Size matters, it would seem, in the world of elite hedge fund managers. George Soros' Quantum Fund had its 2nd-best year on record, adding $5.5bn (22%) to the pound-breaking billionaire's horde and has now shifted above Ray Dalio's Bridgewater fund as the most successful hedge fund of all time. As The FT reports, since inception in 1973, Quantum has generated almost $40bn. Four other funds including Tepper's Appaloosa, Mandel's Lone Pine, and Klarman's Baupost also made more than $4 bn for their investors. Since they were set up, the top 20 hedge funds have made 43 per cent of all the money made by investors in more than 7,000 hedge funds.
Soros Best of all-time...
George Soros’s Quantum Endowment fund had its second-best year ever in dollar terms in 2013, adding $5.5bn to the billionaire’s fortune and putting Quantum back in top place among the most successful hedge funds of all time.
The gains mark a return to stability for Quantum, which Mr Soros closed to non-family members at the end of 2011 to avoid regulatory scrutiny under the Dodd-Frank financial reforms.
Last year’s return means Mr Soros has displaced Ray Dalio’s Bridgewater Pure Alpha as the fund that has made the most money for investors. It has generated almost $40bn since it was founded in 1973, according to Rick Sopher, chairman of LCH Investments, who compiled the rankings.
But size matters...
Four other funds made $4bn or more last year, all correctly calling the strong run in equities, which resulted in the US stock market returning 32 per cent. They were Lone Pine and Viking, the most successful “Tiger cub” protégés of Tiger Management’s Julian Robertson; David Tepper’s Appaloosa; and Baupost, founded by the Boston-based deep-value investor Seth Klarman.
The firms benefited from winning bets on companies such as Priceline.com Inc., Goodyear Tire & Rubber Co. and Delta Air Lines Inc. that outperformed U.S. stock market indexes, regulatory filings show.
Since they were set up, the top 20 hedge funds have made 43 per cent of all the money made by investors in more than 7,000 hedge funds.
And some are on the comeback...
John Paulson returned to form in 2013 by netting clients $2.6 billion, according to LCH’s report. Paulson, who became a billionaire in 2007 betting against the U.S. housing market, posted gains in 2013 ranging from 18 percent to 63 percent at several of his strategies, a person with knowledge of the matter told Bloomberg News last month.
Paulson, whose New York-based firm manages $20 billion, made $200 million for his clients in 2012 after losing almost $10 billion for them in 2011 when he had his worst investing year, according to LCH.
Perhaps best summing up the current euphoria, one hedge fund analyst noted (somewhat ironically given the name "hedge fund"):
“Too many managers now focus on risk control at the expense of returns.”
But there was a warning:
“The challenge will be to trade tactically,” he said. “The discounting of financial repression over the past few years has merely brought forward future returns and left a rather less enticing landscape to long-only managers.”