In a repeat performance, Ray Dalio (Trades, Portfolio) made the most money of any hedge fund manager in the U.S. last year, accumulating $8.1 billion in net gains.
The wealth ballooned assets at his firm, Bridgewater Associates, to $133.0 billion at year-end, multiple times more than his nearest competitor on the annual list of highest-earning hedge fund managers produced by LCH Investments NV. Dalio founded his Connecticut-based firm in 1975, and has raked in $57.8 billion cumulatively since then for mostly large institutional clientele.
Reaping $4.7 billion in gains, Jim Simons' (Trades, Portfolio) quantitative fund Renaissance Technologies, which appeared on the list for the first time, had the second-best year and 17th best run of its peers. Since its founding in 2005, Renaissance has racked up $16.7 billion in gains using its mathematical and statistical methods. The secretive New York-based firm ended the year with $40.5 billion in assets under management.
But a rosy year for some brought only suffering for others. The top 10 managers eked out $11.0 billion in gains and the top 20 netted $23.2 billion in 2018, while other hedge funds lost a cumulative $64.2 billion.
Total gains for the year also reflected a drastic change in fortunes for hedge funds compared to 2017. The top 10 managers reported $25.7 billion in net gains and the top 20 reaped $38.7 billion for the year. The largess spread to more funds as well, with all reported hedge funds gaining $142.8 billion.
Many hedge funds seemed susceptible to the market’s direction, which abruptly reversed course last year after a historic advance. The S&P 500 buoyed firms with a 21.83% rise in 2017 compared to a 4.38% loss in 2018.
Few funds saw significant changes in ranking in 2018, though. Soros Fund Management maintained its second place stature with $43.9 billion in net gains since inception, while Ken Griffin’s Citadel held steady at third place with $30.7 billion in returns overall and $2.1 billion more in 2018. Seth Klarman (Trades, Portfolio), the renowned value investing founder of Baupost Group, moved up to fifth place from sixth with $27.4 billion in gains after pulling in only $400 million last year versus $1.4 billion in 2017. Steve Mandel (Trades, Portfolio)’s Lone Pine fell several places to seventh place from fourth with an annual loss of $1.3 billion.
Notably, John Paulson (Trades, Portfolio)’s dwindling firm Paulson & Co. remained on the list, falling to 16th place from 15th with a loss of $200 million in 2018 and $17.9 billion gain overall since inception.
The year’s worse losses for a top-ranked hedge fund befell Steve Mandel (Trades, Portfolio)’s Lone Pine Capital. The Greenwich, Connecticut-based fund bled $1.3 billion in net losses for 2018, dropping to seventh place from fourth. Since its 1996 inception, the firm has amassed $25.9 billion for investors. It also built assets to $22.5 billion from $15.9 billion at year-end 2017 after surpassing all other top-ranked funds with a $5.0 billion gain.
Mandel’s sizable weighting in the tech sector likely influenced the returns. He increased the long stock portfolio’s tech investments from 30.4% in first quarter 2017 to 42.8% at third-quarter end 2018. Meanwhile, the S&P 500 Information Technology ETF soared 38.8% in 2017 before declining 0.29% in 2018. The new year has started out better for the firm, with GuruFocus data showing that all of his positions are up year to date, including largest holdings Alibaba Group (BABA, Financial) and Microsoft (MSFT, Financial).
Read more here:
Podcast Transcript: Craig Thrasher CFA on International Small-Cap Investing
