davos: LOVE, BETRAYAL swiss bank THE SEARCH AND INSIDER giants fall FOR Growth TRADING to earth
FEBRUARY 2013 Bloomberg Markets
WINNING STRATEGIES BEST RETURNS THE WORLD’S 2013 100 RICHEST HEDGE FUNDS FEBRUARY
THE STEVE COHEN’S SAC RAKES IN PROFITS WORLD’S BLUEMOUNTAIN HARPOONS THE
BLOOMBERGMARKETS.COM RICHEST LONDON WHALE METACAPITAL SCORES HEDGE WITH MORTGAGES FUNDS
02_COVER [PT].indd 4 12/20/12 3:46 PM 20 bloomberg markets February 2013
Pine River has three funds in the top 20. Portfolio manager Aaron Yeary runs the No. 19 fund.
Fannie Mae and Freddie Mac have a friend on West 57th Street. That’s the New York address of Metacapital Man- agement LP, the hedge fund founded by Deepak Narula. The much-maligned mortgage aggre- gators were taken over by the federal government in 2008 and have since absorbed $140 billion in taxpayer bailout money. The head of the House Financial Services Committee wants to abolish them. Yet they still own or guarantee more than half of all U.S. housing loans—and for that reason, the administration of President Barack Obama isn’t about to let them go belly up. Narula, 50, has used Fannie and fund started trading in July 2008. first 10 months of 2012 was Steve Co- Freddie to build the world’s most-suc- Three of the top five funds in the hen’s SAC Capital International, cessful hedge fund. His Metacapital Bloomberg Markets list invested in which earned $789.5 million for its Mortgage Opportunities Fund, which mortgage securities, and two of them managers. In November, the U.S. Se- invests heavily in agency mortgages, are run by Minnetonka, Minnesota– curities and Exchange Commission returned 37.8 percent in the first 10 based Pine River Capital Manage- notified Cohen’s $14 billion firm, months of 2012, putting it at the top of ment LP. Betting on mortgage Stamford, Connecticut–based SAC the Bloomberg Markets list of the securities outpaced every other strat- Capital Advisors LP, that it was con- 100 best-performing hedge funds egy, with an average return of 20.2 sidering suing it for civil fraud re- managing $1 billion or more. That percent, against an industry average lated to insider trading. (See page 36.) comes on top of a 23.6 percent return of just 1.3 percent, according to data Narula’s edge in 2012 was in read- in 2011. The fund was up 520 percent compiled by Bloomberg. ing the tea leaves of Washington pol- since the Mortgage Opportunities The most-profitable fund in the icy makers. Toward the end of 2011,
22 bloomberg markets February 2013 large 100 top- HEDGE performing FUNDS
Assets, in YTD total 2011 Fund, Manager(s) Management Firm, Location Strategy billions return return
1 Metacapital Mortgage Opportunities Deepak Narula Metacapital Management, U.S. Mortgage-backed arbitrage $1.5 37.8% 23.6%
2 Pine River Fixed Income Steve Kuhn Pine River Capital Management, U.S. Mortgage-backed arbitrage 3.6 32.9 4.8
3 CQS Directional Opportunities Michael Hintze CQS, U.K. Multistrategy 1.5 28.9 –10.4
4 Pine River Liquid Mortgage Steve Kuhn, Jiayi Chen Pine River Capital Management, U.S. Mortgage-backed arbitrage 1.1 28.0 7.2
5 Odey European Crispin Odey Odey Asset Management, U.K. Macro 1.8 24.1 –20.3
6 Marathon Securitized Credit Bruce Richards, Louis Hanover Marathon Asset Management, U.S. Asset backed 1.2 24.0 –4.2
Palomino David Tepper Appaloosa Management, U.S. Multistrategy 4.9 24.0 –3.5
8 BTG Pactual GEMM Team managed BTG Pactual Global Asset Management, U.S. Macro 3.6 23.1 3.4
9 Third Point Ultra Daniel Loeb Third Point, U.S. Multistrategy 1.3 22.1 –2.3
10 Omega Overseas Partners A Leon Cooperman Omega Advisors, U.S. Long/short 1.4 21.7 –1.4
11 Seer Capital Partners Philip Weingord Seer Capital Management, U.S. Asset backed 1.2 21.6 2.1
12 Tiger Global Feroz Dewan, Chase Coleman Tiger Global Management, U.S. Long/short 6.0 21.0 45.0
13 Eminence Ricky Sandler Eminence Capital, U.S. Long/short 3.0 20.9 1.6
