In this article, we will be taking a look at the 23 best hedge funds of all time. To see more of these hedge funds, you can go directly to see the 5 Best Hedge Funds of All Time.
Hedge funds play an essential role in the global financial markets. In addition to providing much-needed liquidity, they are closely followed as they provide insights into the direction the market is likely to move. They are the ultimate asset class of the affluent investors managing over $4 trillion in assets.
There are over 30,000 hedge funds globally, all leveraging different strategies and investing in different asset classes and sectors in the race to unlock value in the market. While some focus on stock investments, others are known to bet big on commodities, with others specializing in forex or fixed-income assets.
Some of the biggest hedge funds in the world are best known for engineering activist campaigns targeting companies that they feel are undervalued and mismanaged. By buying significant stakes in such companies, the hedge funds engineer campaigns not limited to management or board changes in the effort of unlocking and maximizing shareholder value.
Hedge funds aim to outperform traditional investment vehicles like mutual funds by taking long and short positions in various asset classes that yield profits regardless of what the broader markets are doing.
The strategies revolve around taking positions in stocks, bonds, commodities, currency derivatives, and alternative assets. Currently, hedge funds hold a record exposure to the seven tech stocks by market capitalization. The largest seven US stocks account for 20% of the total net market value hedge funds hold. This has always been the case in the past, given that tech companies boast of solid high growth rates.
For instance, hedge funds posted their worst performance in 2022 since 2018, dragged down by equities. Portfolio managers struggled to place bets amid market turmoil. Consequently, hedge funds fell by an average of 4.25%. Hedge funds that invest primarily in equities were down by 10.73% but still managed to beat the S&P 500, which was down by 19%.
Event-driven hedge funds that bet on mergers and restructurings were down by 5.04%, with cryptocurrency hedge funds tanking by an average of 55% amid the implosion experienced in the sector. Macro hedge funds that trade a broad range of assets from bonds to currencies to rates stocks and commodities were a bright spot, posting average gains of 9.31%.
The US plays host to the most number of hedge funds, being the epicenter of the global financial sector. Likewise, more than 60% of investment managers tasked with managing and generating returns in hedge funds can be found in the US.
23 Best Hedge Funds of All Time
Source:pexels
George Soros of Soros Fund Management, Paul Singer of Elliot Management, and Ray Dalio of Bridgewater are some of the biggest names shaping hedge fund landscapes. Their names are also known beyond the financial realm, often mentioned in the media owing to their actions in philanthropy politics, among other things. The top hedge fund managers of all time have made over $600 billion in net fees from their investors since inception.
Unknown to most people is that hedge funds are limited to accredited investors or large institutional clients. This is because they are subject to less regulatory oversight compared to traditional investment vehicles like mutual funds. They tend to generate higher alpha than traditional investment vehicles on their ability to take on much more investing risk due to strategic choice and the use of leverage.
Our Methodology
We have shortlisted some of the biggest hedge funds investing in an array of assets in the global financial sector. The sheer size of the funds means they are some of the best, going by the impressive gains they have generated since inception. The hedge funds are ranked based on the net gains since inception.
Best Hedge Funds of All Time
23. Steinhardt Partners
Founded: 1967
Net Gains Since Inception: $14.8 Billion
Founded in 1967 by Michael Steinhardt, Steinhardt Partners was one of the most successful and influential hedge funds in history. While working at the hedge fund, Steinhardt performed better than his peers by earning an average annual return of over 30% higher than every market benchmark.
In his book No Bull: My Life In and Out of Markets, he details some of the strategists that drove the hedge funds' success, including the ability to spot when to trade against the prevailing market trend. Part of the strategy included conducting in-depth research and analytical work while also making smart judgments.
Nevertheless, the hedge fund faced some controversies and was investigated in the 1990's for allegedly manipulating the treasuries market. The hedge fund shut its doors in 1995.
Based in Connecticut, Tudor Investment Corporation is an American investment firm founded in 1980 by Paul Tudor Jones. The hedge fund manages fixed income, currency equity, and commodity assets.
The hedge fund shot to the limelight in 1987 as Jones accurately predicted the stock Markey crash, with its short positions gaining 62% as the Dow Jones Industrial Average plunged 22%. In 2022, the hedge fund diversified its holdings with cryptocurrency investments to protect against rising inflation.
