According to the inaugural ranking of hedge fund managers by news outlet Bloomberg, the top ten highest-earning hedge fund managers made a mouth-watering $7.7 billion in 2018.
James Simmons led the inaugural list, earning $1.2 billion in additional income in 2018, which saw his net worth swell to $16.55 billion. His hedge fund, Renaissance Technologies, is one of the largest hedge funds by assets under management, with over $80 billion in assets as at the close of last year.
The top five was rounded up by Ray Dalio (Bridgewater Associates, $1.26 billion), Bitcoin-bashing Ken Griffin (Citadel, $870 million), John Overdeck and David Siegel (Two Sigma, $770 million).
A Three-Comma Affair
All of the names on the top ten were billionaires, with Jeff Talpins (Element Capital Management, $420 million in 2018), who appeared at 7th on the list, having the least net worth of $1.56 billion. Asides from topping the list as regards a jump in income, Simmons also had the highest net worth, narrowly beating Dalio’s $16.2 billion personal wealth mark. To create the ranking, the news outlet analyzed filings with the Securities and Exchange Commission (SEC), updates on the websites of these hedge funds, as well as reviews of public news about the companies’ investments and actions to determine the volume of assets under each hedge fund’s management.
Not an Industry-Wide Appreciation
As promising as these numbers are, they don’t mirror the general performance of the entire hedge fund industry. For the large part, quant, well-established funds saw decent returns for 2018. Firms invested in equity-oriented funds, didn’t make the cut.
According to the Fund Weight Composite Index compiled by research firm HFR, the average hedge fund fell by 4.07% last year. Still, after years of watching their industry’s performance fall behind that of the stock market, the hedge fund industry was finally able to outperform stocks.
Fund managers saw the end of quantitative easing methods by central banks as an opportunity for them to return to the days of large bets and chances of even larger returns. With the rise in market volatilities and interest rates, the hedge fund industry seemed set to propel itself to record-setting numbers once again.
Funds Closed Too
Sadly, one major milestone that many hedge fund managers will not like to reminisce on was the level of fund closures experienced in the market. In October 2018, after being unable to raise sufficient capital, three separate funds, including Criterion and Tourbillon, ceased operations in a single week.
There have been many theories and little agreements as regards why 2018 was such a challenging year for hedge funds. Even with no quantitative easing, one thing hedge funds have come to realize is that convincing investor with grandiose promises of the returns of glory days is now more difficult. High asset valuations and the continued incidence of unexpected risks have led to downplayed expectations from investors, as most of them have begun looking for safer investment havens.