14 Jana Master Barry Rosenstein, David DiDomenico Jana Partners, U.S. Event driven 3.8 20.4 –2.1
15 Structured Servicing Holdings William Mok Structured Portfolio Management, U.S. Mortgage-backed arbitrage 1.9 20.3 19.6
16 Citadel Tactical Trading Team managed Citadel Advisors, U.S. Long/short 1.0 20.0 38.0
17 Viking Long Andreas Halvorsen Viking Global Investors, U.S. Long biased 1.7 19.4 –0.1
18 Cerberus RMBS Opportunities Steve Feinberg Cerberus Capital Management, U.S. Distressed 1.7 19.0 NA1
19 LibreMax Partners Greg Lippmann LibreMax Capital, U.S. Structured credit 2.3 18.5 2.0
Pine River Aaron Yeary Pine River Capital Management, U.S. Multistrategy 1.6 18.5 5.7
21 Litespeed Master Jamie Zimmerman Litespeed Management, U.S. Distressed 1.7 18.1 4.4
22 AHL Evolution Timothy Wong Man Investments, U.K. Managed futures 1.9 18.0 10.5
Citadel Kensington/Wellington Team managed Citadel Advisors, U.S. Multistrategy 7.0 18.0 20.0
24 Canyon Balanced Joshua Friedman, Mitchell Julis Canyon Capital Advisors, U.S. Distressed 1.9 17.7 –4.5
25 Contrarian Capital One Jon Bauer, Janice Stanton Contrarian Capital Management, U.S. Distressed 2.1 17.6 –1.3
26 DoubleLine Opportunistic Income Jeffrey Gundlach, Philip Barach DoubleLine Capital, U.S. Fixed income 2.3 17.4 20.7
Redwood Offshore Jonathan Kolatch Redwood Capital Management, U.S. Distressed 2.6 17.4 –2.0
28 One William Street Capital Partners David Sherr One William Street Capital Management, U.S. Asset backed 2.2 17.1 –4.3
February 2013 bloomberg markets 23 100 top-performing large HEDGE FUNDS
Assets, in YTD total 2011 Fund, Manager(s) Management Firm, Location Strategy billions return return
29 Cevian Capital II Lars Forberg, Christer Gardell Cevian Capital, Sweden Activist $6.9 16.8% –9.9%
Heliant David E. Shaw D.E. Shaw & Co., U.S. Macro 1.7 16.8 9.2
31 Autonomy Global Macro Robert Gibbins Autonomy Capital, U.S. Macro 2.9 16.0 13.6
Maverick Lee Ainslie Maverick Capital Management, U.S. Long/short 10.0 16.0 –15.8
33 SPM Core William Mok Structured Portfolio Management, U.S. Mortgage-backed arbitrage 1.7 15.7 23.7
34 Canyon Value Realization Joshua Friedman, Mitchell Julis Canyon Capital Advisors, U.S. Multistrategy 8.0 15.6 –4.7
35 MKP Credit Patrick McMahon, Anthony Lembke MKP Capital Management, U.S. Credit 2.0 15.4 –5.1
36 GoldenTree Credit Opportunities Steven Tananbaum GoldenTree Asset Management, U.S. Credit 1.5 15.3 0.7
37 Drawbridge Special Opportunities Peter Briger Jr., Constantine Dakolias Fortress Investment Group, U.S. Credit 4.9 15.1 10.9
38 Silver Point Capital Edward Mule Silver Point Capital, U.S. Distressed 6.8 15.0 6.1
York Credit Opportunities William Vrattos, James Dinan, Daniel Schwartz York Capital Management Distressed 4.2 15.0 –1.4
40 Russian Prosperity Ivan Mazalov, Alexander Branis Prosperity Capital Management, Russia Emerging-markets equity 1.3 14.9 –18.0
41 CQS ABS Simon Finch (formerly Alistair Lumsden) CQS, U.K. Asset backed 2.3 14.3 0.7
42 Third Point Offshore Daniel Loeb Third Point, U.S. Multistrategy 4.9 14.1 –0.1
43 All Weather 12% Ray Dalio Bridgewater Associates, U.S. Macro 6.6 14.0 19.5
Citadel Global Equities Team managed Citadel Advisors, U.S. Long/short 2.0 14.0 21.0
Marathon Special Opportunity Bruce Richards, Louis Hanover Marathon Asset Management, U.S. Multistrategy 1.0 14.0 –4.8
46 OxAM Quant Fund Andre Stern, Steve Mobbs, Steven Kurlander OxFORD Asset Management, U.K. Quantitative 3.8 13.7 23.5
Spinnaker Global Emerging Markets Bradley Wickens Spinnaker Capital, U.K. Emerging-markets debt 1.4 13.7 –9.3
48 Halcyon Asset-Backed Value Joseph Wolnick, Joseph Godley, James Coppola Halcyon Asset-Backed Advisors, U.S. Asset backed 2.5 13.4 4.1
Oculus David E. Shaw D.E. Shaw & Co., U.S. Macro 9.5 13.4 18.0
Perry Partners Richard Perry Perry Capital, U.S. Multistrategy 4.8 13.4 –7.1
