include Renaissance’s very successful – but very secretive – Medallion Fund, noting it has “not been able to adequately verify” its results.

Besides TCI, the only other newcomer to LCH’s top-20 ranking is Egerton Capital, the London-based firm headed by John Armitage. It ranks 18th overall with $18.9 billion in net gains since inception after generating $5 billion in gains in 2019 alone.

According to an investor, last year Egerton’s long-only fund was up 34.1 percent, while its long-short fund rose 21.8 percent.

With TCI and Egerton joining the list, two firms, by definition, had to fall off of it: quant-specialist Two Sigma and macro firm Caxton Associates.

Altogether, in 2019 alone, the 20 hedge fund firms that top the all-time net gains list generated $59.3 billion for its investors, according to the report. This accounts for roughly one-third of the $178 billion in net gains produced by all hedge funds last year.

This is a significant difference from the previous year, when the 20 managers who at the time had produced the largest net gains since inception made $23.2 billion net of fees for their investors, while all other hedge fund managers lost $64.2 billion net for their investors.

LCH’s ranking includes many among the largest and best-known hedge funds, most of which were launched in the 1990s or before. All but one of the founders of these firms often dominate the top of the Rich ListInstitutional Investor’s annual ranking of the highest-earning hedge fund managers – especially in years like 2019, when the U.S. stock market was up around 30 percent and most other markets performed well.

According to LCH, the 20 hedge fund managers that have generated the most gains for their investors since their inception have produced a total of $557.8 billion in gains.

LCH calculates that all current active hedge fund firms managing a total of $3.285 trillion have produced $1.275 trillion in net gains since their inception.

At least three firms among the top-20 have seen the founders replaced, at least on a day-to-day basis. But they have remained on LCH’s ranking because the firms are still run similarly by the new teams.

They include Lone Pine Capital, whose founder Stephen Mandel, Jr. no longer runs its funds on a day-to-day basis; Och-Ziff Capital Management, which is now called Sculptor Capital Management and is no longer headed by founder Dan Och; and Farallon, which is now headed by Andrew Spokes.