In this piece, we will take a look at the 15 best hedge funds to work for. For more hedge funds, head on over to 5 Best Hedge Funds to Work For.
The outbreak of the coronavirus pandemic in 2019 and the resulting stock market crash of 2020 made many investors and industry watchers believe that 2020 was one of the worst years for the stock market. As economies all over the globe shuttered down, economic output and firms' top and bottom lines dropped - causing investor fright that saw a capital flight from the stock market with major indexes erasing one third of their value.
However, the markets recovered soon, as stimulus spending by the government and an uptick in demand for technology products erased the jitters that many were feeling. 2021 was a year of recovery, and the market entered 2022 believing that the worst might be over and the year of returns was upon us. However, macroeconomic problems resulting from expansionary fiscal policies and the Russian invasion of Ukraine would mark another bloodbath of a year for the stock market as historic inflation fueled by a low rate environment, stimulus packages, and a commodity market shock ate through corporate balance sheets and depressed earnings.
At the same time, central banks all over the world started to tighten their monetary policies and increased benchmark interest rates. These rising rates, coupled with inflation, divided the stock market into two segments - one consisting of firms that benefited from the commodity crisis and saw their share prices rise, and the other made up of high growth technology firms whose sales are dependent on strong purchasing powers and which saw their share prices tank.
In this split market, many hedge funds were caught off guard. In fact, according to a report from LCH Investments - often called the hedge fund of hedge funds - 2022 was the worst year for the industry since the 2008 economic crisis. LCH reported in January 2023 that last year the hedge fund industry lost a whopping $208.4 billion. However, this is not the only shocking bit of the performance report. A stunning 9% of these returns were suffered by a single hedge fund, namely, Chase Coleman and Feroze Dewan's Tiger Global.
According to Insider Monkey's data, Tiger Global's portfolio was worth $8.1 billion by the end of last year's fourth quarter, saw the portfolio's value drop by 25% from the third quarter and by an absolutely stunning 82% annually since the portfolio had stood at a sizeable $45 billion by the end of 2021. LCH's data makes it clear why this was the case since the fund of funds reports that last year Tiger Global ended up losing $18 billion. To understand the true scope of these losses, consider the fact that between 2001 and 2021, the hedge fund had made $25 billion in returns for its investors, and it lost almost all of this money in a single year.
After Tiger Global, Dan Loeb's Third Point Capital was another fund that reported significant losses for the year. It lost $3.5 billion in 2022, with Insider Monkey's data showing that the fund's portfolio was worth $5.9 billion. While, unlike Tiger Global, this marked a gain of $400 million in the fourth quarter over the third quarter of 2022, it nevertheless marked a painful 58% annual drop over the 13F portfolio value of $14 billion as of 2021 end. Yet, Third Point was still relatively better off in terms of 2022 losses, as John Armitage's Egerton Capital ended up losing $4.1 billion and Stephen Mandel's Lone Pine Capital was one of the worst performing funds in the industry with a $10.9 billion loss.
With 2022 a thing of the past, it's time to take a look at what's in stock this year. And while hedge funds lost billions last year, not all of them made losses. The big winner of 2022 was Ken Griffin's Citadel Investments, which topped LCH Investments 2022 top hedge fund list by returning $65.9 billion in gains since inception and beating Ray Dalio's Bridgewater Associates - the largest hedge fund in the world in terms of net asset value. The big themes for this year are the same as those for last year, with recession, inflation, and interest rates being at the forefront of investors' minds. And, who better than to listen for advice than 2022's star player Mr. Griffin, who in a recent interview with Bloomberg shared his thoughts on the current macroeconomic environment and outlined:
And I do think that you know everyone has these very high expectations that the Fed can just work magic on inflation and they don't have it that easy. And that's why I really believe that the consistency of messaging is so important. Because of part of how the Fed gets the job done, is the perception of the American public that they can get the job done. Right inflation has a significant component around expectations. If you think prices are going higher, you're gonna be much more demanding in your wage negotiations as a union for example. Or as an employee. You're gonna really be focused on how to get your wages as fast as you can, because you can see the bills coming your way. The Fed breaks up expectations of inflation.