51 BlueMountain Credit Alternatives Andrew Feldstein BlueMountain Capital Management, U.S. Credit 5.1 13.3 3.6
52 Ares Enhanced Credit Opportunities Seth Brufsky, Americo Cascella Ares Management, U.S. Fixed income 2.4 13.2 8.0
Cerberus Institutional Partners Series IV Steve Feinberg Cerberus Capital Management, U.S. Distressed 7.6 13.2 1.3
54 Green HG Luis Stuhlberger Credit Suisse Hedging-Griffo, Brazil Macro 1.4 13.1 –5.7
55 Vertex John Thiessen, Tim Logie Vertex One Asset Management, Canada Distressed 1.0 13.0 –20.0
56 Blue Harbour Strategic Value Partners Clifton Robbins Blue Harbour Group, U.S. Activist 1.1 12.9 3.3
57 Viking Global Equities Andreas Halvorsen Viking Global Investors, U.S. Long/short 16.3 12.7 7.6
58 Brevan Howard Credit Catalysts David Warren DW Investment Management, U.S. Credit 3.0 12.6 1.2
59 Fortress Macro Adam Levinson, Michael Novogratz Fortress Investment Group, U.S. Macro 1.5 12.5 –9.5
60 BlackRock Fixed Income Global Alpha Tim Webb BlackRock Alternative Investors, U.S. Fixed income 3.5 12.3 20.2
61 Beach Point Total Return Carl Goldsmith, Scott Klein Beach Point Capital Management, U.S. Distressed 1.4 12.1 –1.0
QVT Overseas-B Daniel Gold QVT Financial, U.S. Multistrategy 2.4 12.1 5.5
63 Pelham Long/Short Ross Turner, Hadyn Cunningham Pelham Capital Management, U.K. Long/short 2.0 11.9 –10.4
64 Brummer & Partners Zenit Per Josefsson, Svante Elfving Zenit Asset Management, Sweden Long/short 1.5 11.8 –4.0
24 bloomberg markets February 2013 1Fund was launched in 2011. 2Return is for the nine months ended on Sept. 30. Returns are for the 10 months ended on Oct. 31. Includes funds with more than $1 billion in assets. Sources: Bloomberg, 100 top-performing large HEDGE FUNDS hedge-fund databases, hedge-fund firms, investors
Assets, in YTD total 2011 Fund, Manager(s) Management Firm, Location Strategy billions return return
65 Egerton European Dollar John Armitage Egerton Capital, U.K. Long/short $1.5 11.4% –5.0%
Greenlight Capital David Einhorn Greenlight Capital, U.S. Long/short 7.8 11.4 2.9
67 Rimrock High Income Plus Dave Edington Rimrock Capital Management, U.S. Fixed-income arbitrage 1.2 11.2 7.5
68 AG Super Michael Gordon, David Kamin Angelo Gordon & Co., U.S. Multistrategy 3.1 11.0 –0.8
GSO Special Situations Overseas Louis Salvatore, Michael Whitman GSO Capital Partners, U.S. Distressed 1.8 11.0 8.0
Pimco Absolute Return IV Bill Gross Pimco, U.S. Long/short 2.7 11.0 1.8
Providence MBS Russell Jeffrey Providence Investment Management, U.S. Mortgage-backed arbitrage 1.8 11.0 25.1
72 New Mountain Vantage Daniel Riley, David Frost New Mountain Capital, U.S. Long/short 1.6 10.8 12.0
73 York Total Return Jeffrey Weber, Marc Helwani York Capital Management, U.S. Multistrategy 1.5 10.7 –7.2
74 Elliott Associates Paul Singer Elliott Management, U.S. Multistrategy 7.5 10.6 4.0
Hudson Bay Sander Gerber Hudson Bay Capital Management, U.S. Multistrategy 1.5 10.6 4.3
76 GoldenTree Master Steven Tananbaum GoldenTree Asset Management, U.S. Credit 2.9 10.5 –0.3
Hayman Capital Master Kyle Bass Hayman Capital Management, U.S. Event driven 1.0 10.52 1.8
King Street Francis Biondi, Brian Higgins King Street Capital, U.S. Event driven 10.4 10.5 –1.6
Paulson Enhanced John Paulson Paulson Partners, U.S. Merger arbitrage 2.0 10.5 –21.6
80 Loomis Sayles Credit Long/Short Team managed Loomis Sayles & Co., U.S. Credit 1.1 10.4 –0.8
81 Columbus Hill Kevin Eng Columbus Hill Capital Management, U.S. Multistrategy 1.2 10.3 –4.5
Strategic Value Restructuring Victor Khosla Strategic Value Partners, U.S. Distressed 1.4 10.3 –11.3
83 Discovery Global Opportunity Robert Citrone Discovery Capital Management, U.S. Macro 6.3 10.2 3.6
84 Halcyon Partners Offshore John Bader, Kevah Konner Halcyon Asset Management, U.S. Multistrategy 1.5 10.1 –5.9
Lansdowne Developed Markets Peter Davies, Stuart Roden Lansdowne Partners, U.K. Long/short 6.9 10.1 –20.4
