Top hedge funds earn sharply less for clients

Making a point: Bridgewater Associates’ co-chief investment officer Bob Prince during a interview in Davos, Switzerland. The company might have slipped in the pecking order, but still earned US$6.2bil (RM26.57bil) for its investors in second spot. — Bloomberg

NEW YORK: The 20 best performing hedge fund managers earned US$22.4bil (RM96bil) for investors in 2022, marking their slimmest gains since 2016 as many firms, including Tiger Global Management, struggled with slumping financial markets, LCH Investments data shows.

The top 20 managers, led by Ken Griffin’s Citadel, Bridgewater Associates and D.E. Shaw Group, made less than half of the US$65.4bil (RM280.3bil) the group returned in 2021 when rising stock prices led to a record return. In comparison, they made US$63.5bil (RM272.1bil) in 2020 and US$59.3bil (RM254.1bil) in 2019.

In 2022, when fears of rising interest rates and geopolitical uncertainty weighed on markets, investment firms that focused on trading strategies and bet on macroeconomic trends reaped gains. Those with strategies linked to market moves stumbled.

Rick Sopher, chairman of LCH, a fund of funds firm that tracks returns and is part of the Edmond de Rothschild Group, said 2022 was a year of “great divergence” in which several of the top 20 managers managed to make gains for their investors despite the significant falls in equity and bond markets.

Last year will mostly be remembered as a tough one, with the S&P 500 index losing 20% and blue-chip hedge fund managers like Tiger Global and Third Point nursing losses.

Overall, hedge funds lost US$208bil (RM891.4bil) in 2022 for clients, marking the biggest single-year decline since 2008, when they lost US$565bil (RM2.4 trillion).

Hedge funds often promise to outperform, especially when markets are stumbling.

There was a shakeup among the very best performers as Griffin’s Citadel, which earned US$16bil (RM68.6bil), moved into the top spot ahead of Bridgewater, which earned US$6.2bil (RM26.6bil).

D.E. Shaw, Millennium Management, Soros Fund Management, Elliott Management and Viking Global were also in the top 10.

Caxton Associates and Moore Capital, firms helped by macro trading in 2022, made it back onto the list, LCH said, while Tiger Global, whose founder Chase Coleman got his start at Julian Robertson’s Tiger Management, and Third Point dropped off the list.

Citadel, which was founded by Griffin in 1990, saw its flagship Wellington portfolio gain 38% last year while its fixed income fund was up 33%, according to a person familiar with the numbers. — Reuters

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