Third Point is a New York-based hedge fund founded in 1995 by Daniel Loeb. The hedge fund deploys an opportunistic event-driven approach to finding investments in select strategies while managing individual security and market risks.
The hedge fund under the stewardship of Daniel Loeb also engages in activist investment. It takes out stakes in companies it feels are undervalued and pursues strategic alternatives aimed at unlocking and maximizing value. For instance, the firm seeks changes at Bath & Body Works and board changes.
Incorporated in 1987, Icahn Enterprise is a conglomerate that also serves as billionaire investor Carl Icahn's hedge fund. The hedge fund specializes in taking large stakes in companies that the activist investor believes will appreciate from changes in corporate policy.
Icahn is known to take large positions in companies using the hedge fund and then pressure management to pursue strategic alternatives in the race to unlock shareholder value. Part of the changes that the activist investor often pushes for include sell of business units and the whole business. In addition, the activist investor pushes for board seats to direct the companies' directions.
Since 2011, the hedge fund no longer manages money from outside clients. However, investors can invest in Icahn Enterprises stock that trades in the market. The conglomerate has found itself in trouble in the recent past when old rival Bill Ackman called out its high valuation.
The stock tumbled by over 25% in May following a scathing attack from short-seller Hindenburg Research. The short seller alleged that Icahn was overstating the value of the firm's private asset portfolio.
Brevan Howard is an alternative asset management firm that was established in 2002. It focuses on global macro and digital assets. The hedge fund manages assets on behalf of institutional investors worldwide, including sovereign wealth funds corporate, and public pension plans.
The hedge fund is best known for employing traders from major investment banks, portfolio managers, and advanced quantitative analysts. Likewise, it boasts of a high turnover as traders are often cut if they don’t perform up to the company’s standards. Early in the year, the Macro hedge fund grounded some of its traders after hitting maximum losses after the collapse of the Silicon Valley Bank.
Despite the high staff turnover, the fund has delivered impressive results. Two of its most significant funds delivered double-digit gains in 2022 even as the overall market turned bearish. The $10 billion Brevan Howard Master Fund was up 20%, and the $12 billion Alpha Strategies fund gained 28%. Both funds are managed by traders specializing in different strategies, from rates, currencies, and credit to commodities.
Sculptor Capital was established in 1994 by Daniel S. Och with an initial investment capital of $100 million. The hedge fund manages a portfolio worth $4.5 trillion, spanning various industries, including technology, utilities, services, and financials.
The hedge fund provides products across multi-strategy credit and real estate. Its investment strategy benefits from collaboration among investment teams. Sovereign wealth and corporations, public pensions, and high net-worth individuals are some of the most prominent investors in the hedge fund.
Tiger Management is a hedge fund that was founded in 1980. It makes investments in both public and private companies. It mostly invests in internet, software, consumer, and financial technology companies. Julian Robertson founded the hedge fund with $8 million in capital, and by 1996, its assets under management had ballooned to $7.2 billion in value.
It was the second largest hedge fund in the world in 1997, with 10.5 billion in assets under management in 1997 as its holdings grew to $22 billion by 1998. As of 2022, the hedge fund managed close to $55 billion in assets.
Founded in 1997, Lone Pine Capital is a research-driven fundamental equity hedge fund. It mostly invests in equities and equity-related securities. It has provided its services to pooled investment vehicles, pensions, and profit-sharing plans.
The hedge fund is the brainchild of Stephen Mandel, who previously worked for Julian Robertson. It is a research-driven fund that takes a look at companies’ balance sheets to gauge their strength. It also conducts research into its operations and markets before investing.
Established in 1993, Appaloosa Management LP is an American hedge fund founded by David Tepper and Jack Walton. The fund invests in public equity and fixed-income markets, focusing on undiversified concentrated investment positions.
Its clientele base includes high-net-worth individual’s pension and profit-sharing plans. Foreign governments, foundation universities, and corporations also invest in the hedge fund. The hedge fund had one of its best years in 2001, as it gained 67%.
Caxton Associates LP is a global macro hedge fund founded in 1983 by Bruce Kovner. The hedge fund blends rigorous assessment of macroeconomics market technical and individual company analysis to deliver absolute returns.
