Hedge funds are beginning the new decade with more than $3.3 trillion in assets under management (AUM) — a record high, thanks to the strongest performance in 10 years, according to new data.
“The hedge fund industry concluded a historic decade of growth, which began in the aftermath of the financial crisis and saw total capital double in size,” Kenneth J. Heinz, president of industry-tracking firm Hedge Fund Research, said in a statement on Tuesday.
Hedge funds have been pitted against the longest-running bull market in stocks, leading them to fall behind cheaper index funds tracking market returns year after year. While those betting on rising and falling stocks gained 13.7% last year, they fell way behind the 31.5% surge in the S&P 500 index.
The new total represents an increase of $80 billion in the last three months of the year alone, HFR reported. The previous record — $3.24 trillion — was notched in mid-2019.
The record-setting year occurred despite net outflows of $13.6 billion in the fourth quarter, according to HFR.
Last year, the top 20 best-performing hedge fund managers, who oversee less than a fifth of the industry’s assets, made a staggering $59.3 billion for investors, their biggest annual gains in at least a decade, according to the Financial Times. Hedge funds were boosted by a strong tailwind in the stock and bond markets.
Billionaire money managers Chris Hohn and Stephen Mandel led hedge fund gains last year as surging markets helped the $3 trillion market post its best performance in a decade.
The industry racked up gains worth $178 billion after fees, according to estimates by LCH Investments, a fund of hedge funds. Hohn’s TCI Fund Management made $8.4 billion for clients, while Mandel’s Lone Pine Capital enriched investors by $7.3 billion.
Although Ray Dalio’s Bridgewater Associates, the largest hedge fund in the world, suffered its first annual loss since 2000, it retained its top spot in the all-time ranking with $58.5 billion of gains since it launched in 1975, the Times reported.
It is also estimated that the top managers have made a combined $62.5 billion in donations or commitments to philanthropy and charitable causes. That “represents approximately 45% of the performance fees their firms have earned since inception,” Sopher said.
Top 20 Hedge Fund Managers Ranked by Profits in 2019
2. Lone Pine
3. Ren Tech
9. Elliot Associates
10. DE Shaw
12. SAC / Point 72
14. Och Zoff / Sculptor
16. Brevan Howard
18. King Street
19. Bridgewater Associates
20. Soros Fund Management