The rich keep getting richer — especially when it comes to hedge fund managers.
Although last year hedge funds suffered their worst aggregate performance since the financial crisis — and 60 percent of all funds lost money, according to data tracker HFR — the 20 most successful hedge fund managers were not adversely affected, according to London-based investment firm LCH Investments’ annual ranking of the most successful hedge funds of all time.
This prestigious group of managers made $23.2 billion net of fees for their investors last year, according to estimates by LCH, a fund-of-funds firm launched in 1969. By contrast, all other hedge fund managers generated $64.2 billion in net losses for their investors, according to the report.
“This is an impressive performance,” said Rick Sopher, chairman of LCH Investments, in a press release. “Most managers in the top 20 either managed to stay out of trouble when equity markets fell sharply toward year end, or had an investment approach that was not linked to the direction of equity markets.”
LCH ranks the managers by net gains after fees since their inception. The top 20 hedge fund managers have generated $500.3 billion of the total gains generated by all managers, or 45.6 percent of the total, even though they only account for 17.9 percent of the assets, LCH found.
Ray Dalio’s Bridgewater Associates was the clear winner of this year’s ranking. For one thing, it topped last year’s earners, generating a total of $8.1 billion in net gains for investors. Since inception, Bridgewater also ranks No.1, having generated a total of $57.8 billion for investors.
As we earlier reported, last year the firm’s flagship Pure Alpha strategy gained 14.6 percent net of fees.
We also recently reported that Dalio earned $2 billion for himself based on gains on his own capital in the funds and his share of the fees.
In 2018 the hedge fund managers who made the most money for their investors were computer-driven managers who use systematic strategies without taking significant equity market risk, according to LCH. In other words, they did not depend on the direction of the stock market to make money. In addition to Bridgewater, these firms include Renaissance Technologies and Two Sigma.
Interestingly, for the first time LCH included Jim Simons’ Renaissance Technologies, which in the past was left off the ranking even though it is widely deemed the most successful hedge fund manager of all time.
It made $4.7 billion for its investors in 2018, ranking second for the year. Since its 2005 inception — the date LCH uses, since that is when Renaissance opened additional funds to take in outside capital — it has generated a total of $16.7 billion for its investors, ranking number 17 overall.
LCH does not include the gains generated by Renaissance’s oldest fund, the Medallion Fund, which has been closed to outsiders for more than a decade and now manages money only for partners and employees.
Two Sigma, headed by John Overdeck and David Siegel, made $3.2 billion for investors last year, third most among the top-20 firms. Since inception it ranks No. 19, at $15.2 billion.
George Soros’ Soros fund Management continues to rank second, with $43.9 billion since inception, even though in 2011 Soros announced he was returning all outside money to investors. However, this year LCH stopped counting its gains or losses.
Ken Griffin’s Citadel remains third overall at $30.7 billion since inception, after making $2.1 billion for investors last year. Its flagship Kensington and Wellington multistrategy funds gained more than 9 percent last year.
Of the funds in the top 20, LCH says six lost money for their investors last year: Stephen Mandel Jr.’s Lone Pine Capital, O. Andreas Halvorsen’s Viking Global Investors, David Tepper’s Appaloosa Management, Louis Bacon’s Moore Capital Management, John Paulson’s Paulson & Company, and Brian Higgins and Francis Biondi’s King Street Capital.