An increasingly precarious environment for Americas hedge funds is creating clear winners and losers among the
biggest firms, according to the bi-annual Absolute Return Billion Dollar Club rankings.
As a group, the Club remains awash in cash. Some 269 firms–nearly the same total, if not composition, as six months
earlier–managed $1.46 trillion in hedge fund assets as of the start of the year. That’s a 2.94% increase from the July
figure, and a solid 9.30% boost from the start of 2012.
For the top 50 by size, times are even better. They grew 6.18% during the past six months, and 11.29% during the past
But beneath the surface lies a swelling churn. Some 17 firms dropped below the all-important $1 billion mark in the
latest six-month period, the most casualties since January 2009 during the heart of the financial crisis. Those fallen
funds (some of which, if history is any guide, may rise again) have been quickly replaced by newcomers–both recent
launches and firms that have grown slowly over a decade or more.1
Among the top firms, Ray Dalio’s idiosyncratic Bridgewater Associates continues to shovel profits to investors from
its offices in the hinterland of Westport, Conn. Inflows to its flagship Pure Alpha strategy (see returns here) and
strong performance in All Weather 12% (see returns here) helped the firm to the second-largest dollar increase in the
J.P. Morgan Asset Management remains in second; it has seen steady asset drops for its Highbridge arm nearly
canceled out by gains for its J.P. Morgan-branded funds. Performance gains have kept third place Och-Ziff Capital
Management in its slot during a positive stretch for its multistrategy funds.
The biggest increase overall belongs to Adage Capital Management, which shot up to $25 billion from $16 billion one
year earlier and $8.3 billion two years ago. It is now the sixth-largest hedge fund firm in the Americas, up from 15th
place at the start of last year. The Boston firm has benefited from a fortuitous combination of performance and
inflows; its flagship long/short fund was up 18.6% last year. Investors may also have been attracted to its low
management fee (0.5%) and incentive scheme that only charges for performance in excess of the Standard & Poor’s
500, according to a person familiar with the fund.
Other major winners included Apollo Management, helped by its acquisition of credit manager Stone Tower Capital;
the D. E. Shaw Group, assisted by outsized gains in its core quantitative funds; and AQR Capital Management. The
aforementioned firms either declined to comment, or did not respond to requests.
Those winners have a lot of company, as 62% of Billion Dollar Club hedge funds (that is, those who did not drop out)
increased their assets during the past year.
On the flip side, it was yet another disappointing period for
Paulson & Co., with the firm dropping $4.8 billion (and eight
places on the rankings) in the past year. In a statement,
Paulson’s external spokesman, Armel Leslie of Walek &
Associates, said it had been a “mixed year for our funds.”
“While Advantage was down, Merger, Credit and Recovery,
representing more than 65% of firm wide assets, were all
positive with Paulson Enhanced up 20%. We are committed
to returning the underperforming funds back into positive
territory and believe our portfolios are well positioned for
2013,” Leslie said.
Even with its considerable decline, Paulson remains the 14th
largest firm in the Americas, down from third place at
A group of major managers fell off the list altogether, led by
Columbia Management Investment, down approximately $2
billion to $600 million in just six months (see performance
here). HighSide Capital Management dropped from $1.1
billion to $800 million in the past year. The firm’s assets
have been on a steady decline from a midyear peak of $4.7
billion achieved in 2008. Katrina Allen, an external
spokeswoman for HighSide at PR shop ASC Advisors, said
the fund declined to elaborate on its descending assets.
Elm Ridge Capital Management had fallen off the list by
September according to its SEC filings, which listed client
assets of $989 million at that time. The firm’s flagship U.S.
equity fund was down 14.15% last year (see performance
here). The firm did not return calls seeking comment. Stark
Investments, which closed two of its funds last year, also
exited the Club.
Investors pulled $900 million from Gracie Asset
Management following the departure of a macro portfolio
manager. Following poor performance, QFS Asset
Management liquidated two funds, resulting in its departure
from the list.