The richest hedge fund managers became even richer in 2017.
The 25 highest-earning hedge fund managers last year collectively made the most money in four years —and most of the top earners on Institutional Investor’s 17th annual Rich List are among the wealthiest hedge fund managers, a reminder of the power of compounding.
Altogether, the top 25 earners last year made a total of $15.38 billion, which works out to an average of $615 million. This is an increase of nearly 40 percent from 2016, a year when the top 25 collectively earned the lowest amount since 2005.
Not coincidentally, 2017 saw hedge funds generate their best average performance since 2013.
It took a cool $225 million to earn a spot in the top 25 for 2017. This compares with just $130 million in 2016 and $135 million in 2015.
There are several reasons for these much larger earnings figures at the top. For one thing, the average hedge fund fared better than in the previous few years. In addition, more managers generated better returns than in 2016, when about half either lost money or posted low-single-digit returns.
And many more hedge funds last year — compared with 2016 — were not only profitable but generated respectable-to-spectacular gains, enabling more of the wealthier hedge fund managers to top the list.
Each year II calculates the 25 hedge fund managers who make the most money in a single year. We also highlight a Second Team — those ranking 26 through 50.
We count gains on managers’ own capital invested in their funds, as well as shares of the firms’ total fees. When calculating the gains generated by managers’ own money, we do not take into consideration a high-water mark. In many cases, the gains on their own capital play a major role in the ability of managers to qualify for the ranking.
This year four managers made ten figures — at least $1 billion.
They were led by Renaissance Technologies’ James Simons, who earned $1.7 billion. He has qualified for the ranking all 17 years.
He was followed by Appaloosa Management’s David Tepper ($1.5 billion), Citadel’s Kenneth Griffin ($1.4 billion), and Bridgewater Associates’ Ray Dalio ($1.3 billion).
Millennium Management’s Israel (Izzy) Englander just missed joining this elite class, earning $975 million last year.
To underscore the power of compounding, though Renaissance’s funds all outperformed their historical average and posted double-digit gains, the firms of the four next-highest earners posted gains that fell short of their historical annualized returns. However, the four others have so much wealth tied up in their funds that they still were able to top the Rich List, driven by gains from their own capital.
Dalio’s experience, however, was unique. The manager’s Pure Alpha strategy generated low-single-digit gains last year. This means Dalio did not make the majority of his earnings from gains on his own capital. His funds also did not generate large performance fees.
By contrast, Bridgewater, the world’s largest hedge fund firm, with $108.4 billion, is able to generate a huge pot of management fees.
Altogether, 15 individuals from last year’s top-25 ranking qualified for the Rich List this year, including last year’s 14 highest earners, further demonstrating the power of compounding.
This year just one person makes his debut in the top-25 ranking, at No. 20 — Scott Shleifer, a partner at Chase Coleman III’s Tiger Global Management, who heads up the firm’s public equity business. Last year, Tiger Global’s long-short funds rose 28.2 percent and the long-only funds surged 38.1 percent. As a result, Shleifer, who is also a portfolio manager for the firm’s large venture capital business, made $260 million in 2017.
He and Coleman, who ties for eighth place with $600 million, are among the five of the top 25 who have roots in working for the legendary Julian Robertson Jr. of Tiger Management Corp. The others are Coatue Management’s Philippe Laffont ($550 million), Lone Pine Capital’s Stephen Mandel Jr. ($325 million), and Viking Global Investors’ O. Andreas Halvorsen ($300 million).
Joseph Edelman ($525 million), whose Perceptive Advisors is the smallest among the top 25 firms in terms of assets under management, posted the best performance of the group. His health care– and biotech-oriented fund was up 40.13 percent.
Meanwhile, two managers return to the top-25 ranking after suffering one or two years of losses — York Capital Management’s Jamie Dinan ($350 million) and Glenview Capital Management’s Larry Robbins ($230 million).
For the full list click here.