86 Avenue International Shawn Foley, Rob Symington Avenue Capital Group, U.S. Distressed 2.0 10.0 –12.9
Highside Capital Partners Lee Hobson Highside Capital Management, U.S. Long/short 1.0 10.0 –1.3
SAC Capital International Steve Cohen SAC Capital Advisors, U.S. Long/short 9.0 10.0 8.0
Senator Global Opportunity Alex Klabin, Douglas Silverman Senator Investment Group, U.S. Multistrategy 3.7 10.0 –0.7
Visium Balanced Jacob Gottlieb Visium Asset Management, U.S. Long/short 2.6 10.0 2.1
91 Aristeia Partners Anthony Frascella, William Techar Aristeia Capital, U.S. Credit 1.5 9.8 2.4
92 Spinnaker Global Opportunity Jorge Benjamin Rosas, Marcos Lederman Spinnaker Capital, U.K. Emerging-markets debt 1.4 9.6 –11.8
93 OZ Master Daniel Och Och-Ziff Capital Management Group, U.S. Multistrategy 21.4 9.5 –0.6
94 Double Black Diamond Clint Carlson Carlson Capital, U.S. Multistrategy 4.4 9.4 –0.8
Monarch Debt Recovery M. Weinstock, A. Herenstein, C. Santana Monarch Alternative Capital, U.S. Distressed 1.3 9.4 –0.5
96 Elliott International Paul Singer Elliott Management, U.S. Multistrategy 13.4 9.3 3.8
Passport Global Strategy John Burbank II Passport Capital, U.S. Long/short 1.3 9.3 –18.7
98 M. Kingdon Offshore Team managed Kingdon Capital Management, U.S. Long/short 1.2 9.1 –18.0
99 Two Sigma Compass Enhanced U.S. Team managed Two Sigma Investments, U.S. Managed futures 2.6 9.0 3.7
York Capital Management James Dinan, Daniel Schwartz York Capital Management, U.S. Multistrategy 5.1 9.0 –7.1
February 2013 bloomberg markets 25 government-backed mortgage se- Pine River founder Brian Taylor curities dropped in value as Obama started the firm after 14 years at Minnetonka hedge fund EBF. expanded programs to help owners refinance and bonds without insur- ance fell amid the euro crisis. Narula took advantage. He later concluded that the Federal Reserve was going to help homeowners and bought bonds ahead of its September announce- ment that it would buy $40 billion a month of agency—that is, Fannie-, Freddie- and Ginnie Mae–backed— mortgage bonds. “To revive the hous- ing market, the Fed has thrown a lot of firepower at agency mortgage- backed securities,” Narula says. “Pol- icy makers have worked hard to let homeowners refinance. They’ve been clear that that’s their mission—and you want to be careful going against that mission.” In addition to his intuition on Wash- ington policy moves, Narula uses math- ematical models to calculate how long homeowners will make payments at their current interest rates before ei- ther refinancing or defaulting. The models predict behavior based on a homeowner’s credit score, address, loan size, loan age and other factors. The algorithms also allow sophisti- cated investors to hedge against wrong- way bets. “You want to come up with wagers where if you’re right, you’ll do really well and if you are wrong, you don’t get hurt too badly,” Narula says. No. 1 Metacapital is followed on the
Policy makers have made it their mission to help investor Chase Coleman, whose Tiger homeowners refinance, Narula says. ‘You want Global fund was No. 1 in 2011. It fell to to be careful going against that mission.’ No. 12 in 2012, with a 21 percent re- turn. Coleman was the only protege of Julian Robertson, founder of Tiger Management LLC, to crack the top list by Steve Kuhn’s Pine River Fixed Michael Hintze’s London-based CQS 20. “Tiger cub” Lee Ainslie of Maver- Income Fund, which also invests in U.K. LLP, was No. 3 and the top Eu- ick Capital Management saw his No. mortgage bonds and returned 32.9 ropean fund. Crispin Odey’s London- 31 Maverick fund gain 16.0 percent. percent. Pine River captured No. 2 and based Odey European was second best Ainslie benefited from wagers on Ap- No. 4 and tied for No. 19. That fund is in Europe, with a 24.1 percent return. ple Inc., which returned 47.6 percent run by portfolio manager Aaron Yeary. (See “Betting on Banks,” page 44.) as of Oct. 31. CQS Directional Opportunities, run by Odey is a stock picker, as is Internet David Tepper also made money on
