Two years ago, Michael Platt returned the money his BlueCrest Capital Management traded for all its outside investors, but kept dozens of teams of traders to manage the fortune he had accumulated running what used to be one of Europe’s biggest hedge funds. Platt effectively becoming BlueCrest’s last remaining client. He then dialed up the leverage and took on more risk.
Platt’s new hedge fund formula is working. In 2017, BlueCrest Capital generated a return of 54% on its capital, net of all costs and trader pay, its second huge performance year in a row. In 2016, the firm returned 50%. As a result, Platt earned an estimated $2 billion and tops this year’s Forbes list of the highest-earning hedge fund managers and traders.
The hedge fund industry, the richest corner of Wall Street, has generally been unable to keep up with the surging bull market that has lifted stocks around the world in recent years. Last year was no exception. The average hedge fund manager returned 8.5% net of fees in 2017, according to HFR, compared to the 21.8% return of the Standard & Poor’s 500 index. But that was enough for it to be a good year for the top performing hedge fund managers.
In total, the 25 highest-earning hedge fund managers and traders made a combined $16.8 billion in 2017, making it the best year for the top hedge fund managers since 2013. Forbes includes in its analysis hedge fund managers and traders who now mostly or even exclusively manage their own money and some of them can be found in the top 10 highest earners of 2017. To see the full list, click here.
The hedge funds Jim Simons’ quantitative trading firm, Renaissance Technologies, manages for outside investors did well last year. Its big Renaissance Institutional Equities Fund returned 14.5% in 2017. But the bulk of Simons’ earnings comes from Renaissance’s Medallion fund, which is not open to outside investors and only invests money belonging to Simons and his Renaissance partners and employees. Forbes estimates that Simons earned $1.8 billion in 2017.
David Tepper still manages outside capital at his hedge fund firm, but increasingly most of the some $17 billion his Appaloosa Management hedge fund firm trades belongs to Tepper and his employees. His hedge funds posted returns in the low double digits last year and Tepper earned an estimated $1.5 billion.
Ken Griffin is still very much in the business of managing outside capital. His Citadel hedge fund oversees $27 billion. Its main hedge fund returned 13.1% net of fees in 2017 and other key Citadel funds, like Citadel Tactical Trading and Global Fixed Income, returned between 12% to 13%. Griffin earned an estimated $1.4 billion in 2017.
Ray Dalio founded the world’s biggest hedge fund firm, Bridgewater Associates. Its biggest Pure Alpha hedge fund had a disappointing 2017, returning 1.2% net of fees while the stock market soared. But Bridgewater’s All Weather fund did better, returning 13.1% last year. Forbes estimates that Dalio earned $900 million in 2017.
Israel “Izzy” Englander has built one of the hedge fund industry’s most powerful multi-manager shops, employing dozens of trading teams. Millennium Management oversees $36 billion and its hedge fund returned 7.1% net of fees in 2017. Englander earned an estimated $900 million in 2017.
Daniel Loeb is known for the brash letters he sends to corporate boards and managers. But he has quietly been churning out solid performance figures in recent years while many of his peers struggle. His Third Point firm now manages $19 billion and its flagship hedge fund returned 18.1% net of fees in 2017. Loeb earned an estimated $750 million last year.
At the start of 2018, the regulatory ban that prevented Steve Cohen from managing capital for clients ended. His Point72 Asset Management hedge fund firm has moved to start managing money for outside investors again. But last year Point72 was only trading Cohen’s money. Cohen earned an estimated $700 million in 2017 after accounting for expenses and costs.
Christopher Hohn, who runs Children’s Investment Fund Management, is one of the hottest hedge fund managers around. Last year his main $18 billion hedge fund returned 27% net of fees. An activist investor who tries to shake up corporate boards, Hohn has consistently been banging out strong returns in recent years. He made an estimated $600 million last year.
The top-earning hedge fund managers and traders list is reported by Antoine Gara, Lauren Gensler, Noah Kirsch and Jennifer Wang. To determine the highest-earning hedge fund managers and traders of 2017, we examined hedge fund returns and worked to understand the fee and ownership structure of a wide array of money management firms. Hedge fund firms generally charge management fees of 2% and performance fees that give them 20% of the trading profits, but we found all sorts of variations on this theme. In addition, our earnings figures include the personal gain or loss of each manager’s interest in their funds. Our figures are pretax, account for firm expenses and profit-sharing arrangements, and exclude gains or losses stemming from ownership in the investment firms themselves or from investments held outside of the managed investment pools.
More Info: www.forbes.com
Categories: Money Matters