Investing

World's Top Hedge Fund Manager Made $3.8 Billion

For hedge funds, 2020 was a good year. All told, they earned $127 billion last year, and half of those returns were kept by the funds themselves.

According to LCH Investments, a fund of funds that tracks returns, the world’s 20 best-performing hedge funds earned a total of $63.5 billion for their clients. A new report from Institutional Investor’s Steve Taub puts the earnings of the top 25 fund managers at a total of $32 billion, with Millennium Management’s Israel (Izzy) Englander in the top spot with earnings totaling $3.8 billion.

Investors in Englander’s firm were paid $10.2 billion last year, and over the firm’s lifetime it has paid investors $36 billion in returns. Millennium’s flagship fund returned 26% last year.

Ranking second in Institutional Investor’s list is Jim Simons of Renaissance Technologies, who pulled in $2.6 billion last year. Simons announced his retirement as chairperson of the firm in January.

The company’s flagship Medallion fund is available primarily to company employees, and it returned 76% last year. The company’s Institutional Equities Fund (IEF) had dropped nearly 23% by December 25, and the Institutional Diversified Alpha (IDA) fund had lost nearly 34% by the same date.

An unnamed investor in Renaissance Capital’s Medallion fund told Institutional Investor that the IEF’s performance last year should not be a surprise: “It has a 6-month to one-year holding time and it uses factor-based risk models to hedge risk. There is nothing wrong with the models. it’s just the world is wrong.”

Translation: Because quantitative models are built on historical performance and the 2020 COVID-19 pandemic was the first in 100 years, the models were useless. Actively managed funds, like Millennium, beat algorithmically driven funds, like Renaissance.

Since its launch in 2005, Renaissance’s IEF has an annualized return of 8.05%. The IDA fund was launched in 2012, and 2020 was its worst performance since that time.

Tiger Global earned $10.4 billion for investors last year, the most of any firm, and fund manager Chase Coleman earned a tidy $2.5 billion. The firm’s long-short fund was up 48.4% for the year and its long-only fund rose by 65%.

Fifteen hedge fund managers were paid $1 billion or more last year, nearly double the eight who earned that amount in 2019.

Here are the remaining seven of the top 10 hedge fund managers.

Kenneth Griffin of Citadel pulled in $1.8 billion last year. Last week, Griffin was testifying in Congress about his company’s role in the GameStop incident of last month.

Steven Cohen of Point72 Asset Management and David Tepper of Appaloosa Management both earned $1.7 million last year. Cohen also bought the New York Mets last year, and Tepper is continuing to transition his firm into a family office.

Philippe Laffont of Coatue Management raked in $1.6 million last year, and his fund returned 65%, more than five times its annualized return of some 11% to 12%.

O. Andreas Halvorsen of Viking Global Investors and Scott Shleifer of Tiger Global both earned $1.5 billion. Like Chase Coleman, Halvorsen’s fund is a spinoff of Tiger Global.

William Ackman of Pershing Square Capital Management hauled in $1.4 billion in 2020. His flagship fund returned 70% last year, and he completed a $4 billion IPO of his Tontine Holdings SPAC.