26 bloomberg markets February 2013 WORLD’S LARGEST fund’s assets because he couldn’t stocks. His Palomino fund, at 24 per- achieve the returns he had histori- cent, ties for No. 6 in 2012; it was No. 1 HEDGE-FUND FIRMS cally produced. in 2009. Assets under Narula attributes his success to management, Those big gains came amid a fourth Firms in billions long years of studying the bond mar- consecutive year of underperfor- kets. The son of an Indian diplomat, 1 Bridgewater Associates (Westport, Connecticut) $81.3 mance by hedge funds. The average he earned an engineering degree from return of 1.3 percent compared with a 2 Man Group (London) 60.0 the Indian Institute of Technology in 14 percent gain, including dividends, Kanpur, one of the country’s top 3 JPMorgan Asset Management (New York) 44.5 for the Standard & Poor’s 500 Index schools. His real interest, however, through October. Since Jan. 1, 2009, 4 Brevan Howard Asset Management (London) 39.3 was finance, and in 1985, he enrolled the average hedge fund gained a cu- 5 BlueCrest Capital Management (London) 33.9 at Columbia Business School in New mulative 13.5 percent compared with York, where he earned a Ph.D. in man- 69.8 percent for the S&P 500. “Hedge 6 Och-Ziff Capital Management (New York) 31.8 agement science while also studying funds probably oversold themselves 7 BlackRock Advisors (New York) 27.0 finance. He then spent 11 years as a for a long time, saying we’re going to mortgage bond analyst and trader at D.E. Shaw & Co. (New York) 27.0 get stocklike returns with lower vola- Lehman Brothers Holdings Inc. tility,” says Andrew Junkin, senior 9 Baupost Group (Boston) 26.5 Narula started Meta- consultant at Wilshire Associates, capital in 2002 with $15 10 Winton Capital Management (London) 26.2 For the full which advises pension plans. “Then list, download million from friends and 2008 comes and blows those two our IPAD APP his own savings. In that Figures are the latest available. at MKTS
best-performing strategies MORTGAGE-BACKED ASSEt BACKED EQUITY STATISTICAL CAPITAL STRUCTURE/ DISTRESSED BLOOMBERG GLOBAL ARBITRAGE ARBITRAGE CREDIT ARBITRAGE SECURITIES HEDGE FUND INDEX 20% 2012 20% 15% 2011 15% 10% 10% 5% 5% 0% 0% –5% 15.2% 3.3% 2.9% 0.6% 20.2% 14.9% 9.7% 9.4% 8.3% 1.3% −5% –10% −4.4%
−10% −7.6 Source: Bloomberg %
28 bloomberg markets February 2013 sitting in front of computer terminals No. 2 fund manager Steve Kuhn in his sparsely furnished Manhattan says, ‘The best trade in 2012 was being long subprime.’ office. “If you are too early, you are wrong.” Narula launched his Mortgage Op- portunities Fund in 2008 and has thrived on buying and selling agency- backed mortgages while keeping a close eye on the Fed. “The Fed’s mis- sion is to drive down the 30-year mortgage rate,” Narula says. In the past five years, he has devised a series of trades to take advantage. In the third quarter of 2008, anticipating government intervention in the mortgage market, he bought agency bonds that were backed by 30-year mortgages while simultaneously sell- ing U.S. Treasury securities. After agency mortgage prices had risen, he closed the trade, shorted 30-year mortgage bonds and bought 15-year bonds. At the end of 2011, he switched to buying 30-year mortgage bonds in anticipation of further government buying. Beyond his Fed watch, Narula has geared up his algorithms to anticipate what homeowners will—and won’t— do. Because housing values have fallen and banks are stingy with new loans, many haven’t been able to re- spond to low interest rates by refi- nancing, even with new government programs. “Betting that homeowners will not be refinancing has been a winning wager,” Narula says.
