2011 was officially the second worst year in the history of the industry, thanks to largely unforeseen levels of volatility in the commodity, equity and European debt markets that interrupted the international economic recovery. As a result, the average hedge fund was down approximately 5% last year. However, challenging markets didn’t stop the top three highest-earning hedge fund managers of 2011 from taking home billion-dollar paychecks.
A top the list of the world’s wealthiest hedge fund managers sits the legendary George Soros with a fortune of $20 billion. In 2011, his Soros Fund Management returned the approximately $1 billion it was managing for outside investors. Now structured as a family office, the shop will not be subject to the hedge fund industry’s imminent disclosure requirements. The office will continue to manage the Soros family’s personal wealth and the assets of Soros’ numerous foundations, including his Open Society Foundation and the Soros Humanitarian Foundation. Foundations associated with Soros had known assets north of $4 billion as of their most recent regulatory disclosures.
One spot and $6 billion behind Soros is Carl Icahn, with a net worth of $14 billion. Like Soros, Icahn returned outside investors’ capital last March and will avoid the new disclosures required of alternative asset managers due to the SEC this year. Now managing approximately $5 billion, Icahn Capital Management returned a whopping 35% in 2011, resulting in a personal gain of $2 billion for Icahn himself.
Rounding out the top 3 wealthiest hedge fund managers in the world is John Paulson. Back in 2007, Paulson was the darling of the hedge fund industry. In what has been described by some as the greatest trade of all time, Paulson bet against subprime credit and earned a reported $3.5 billion, the largest personal payday in the history of Wall Street to that point. 2011 was not so kind to Paulson; his Paulson Advantage fund returned -35.91% net of fees while his Paulson Advantage Plus fund produced a net return of -50.67%. Despite holding the majority of his personal capital invested in Paulson & Co. funds in gold-denominated shares, Paulson’s net worth is down $3.5 billion year over year to $12.5 billion.
While Paulson struggled, other industry veterans thrived on the volatility that defined 2011. Ray Dalio, founder of Westport, Connecticut-based Bridgewater Associates, earned $3 billion over the past year. On the whole, Bridgewater’s funds produced net returns of approximately 20%, thanks in part to timely bets on United States and German debt. With $120 billion under management, Bridgewater generated princely fee revenue in 2011. Dalio is now the master of a $10 billion personal fortune and comes in fifth on our list of the world’s wealthiest hedge fund managers.
Joining the many familiar faces amongst the world’s wealthiest hedge fund managers are four newcomers, all of whom did remarkably well in an exceptionally terrible year for money managers. Tiger cub Chase Coleman had a breakout year in 2011. His Tiger Global Management destroyed the competition, finishing the year with net returns of approximately 45%. The result was a $500 million payday for Coleman and a spot on the Forbes Billionaires list with a net worth of $1.1 billion. The wealthiest of the newcomers is Third Point’s Daniel Loeb. The performance of his $8.8 billion firm has won him a fortune of $1.2 billion, and a spot in the billionaires club.
David Einhorn of Greenlight Capital and Paul Singer of $19 billion Elliott Management. Einhorn’s $8 billion firm produced net returns of 2.3% in 2011, netting the founder $80 million and landing him on the Forbes Billionaires list with a net worth of $1.1 billion. For his part, Singer made $100 million in 2011 and made the list with a net worth of $1 billion. The average hedge fund was down approximately 5% last year. However, challenging markets didn’t stop the top three highest-earning hedge fund managers of 2011 from taking home billion-dollar paychecks.