Twelve billion dollars.
It’s more than JPMorgan Chase paid all 56,000 of its investment bank employees, and almost twice as much as gamblers lost in Las Vegas last year.
It’s also what 15 hedge fund managers collectively earned in 2019.
Five of them — Chris Hohn, Jim Simons, Ken Griffin, Steve Cohen and Chase Coleman —reaped more than $1 billion each, according to estimates by the
The rewards for the men — and they’re all men — are notable, especially given only a third of the 15 managers on the list beat the S&P 500’s 29% gain last year. It also comes as the hedge fund industry has been grappling with closures and mediocre returns.
Hedge fund advocates say they’re supposed to profit regardless of whether the market goes up or down and performance shouldn’t only be compared with equity indexes. Still, many were boosted by soaring stocks as central banks, including the Federal Reserve, kept monetary policy loose.
Many of the firms made money betting on the same stocks, typically tech names. More than half those on Bloomberg’s list counted Alibaba Group Holdings and Facebook among their top 10 contributors to equity returns, according to an analysis of regulatory filings.
“If that’s where the opportunity is, it’s where it is,” said Darren Wolf, head of alternative investment strategies for the Americas at Aberdeen Asset Management, which invests in hedge funds on behalf of its clients. “But it creates challenges for us,” he said, because Aberdeen’s clients are already invested in indexes heavily weighted with tech stocks.
Most of the managers on this year’s list charge fees of at least 20% on gains, even as the industry is slashing fees amid pressure from investors disappointed with years of lackluster performance. Representatives for the firms on the list declined to comment.
Marcus Frampton, chief investment officer for Alaska Permanent Fund, said his firm, which oversees $68 billion, is “happy to pay 20% in fees” as long as a manager consistently produces benchmark-beating returns. “That represents skill not market exposure."
Hohn, 53, topped the rankings after his TCI Fund Management gained 41%. The London-based activist was lifted by concentrated bets on stocks, including Alphabet, Microsoft and Canadian rail companies.
Griffin, 51, made $1.5 billion through his multistrategy funds. That doesn’t even take into account his market-making operation, Citadel Securities, which generates billions more in revenue.
Simons, 81, features prominently on the list even though he retired from Renaissance Technologies a decade ago. His ownership stake in the firm, which now manages $75 billion — plus his investment in the secretive Medallion Fund — almost guarantees that he’ll continue to be among the highest-paid managers for years to come.
-
Following criticism for its faulty 2016 election algorithms, the firm appointed a new research director to collaborate with its quants and money managers.
March 5 -
The recent plunge raised suspicions that quants had caused or exacerbated the sell-off.
February 14 -
Despite returns of about 8% last year, the products lagged behind the S&P 500’s 22% climb.
January 5
Bridgewater Associates founder Ray Dalio collected $480 million, down from $1.3 billion in 2018, after his flagship fund Pure Alpha II lost money for the first time in two decades. Dalio's All Weather strategy fared better, gaining almost 17% last year, while he continues to have a sizable ownership interest in the $160 billion Connecticut-based firm.
The list excludes those who no longer manage external capital, such as Michael Platt and Stanley Druckenmiller, but is notable for featuring so many Tiger Management alumni.
These are the so-called Tiger Cubs, who worked for legendary investor Julian Robertson, and Tiger grandcubs. Lone Pine’s Stephen Mandel and Tiger Global’s Coleman each gained more than 30% in their main funds. Andreas Halvorsen of Viking Global returned 18%. His former chief investment officer, Dan Sundheim, returned 22% at his relatively new firm D1 Capital Partners.
“They all had good years because they tend to be net long,” Alaska’s Frampton said of the Tiger complex. — Additional reporting by Michelle Davis and Nishant Kumar
HOW THEIR INCOME WAS CALCULATED
Bloomberg’s ranking of hedge fund manager income shows that the top 15 individuals earned about $12.4 billion last year.
Bloomberg used SEC filings, company websites and news reporting to determine assets under management. Those figures are for the start of 2019 and don’t include asset inflows and outflows during last year.
Fee details were taken from SEC filings and reporting. Where there was no disclosure, Bloomberg assumed a 2% management fee and 20% performance fee. Management fees aren’t included as part of the profits.
Some firms run dozens of individual funds and strategies. In general, Bloomberg’s analysis only includes the largest and most material funds within the investment firms.
They’re more expensive than their passive peers. But did they beat their benchmarks?
Some hedge fund managers hold significant assets outside of traditional hedge fund activities, including venture capital or low-fee strategies, which also aren’t included in the analysis.
The information on how much each hedge fund owner had invested in their own funds comes from SEC filings and calculations done previously for the Bloomberg Billionaires Index. Ownership percentages of firms are based on regulatory filings and reporting, and phantom equity interests in firms may mean ownership is overstated.
Gross performance fee figures are calculated using annual return data for funds in the analysis. In most cases, Bloomberg assumes that half of the performance fees were distributed to employees and reinvested in the firm, with the owners collecting the other half.
Losses recouped from previous years are excluded when calculating returns on managers’ personal investments, and performance fees are calculated to take into account estimated high-water marks. Several of the year’s best performing hedge funds don’t appear on the list because they have yet to recoup losses incurred in previous years. There are also large hedge fund firms where no return data is available.
Hedge funds must manage funds for external clients to be included on the list. — Additional reporting by Tom Maloney and Pierre Paulden