in november 2011, Pine river bought mortgage bought subprime-mortgage-backed securities for as little as 42 cents on the bonds as cheaply as 42 cents on the dollar. a year later, they had risen to 72 cents. dollar. A year later, they had risen to 72 cents. Pine River reduced its sub- prime holdings through 2012, as other investors poured into the mar- Pine River’s Steve Kuhn churns bet on subprime mortgages. “The best ket. “We like to say some of the new through massive amounts of data to trade in 2012 was being long sub- entrants are going to pay a tuition determine which bonds to bet on. prime,” says Kuhn, who has an eco- price,” he says. “They don’t know the “Everyone has the same research, but nomics degree from Harvard market as well as we do.” it depends on how you look at it,” University. “It’s nice to be right about A Minneapolis native, Kuhn is well Kuhn, 43, says. that one.” traveled. He started out trading mu- Kuhn’s analysis convinced him to In November 2011, Pine River nicipal bonds at Piper Jaffray Cos.
30 bloomberg markets February 2013 mid-size hedge For the full list, download funds our IPAD APP at MKTS
Assets, in YTD total 2011 Fund, Manager(s) Management Firm, Location Strategy millions return return
1 Cheyne Total Return Credit 1 David Peacock, John Weiss Cheyne Capital Management, U.K. Fixed income $555.0 61.4% –13.2% 2 NTAsian Discovery Kenneth Ng NTAsset, Thailand Long-biased equity 283.9 48.9 4.6 3 Barnegat Investments Bob Treue Barnegat Fund Management, U.S. Fixed-income arbitrage 625.7 41.4 11.1 4 Hildene Opportunities Brett Jefferson Hildene Capital Management, U.S. Structured credit 618.3 39.4 13.3 5 Tilden Park Capital Master Josh Birnbaum Tilden Park Capital Management, U.S. Structured product 851.0 33.9 10.1 6 BlackRock Obsidian Stuart Spodek BlackRock Alternative Investors, U.S. Fixed income 792.0 31.4 –13.5 7 Midgard Fixed Income Christian Lindstrom Lage PFA Asset Management, Denmark Fixed-income arbitrage 503.7 31.3 22.5 8 400 Capital Credit Opportunities Chris Hentemann 400 Capital Management, U.S. Asset backed 318.0 28.9 3.1 9 Asgard Fixed Income I Morten Mathiesen Moma Advisors, Denmark Fixed-income arbitrage 289.0 28.7 25.3 10 Jana Nirvana Barry Rosenstein, David DiDomenico Jana Partners, U.S. Event driven 600.0 28.6 –3.5 11 Danske Invest Fixed Income Strategies Michael Petry Danske Bank, Denmark Fixed income 962.2 28.5 18.3 12 Quantedge Global Leow Kah Shin, Chua Choong Tze Quantedge Capital, Singapore Macro 409.1 27.7 32.9 13 Midway Market Neutral Robert Sherak Midway Group, U.S. Mortgage-backed arbitrage 379.0 25.8 22.3 14 Ellington Credit Opportunities Michael Vranos Ellington Management Group, U.S. Mortgage backed 432.5 24.4 1.7 15 Chenavari Toro Capital IA Benoit Pellegrini, Dan Turner, Frederic Couderc Chenavari Investment Managers, U.K. Asset backed 334.7 24.3 24.7
CTC Team managed CTC Fund Management, U.S. Multistrategy 353.5 24.3 35.9 17 Marcato International Richard McGuire Marcato Capital Management, U.S. Long/short 500.0 24.1 –4.3 18 STS Partners Michael Scheckman Deer Park Road Corp., U.S. Asset backed 563.2 23.5 24.0 19 CCA Mortgage/Credit Opportunity Rajesh Agarwal Citi Capital Advisors, U.S. Mortgage-backed arbitrage 460.3 23.0 –4.2
OEI MAC Crispin Odey Odey Asset Management, U.K. Long/short 733.9 23.0 –20.1 21 Cassiopeia Michel Dominice, Alain Dos Santos Dominice & Co. Asset Mgmt., Switzerland Market neutral 602.4 22.7 6.2 22 Axonic Credit Opportunities Clayton DeGiacinto Axonic Capital, U.S. Mortgage-backed arbitrage 962.0 21.7 6.0
SAB Capital Partners Scott Bommer SAB Capital Management, U.S. Long/short 450.0 21.7 –0.4 24 Cerberus International II Steve Feinberg Cerberus Capital Management, U.S. Distressed 378.0 21.4 9.9
ECF Value Jeff Gates, Dax Vlassis Gates Capital Management, U.S. Distressed 384.4 21.4 2.9
Perceptive Life Sciences Master Joseph Edelman Perceptive Advisors, U.S. Long/short 536.0 21.4 5.9
Returns are for the 10 months ended on Oct. 31. Includes funds with $250 million to $1 billion in assets. Sources: Bloomberg, hedge-fund databases, hedge-fund firms, investors before working at commodities gi- U.S. mortgage market. While there, quantitative analysts and software ant Cargill Inc., Chicago-based hedge he also taught finance to students developers. fund Citadel LLC and, starting in at Tsinghua and Peking universi- Kuhn was hired at Pine River 2002, Goldman Sachs Group Inc. In ties. At Pine River, he has taken ad- in 2008, joining fellow Minneso- 2005, Goldman sent him to China to vantage of his Chinese connection. tan Brian Taylor, who founded the educate staffers of sovereign-wealth The firm opened an office in Beijing firm in 2002 after spending 14 years funds and the central bank on the in 2010 that employs a squad of 33 at Minnetonka hedge fund EBF &
