In 2012, prominent hedge fund managers made headlines by successfully trading against JPMorgan Chase & Co., spending lots of money to influence the U.S. presidential election, and proclaiming that a nutritional supplements company was operating a pyramid scheme. While they made plenty of noise, very few of these traders managed to beat the U.S. stock market after charging their investors rich fees.
But in northern New Jersey, David Tepper had another extremely strong year. The founder and head of Appaloosa Management guided his flagship hedge fund to net returns of nearly 30%. Tepper personally made an estimated $2.2 billion in 2012, topping Forbes’ list of the 40 highest-earning hedge fund managers and traders.
It has been four years now since Tepper, 55, started aggressively buying shares in U.S. banks like Bank of America that were reeling from the credit crisis, successfully betting that the U.S. economy and financial sector would not crumble. His 2009 trade became legendary, but while other hedge fund managers who did spectacularly well during the credit crisis have faded, Tepper, a former Goldman Sachs bond trader, has continued to deftly trade financial markets. In 2012 he continued to make a good case for being one of the greatest hedge fund managers ever.
While 2012 was not a great year for the average hedge fund, which underperformed the U.S. stock market, traders who oversee large hedge funds didn’t need to match the S&P 500 index’s 16% performance to make a lot of money last year. In total, the 40 highest-earning hedge fund managers and traders made a combined $16.7 billion in 2012, with the lowest earning managers on our list making $90 million.