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The world’s most profitable hedge funds made their greatest income on file final 12 months as punchy bets on inventory markets paid off when share costs surged.
The highest 20 managers made income for buyers of $67bn in 2023 in accordance with analysis by LCH Investments — up from the earlier file of $65bn in 2021.
This efficiency cemented their dominance over the remainder of the {industry} — the 20 hedge funds which have carried out greatest since their inception handle 19 per cent of property however they made round a 3rd of annual income final 12 months, in greenback phrases.
The LCH checklist calculates which managers within the $4tn hedge fund-industry are most profitable primarily based on the cumulative greenback income they’ve made for buyers, internet of charges, since inception. LCH has been monitoring the highest 20 hedge funds since 2012.
Standout performers final 12 months included Sir Christopher Hohn’s TCI, Ken Griffin’s Citadel and Andreas Halvorsen’s Viking.
Brad Amiee, director and head of analysis at LCH Investments, stated the inventory market’s sturdy efficiency was a contributory issue for a number of the greatest funds.
“Equities have been on a improbable run,” he stated.
That efficiency has continued into this 12 months: the S&P 500 index of main shares hit an all-time excessive on Friday, pushed by sturdy features for the biggest know-how firms.
TCI made $12.9bn for buyers and ended final 12 months up 33 per cent, forward of the S&P 500 index’s 24 per cent rise. Its largest holdings included Alphabet, Canadian Nationwide Railway, Visa, Common Electrical and ranking company Moody’s as on the finish of September, in accordance with a regulatory submitting.
Citadel made $8.1bn in income final 12 months after bringing in a record-breaking $16bn in 2022. Its efficiency since its inception makes it probably the most profitable hedge fund in historical past.
Halvorsen’s Viking made $6bn final 12 months.
US billionaire Invoice Ackman’s hedge fund Pershing Sq. rejoined the highest 20 hedge funds after leaving the rankings in 2015. It was up 27 per cent in 2023, making $3.5bn.
TCI and Pershing Sq. benefited specifically by making narrowly concentrated bets that individual shares would go up.
“You possibly can argue that, since shorting is such a difficult sub-strategy, conserving issues long-biased and having a concentrated place in prime quality positions has been the best way to go,” Amiee stated.
Some multi-strategy companies, which commerce a variety of methods, additionally carried out properly — together with Citadel.
Millennium and DE Shaw, that are additionally multi-strategy companies, took joint second place within the all-time rankings, making $5.7bn and $4.2bn final 12 months respectively.
“The persistence in profitmaking of the large multi-strategy companies over the previous few years has been a exceptional pattern,” stated Rick Sopher, chief government of Edmond de Rothschild Capital and chair of LCH Investments.
Bridgewater, which in 2022 misplaced its place on the prime of the all-time rankings to Citadel, fell an additional two locations to fourth, shedding $2.6bn. Final 12 months it capped investments in its flagship automobile and minimize about eight per cent of its workforce in a shake-up after its founder Ray Dalio ceded management of the agency.
TCI and Pershing Sq. are the youngest funds on the checklist, competing with older companies resembling Millennium and Citadel, which had been based in 1989 and 1990 respectively.
The analysis discovered that the highest 20 managers had created $755.4bn in income since they had been arrange — greater than the $655.5bn in property they’re presently managing. The figures counsel that prime managers prioritise cautious deployment of buyers’ capital, moderately than making the fund as giant as doable.