32 bloomberg markets February 2013 Associates. Pine River, which also has offices in New York, is named after a WORLD’S most-profitable HEDGE FUNDs town in Minnesota close to where Taylor has a lake house. profit, in Fund, Manager(s) Management Firm, Location millions Kuhn plays in markets where Na- rula has a smaller footprint. He buys and sells nonagency mortgage 1 SAC Capital International Steve Cohen SAC Capital Advisors, U.S. $789.5 bonds—that is, those not bought or 2 Viking Global Equities Andreas Halvorsen Viking Global Investors, U.S. 456.5 backed by Fannie and Freddie. He 3 OZ Master Daniel Och Och-Ziff Capital Management Group 402.6 uses several stratagems to hedge against a decline in their value. To de- 4 Elliott International Paul Singer Elliott Management, U.S. 284.1 termine which securities to buy, 5 Oculus David E. Shaw D.E. Shaw & Co., U.S. 278.6 Kuhn and his team analyze massive amounts of data on servicers and bor- 6 Citadel Kensington/Wellington Team managed Citadel Advisors, U.S. 262.5 rowers, from credit scores and loan 7 Tiger Global Feroz Dewan, Chase Coleman Tiger Global Management, U.S. 254.5 age to ZIP codes and income. Kuhn is now cutting his holdings in 8 Silver Point Capital Edward Mule Silver Point Capital, U.S. 219.7 the subprime mortgage market. Na- 9 Pine River Fixed Income Steve Kuhn Pine River Capital Management, U.S. 210.0 rula, by contrast, thinks he can glean 10 Greenlight Capital David Einhorn Greenlight Capital, U.S. 196.7 hefty returns from agency bonds for several more years. Others think the 11 King Street Francis Biondi, Brian Higgins King Street Capital, U.S. 193.5 game is just about up. “Our expec- 12 Elliott Associates Paul Singer Elliott Management, U.S. 178.8 tations are much more muted,” says John Bailey, chief executive offi- 13 Cerberus Institutional Partners Series IV Steve Feinberg Cerberus Capital Management, U.S. 177.4 cer at Spruce Private Investors LLC 14 Canyon Value Realization Joshua Friedman, Mitchell Julis Canyon Capital Advisors, U.S. 170.4 in Stamford, Connecticut, which 15 Palomino David Tepper Appaloosa Management, U.S. 169.1 advises clients on alternative invest- ments. “The easy money’s been made.” 16 BTG Pactual GEMM Team managed BTG Pactual Global Asset Management, U.S. 165.0
Kambiz Foroohar covers billionaires 17 Drawbridge Special Opportunities P. L. Briger Jr., C. Dakolias Fortress Investment Group, U.S. 158.9 at Bloomberg News in New York. [email protected] Kelly Bit covers hedge funds in New York. 18 BlueCrest International Class A Onshore Michael Platt BlueCrest Capital Management,U.K. 157.3 [email protected] With assistance from Jody Shenn in New York. 19 Discovery Global Opportunity Robert Citrone Discovery Capital Management, U.S. 146.1
To write a letter to the editor, send an e-mail to 20 BlueMountain Credit Alternatives Andrew Feldstein BlueMountain Capital Management, U.S. 134.7 [email protected] or type MAG
How We Crunched the Numbers
Our rankings of hedge-fund didn’t report its fees, we used the Our ranking of the most-profitable We couldn’t obtain returns from managers are based on data compiled average of funds in our universe: a funds took 2011 performance num- several of the biggest hedge-fund by Bloomberg specialist Anibal 2 percent management fee and a bers into account because most man- firms by assets. For a handful of other Arrascue and information supplied by 20 percent incentive fee. agers get paid only when the value of firms, we had returns on only one or hedge-fund research firms, hedge Using gross returns, we were able their funds is greater than its previ- two funds. Onshore and offshore as- funds and investors. This year, we to reconstruct approximately what ous highest value. About half of the sets and returns were combined for a have two lists of top performers: 100 the assets were at the start of the top-performing large hedge funds number of funds, while figures for funds with assets greater than $1 bil- year. (Because we didn’t have inflows had negative returns in 2011. The other funds on our lists were for only lion and 25 funds with assets of or outflows, the asset numbers didn’t profits for these funds were calcu- the larger class of the fund. $250 million to $1 billion. Assets and take asset flows into account.) We lated by using the percentage by The numbers were difficult to ver- returns were for the 10 months ended subtracted original assets from cur- which their return this year exceeded ify. Unless the information came from on Oct. 31, 2012. rent assets and multiplied the result their “high-water mark.” Bloomberg or the hedge-fund firm it- The returns we obtained were net by each fund’s performance fee to Several funds appearing on the self, we tried to verify it with other of fees. We calculated profits for each derive the profits. Management fees most-profitable ranking do not show sources. fund by dividing the net figure by 100 aren’t included; we assumed they up on our lists of top performers. That percent minus the sum of the man- were used for the day-to-day is because the size of a fund can Bloomberg Rankings agement and incentive fees. If a fund operations. trump returns in calculating profits. [email protected]
34 bloomberg markets February 2013 36 bloomberg markets February 2013 While Steve Cohen according to investors. 3 percentandas muchas50percent, 20 percentoftheprofits, Cohenlevies feeandthentake 15tomanagement most fundsimposea1to2percent the highest feesonWall Street. While someofbut becauseCohencharges measure, witha10percentreturn— performance—it tiesforNo. 86onthat nual ranking. according toBloomberg Markets’ an- months of2012, earning$789.5 million, most-profitable fundinthefirst hedge 10 Cohen’s flagshipfund,was theworld’s money. SACCapitalInternational, continued todowhathedoesbest: make has manager trading, thehedge-fund ployees’ involvement alleged ininsider lately becauseofformerandcurrentem- SAC isNo. 1not somuchbecauseof has been in the news hasbeeninthenews
Martoma, who worked atanSAC unit SAC portfoliomanager, was arrested. trading after Mathew Martoma, aformer time directlylinked toacaseofinsider since August 2011. national hasbeenclosedtonewinvestors shared $907million.SACCapitalInter calendar 2011, he and his managers his main fund tumbled 19 percent. For just onemoney-losing year, 2008, when ing his firm two decades ago. He’s had annual return of30percentsincestart- uities investor, hasproducedanaverage the fundreturnedjust 10percent. cohen sac capital international topped themost- charges incentivefees ofas muchas 50percent. profitable ranking, at $789.5 million, even though In November, Cohenwas forthefirst The fundmanager, who’s aneq- largely - KELL pleaded guilty. ing whileworkingatSAC;three have ployees have beentiedtoinsidertrad- firm. SixformerorcurrentSACem- with insider trading at anothercharged ployee RichardChoo-BengLeewas 2009, whenformerSACCapitalem- ment’s insider-trading investigation in then bet against the companies. sold itspositionsinElanandWyeth and Cohen, prosecutorssay, afterwhichSAC Martoma hada20-minutephonecallwith he learned that the tests badly, were going conduct clinicaltests onthedrug.When ited informationfromadoctorhelping Inc. Prosecutorssay thatMartomasolic- Jersey–based Wyeth, now aunit of Pfizer based ElanCorp. andMadison,New bydeveloped fouryearsago Dublin- treat Alzheimer’s diseasethatwas being case involves tests ofadrugdesignedto the SECbroughtagainst Martoma.The Cohen was deposed in the civil case that investors ontheconferencecallthat with the government’s inquiry.” ately andwillcontinuetocooperate confident they have acted appropri ment saying: “Mr. CohenandSACare spokesman forSAC, issuedastate- December. Jonathan Gasthalter, a asofmid- accused ofwrongdoing considering filing a civil claim. Securities andExchange Commissionis Wells notice, a warning that the U.S. ence callthatithadbeenserved witha ing week,SACtoldinvestors onaconfer LP.for SACCapitalAdvisors Thefollow $276 millioninprofits andaverted losses trading schemethatnetted asmuch prosecutors callarecord-setting insider- 2006 to2010, inwhatU.S. was charged called CR Intrinsic Investors LLP from SAC was first linked tothe govern- SAC PresidentTom Conheeney told Neither CohennorSAChadbeen Y BIT
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Scott Eells/Bloomberg