Mr. Griffin added that the excess savings during the pandemic, as people were restricted from going out or traveling, led to massive savings to the tune of trillions of dollars. This money, according to him is flowing back into the economy and will make the latter half of this year ''interesting'' to watch as a transition point since according to his estimates, roughly a trillion of it is still left with people in the form of excess savings, with a spending rate of $100 billion per month.
Amidst this backdrop, we'll take a look at some of the best hedge funds to work for especially in the aftermath of last year's bloodbath.
15 Best Hedge Funds to Work For
Ken Griffin of Citadel Investment Group
Our Methodology
Since the top twenty hedge funds in terms of returns made since inception did not all make a profit, we divided our list into two portions to attune it to recent developments. The top ten funds are ranked according to their net gains in dollar terms last year, with the bottom five ranked based on their net gains in dollar terms since inception. So let's start.
15 Best Hedge Funds to Work For
15. Sculptor Capital Management
Gains Since Inception: $29.9 billion
Sculptor Capital Management is among the top thirty hedge funds in the world in terms of total assets as of June 2022, when it managed total assets worth $15.4 billion. While the fund posted a $1.8 billion loss in 2022, since its inception it has made $29.9 billion in gains since inception.
14. Lone Pine Capital LLC
Gains Since Inception: $31.3 billion
Lone Pine Capital LLC is an American hedge fund that was set up in 1997. The fund has $31.3 billion in gains since inception, and it posted a massive $10.9 billion loss in 2022. The fund has offices in New York, London, and San Francisco. As of June 2022, it had $5.4 billion in total assets.
13. Baupost Group
Gains Since Inception: $33.2 billion
Baupost Group, set up by Seth Klarman, is known for holding most of its funds in cash and returned more than 20% during its initial years. However, in 2022, it lost $1.5 billion. Despite this, Baupost ranks at number 15 in the list of the world's largest hedge funds with $15 billion in assets and has made $33.2 billion in returns since being set up. Naturally, these massive gains since inception make the fund one of the best hedge funds to work for.
12. Baupost Group
Gains Since Inception: $35 billion
Viking Global Investors is an American hedge fund based in Greenwich, Connecticut. Its portfolio was worth $19.9 billion as of the end of last year's fourth quarter, and by 2022 end, the fund had made $35 billion in net gains since being set up. This was despite $3 billion in losses during the year.
11. Soros Fund Management, LLC
Gains Since Inception: $43.9 billion
Soros Fund Management, LLC is one of the most famous hedge funds in the world, as it was set up by George Soros who is known for having made billions by predicting currency volatility. The fund has made $43.9 billion since inception, and its losses or gains for last year are not available since it is now a family office after having returned 20% for decades.
10. Farallon Capital Management, L.L.C.
Gains In 2022: $500 million
Farallon Capital Management, L.L.C. is an American hedge fund set up in 1986. It focuses on real estate, illiquid firms, energy, and a long/short strategy. The fund made $500 million in net gains last year, with $33.1 billion in gains since inception. The combination of gains both last year and throughout its history make Farallon Capital one of the best hedge funds to work for.
9. Appaloosa Management
Gains In 2022: $1.6 billion
Appaloosa Management is an American hedge fund that was set up in 1993. The firm primarily focuses on distressed debt and bankrupt companies. It generated $1.6 billion in returns last year, had $14 billion in assets as of June 2022, and has made $32.3 billion in returns since its inception.
8. Caxton Associates
Gains In 2022: $2.1 billion
Caxton Associates is a hedge fund with offices all over the world in cities such as New York, Sydney, and London. It made $2.1 billion in returns last year, and has raked in $19.8 billion in returns over its lifetime. Caxton Associates is one of the best hedge funds to work for due to having performed well in a turbulent year.
7. Point72 Asset Management
Gains In 2022: $2.4 billion
Point72 Asset Management ranks among the top twenty hedge funds in the world as of June 2022 through its $26.1 billion in assets. Its returns stood at $2.4 billion last year, with total returns of $30.1 billion.
6. Elliott Investment Management
Gains In 2022: $2.8 billion
Elliott Investment Management is a specialist hedge fund called an activist fund, which means that it takes up large stakes in poorly performing firms to influence a turnaround. The fund made $2.8 billion last year.
