The Top 50 Hedge Funds in the World Part 3: 40-31

NYC1-hedgethink The Top 50 Hedge Funds in the World Part 3: 40-31

Our countdown of the 50 biggest hedge funds in the world continues, with some of the biggest names in the hedge fund universe including Louis Bacon, Paul Tudor Jones II, and Wall Street’s former wonderkid Kenneth Griffin.

40: Tudor Investment Corp. Greenwich CT, USA

Having found fame by accurately predicting the 1987 market crash known as Black Monday, when the Dow Jones fell by 22%, Tudor Investment Corp founder and CIO Paul Tudor Jones II was one of the few investors who made money that day. Ever since, Jones has produced high double-digit annualized returns, and his fund has been among the top 100 biggest hedge funds since Alpha started producing the list in 2002. His powers of prediction did, however, fail him in 2007, when he failed to see the collapse of Lehman Brothers and the subsequent financial crisis coming, but since then he has bounced back and has maintained his position as the 40th biggest hedge fund for two years running, with assets growing by $1 billion to $11.3 billion between 2012 and 2013.

40: Bain Capital Boston, MA, USA

Although Bain Capital is best known as one of the biggest private equity firms in the world, it also has a hedge fund business that has been one of the biggest in the world since 2006. Its hedge fund business Brookside Capital, which operates a global long-short equity strategy, has built its reputation around steady performances, although a bad year in 2011 caused it to lose the confidence of many investors, dropping from No. 3 to No. 36 in the space of that year. Since then, it has stayed fairly steady, dropping five places in the rankings last year despite growing by $100m to $11.3bn in assets under management.

38: Two Sigma Investments/Two Sigma Advisers New York, NY, USA

Quant-based hedge fund Two Sigma has enjoyed a rapid rise in the short time it has been in existence, having only broken into the top 100 in 2011, and is mounting a serious challenge to much longer-established competitors in the quant space such as DE Shaw and Renaissance Technologies. Key to its success has been its innovative data analysis systems and proprietary technology, and its stellar returns have enabled them to charge stratospherically high performance fees of 37.5%. This clearly hasn’t put off investors, with the amount of capital under management growing from $8.5 billion to $11.4 billion, which has seen the firm rise from 54 to 38 in the rankings over the past year.

38: Pershing Square Capital Management New York, NY, USA

As one of the highest-profile activist investors, Pershing Square CEO and founder William Ackman has ruffled more than a few feathers in his time. Perhaps the biggest controversy came when he challenged the credibility of New York-based Municipal Bond Insurance Association’s (MBIA) triple-A credit rating, building up a big short position using credit default swaps against MBIA corporate debt. It took five years for him to be proved right, but when MBIA crashed in 2008, he made $1 billion for Pershing Square’s investors – a deal which landed him in hot water with New York State Attorney General Eliot Spitzer, a seasoned campaigner against Wall Street’s excesses. He lived to tell the tale, however, and this year he climbed one place up the rankings, with his fund growing by $600m to $11.4bn.

37: Wellington Hedge Management  Boston, MA, USA

As one of the most secretive hedge funds in the business, little is known about Wellington Hedge Management, the hedge fund arm of mutual fund giant Wellington Management. In 2013, it grew slightly in terms of assets under management from $11bn to $11.7bn, but dropped down the rankings by one place.

36: Avenue Capital Group  New York, NY, USA

Siblings Mark Lasry and Sonia Gardner are veterans of the distressed-debt investing game, having innovated with a style that avoided leverage and put an emphasis on liquidity with Amroc Investments in 1989, a partnership they founded in association with the Robert Bass Group. Since striking out on their own in 1995 with just $5m in capital, they have gone from strength to strength, although they did drop down the rankings from 29 to 36 this year, with their capital shrinking from $12.5bn to $12bn.

35: Centerbridge Partners  New York, NY, USA

Founded by former Blackstone trader Mark Gallogly and former partner and head of distressed securities at Angelo, Gordon & Co Jeffrey Aronson, Centerbridge Partners is something of a hybrid between its multistrategy hedge funds and its better-known private equity business. Since its formation in 2006 with a record-breaking $3.2 billion private equity fundraising round, the firm has established itself as one of the major players in both arenas, and today the firm manages $12.1bn in its hedge fund business alone, an increase of $100m on the previous year.

34: CQS  London, UK

The worlds of mathematics and finance are inextricably linked, and those that are expert in both of these complex worlds can reap the benefits, as CQS founder and CEO Michael Hintze has found. Having trained in physics, pure math, and electrical engineering, Hintze went on to develop quantitative strategies that have helped to grow his hedge fund’s assets from $5.2 million at its launch to $12.2 billion today. It is also the seventh biggest hedge fund in Europe, and has climbed six places in the global rankings in the last year.

33: Pacific Investment Management Co.  Newport Beach, CA, USA

A few years ago, funds that dealt exclusively in bonds such as Pacific Investment were going great guns as investors flocked to these high-yielding, relatively safe investments. Since then, bond yields have dropped as rising interest rates have driven investors away from fixed-income assets, and the Fed’s dithering over the scaling back of its bond-buying fiscal stimulus programme didn’t help either. That said, PIMCO’s strong forty-year record of growth and solid performance remained attractive to investors in 2013, with assets increasing by almost $6bn to $12.8bn, sending it soaring 37 places up the rankings.

32: Moore Capital Management  New York, NY, USA

With returns being squeezed by the influx of institutional money into hedge funds, many of the biggest names in the industry have been handing back investor’s money in an effort to stay nimble. One example of this is Moore Capital Management’s Louis Bacon, who founded Moore in 1989 after leaving his post as vice president of trading at Shearson Lehman Brothers. After returning only 0.3% to investors in 2012, Bacon returned $2bn to investors – which saw the firm drop 11 places down the rankings – and reaped the rewards of his downsizing strategy, with the firm putting out its best returns for several years.

31: Citadel  Chicago, IL, USA

Having avoided the traditional route of studying at business school before working on Wall Street, Citadel founder and CEO Kenneth Griffin is something of a maverick. He started by trading convertible bonds out of his Harvard University dorm room in the 1980s, and with the help of Glenwood Capital’s Frank Meyer, he started Citadel in 1990. Since then, his stellar performance has attracted billions in investment, and despite nearly getting wiped out by the financial crisis of 2008, he has bounced back in style, jumping six places up the rankings and growing his fund’s capital by $3bn to $14bn between 2012 and 2013.

Other articles in this series

Top 50 Hedge Funds in the World Part 1: Introduction
Top 50 Hedge Funds in the World Part 2: 50-42
Top 50 Hedge Funds in the World Part 4: 30-21
Top 50 Hedge Funds in the World Part 5: 20-11
Top 50 Hedge Funds in the World Part 6: The Top Ten