Despite experiencing client redemptions totaling 27% of assets under amendment at the height of the financial crisis between 2008 and 2009, the hedge fund posted a 13% gain. In 2010, the edge fund returned $12.8 billion to clients while managing $6 billion. The fund shut down its gates to new money in 2020 after making a record 40% during the pandemic.
Established in 1986, Farallon Capital is a hedge fund that invests in public and private assets worldwide. It leverages various investment strategies developed through critical thinking and rigorous bottom-up fundamental analysis.
The hedge fund is driven by its commitment to deliver superior risk-adjusted returns to investors. Some of its notable investment strategies include long/short equity, merger arbitrage, risk arbitrage, real estate, and direct investments.
Additionally, the hedge fund engages in proxy battles as part of its activist plays in the race to unlock shareholder value. The hedge fund is in the process of waging a proxy fight at biotech company Exelixis.
Seth Klarman’s Baupost Group is a big hedge fund. He started working with his professor, Bill Poorvu, after finishing Harvard Business School. Poorvu and his partners made the name Baupost from their names. Klarman’s name was not in it. Baupost Group is a hedge fund that emphasizes risk management and only goes long. It is also alleged that the hedge fund does not use leverage in its investments except in real estate.
The hedge fund has delivered an average annual return of 20% since its inception, making it one of the best-performing. However, the hedge fund had its worst performance in 2020 at the height of the pandemic; it returned just under 5%. The hedge fund manager also made less than 10% compared to an 11% average return in the industry.
Founded in 1999, Viking Global is a global investment firm that employs a fundamentally driven investment approach to pursue opportunities. The hedge fund celebrated its first public equity strategy with $520 million in capital in 1999.
Currently, the hedge fund has three portfolio managers, five analysts, and two traders. The hedge fund invests globally with a long-term fundamental research-based perspective driven by its pursuit of excellence. It also strives to deliver operational excellence and high-risk adjusted returns.
Davidson Kempner is a global institutional investment management firm with over 40 years of experience. Founded in 1983 by M.H. Davidson, the hedge fund specializes in fundamental investing with a multi-strategy approach.
As of last year, it was ranked as the eighth-largest hedge fund, employing over 500 employees. It has made a name for itself with its fundamental method of investing with an event-driven focus. It primarily invests in various credit and equity strategies and real estate assets.
AQR Capital Management is a firm that manages investments and aims to achieve client goals. Founded in 1998 by Cliff Asness and David Kabiller, the hedge fund offers a variety of quantitatively driven alternative and traditional investment vehicles.
It also deploys a research-based systematic and consistent approach to portfolio construction. The disciplined approach has allowed the hedge fund to identify long-term, repeatable sources of solid returns while investing in equities, commodities, and other assets.
Created as Elliott Associates in 1977, Elliot Management is one of the oldest hedge funds that strive to protect and grow client capital. Paul Singer created the hedge fund with $1.3 million from friends and family. In its early years, the hedge fund focused on convertible arbitrage. It has since transitioned into a multi-strategy hedge fund.
It mostly focuses on equities, private equity private, credit distressed securities, real estate, and commodities. The hedge fund employs nearly 555 people, nearly half dedicated to portfolio management, analysis trading, and research. Elliot Management mostly focuses on opportunistic trading and operational and counterparty risk management.
Soros Fund Management, founded in 1970 by the famous investor George Soros, became one of the largest and most successful hedge funds. In 2010, it was one of the most profitable funds, averaging gains of 20% annually.
Currently, the hedge fund is the primary adviser of Quantum Group of funds that deals in international investments. It primarily invests in public equity and fixed income with big investments in transportation, energy, retail, financial, and other industries. The fund currently manages close to $23 billion in assets under management having generated more than $30 billion in profit for investors over the decades.
Renaissance Technologies is one of the best hedge funds founded in 1982 by James Simons. The hedge fund focuses on a specific type of trading that uses mathematical and statistical methods to analyze the market and make decisions.
The Medallion hedge fund holds the best track record for returning more than 66% annualized before fees and 39% after expenses over 30 years. Because of the fund’s success, Simons has often been regarded as one of the best money managers on earth.
In 1994, the hedge fund returned over 70% and returned over 98% in 2000. Since its inception, the hedge fund has only lost money in a single year in 1989. In 2008, when the S&P 500 lost 37%, the hedge fund returned a gain of 82% net of fees.
