A year can be a long time in the world of high finance. In 2012, Steve Cohen’s SAC Capital International was the most profitable hedge fund on Wall Street. In the 2013 list, compiled by Bloomberg, he didn’t even make the top 100 – mainly because he was returning investors’ money as his firm settled criminal charges related to insider trading with the U.S. government. Now, Larry Robbins of Glenview Capital is sitting atop the pile, with a staggering 84.2% gain for the year.
However, there weren’t that many hedge funds that enjoyed a stellar year in 2013, with only 16 of the top Wall Street hedge funds making a return that beat the S&P 500. Admittedly, the S&P had a tremendous year, gaining over 25%, well above the 20% benchmark that most investors expect from a top hedge fund, but the trend of hedge funds underperforming the stock market appears to be a recurring one. In fact, the last time hedge funds, as a group, outperformed the stock market, it was in 2008 when they lost just 19% while the market dropped over 37%.
As you might expect with the stock market rallying so strongly, most of the fund managers that outperformed it did so by betting big on U.S. stocks. Larry Robbins made the biggest gains by betting that Obamacare would boost healthcare stocks, and hospitals in particular. He was proved right in spectacular fashion, with one of his biggest holdings, medical facility operator Tenet Healthcare Corp. (THC), jumping 45% over the first ten months of 2013.
Robbins’ preoccupation with health-care stocks is not a new one, however, and he has invested heavily in them since 2004. After the Supreme Court decided to let Obama’s Affordable Care Act stand in 2012, Robbins bought lots more, and hospitals now account for 33% of his entire portfolio.
Some of the biggest names in the hedge fund universe had a 2013 to forget. For example, Ray Dalio’s Bridgewater Associates, the biggest hedge fund in the world, only returned 6% in 2013 from his $63 billion Pure Alpha II fund – which wasn’t even good enough to scrape into the Bloomberg Markets 100. However, the sheer size of his funds, with over $88 billion under management, meant that the Pure Alpha II fund was the most profitable fund overall in 2013, even though the percentage returns were comparatively poor.
On big name who re-entered the picture with a bang in 2013 was John Paulson, famous for netting a record $15 billion profit by betting against the sub-prime mortgage market in 2007. After looking a bit of a one-hit-wonder on account of his subsequent struggles, he mounted a big comeback in 2013 by purchasing shares in companies that are prospering amidst a healing U.S. economy, including financial firms such as Apollo Global Management LLC and Blackstone Group LP, as well as hotel companies that were hit hard by the recession like MGM Resorts International and Extended Stay America Inc. His timely bets on recovering industries saw his top-performing fund, Paulson Recovery, surge to third on this year’s list.
The big success stories this year came from big bets on high-flying stocks, including the likes of David Goels Matrix Capital Management Co. (No. 2), Jeffrey Altmans Owl Creek Overseas Fund Ltd (No. 6). Lansdowne Developed Market Strategic Investment Fund (No. 4) and Christopher Hohn’s Childrens Investment Fund (No. 5).
At number two on the list was David Goels $1.6 billion Matrix fund, which made phenomenal 56% returns with big long and short bets on tech stocks. Goel first made his name as a technology analyst with hedge fund legend Julian Robertson’s Tiger Management before striking out on his own in 1999. In 2013, he made big bets on cloud computing that paid off handsomely, such as stakes in online accounting software provider Xero Ltd, which rocketed 268% over the course of the year, and Workday Inc. which rose 37%. He also profited from buying Netflix shares in 2012 for around $60 – around the same time as activist investor Carl Icahn did – and saw them hit $339.5 in January 2013.
All in all, it was a year that rewarded optimism, rather than the risk-hedging strategies that are the hallmark of hedge fund investing. And with the U.S. economy showing further signs of recovery this year, there is a good chance that this type of approach will continue to reap benefits in 2014. Anyway, without further ado, here is the top 30 list of the best-performing hedge funds in 2013, as recorded by Bloomberg Markets.
30) Blue Harbour Strategic Value Partners (Clifton Robbins)
Management Firm, Location: Blue Harbour Group, U.S.
Strategy: Activist
Assets (in billions): $1.3
YTD Total Return: +19.8%
2012 Return: +16.2%
29) Odey European (Crispin Odey)
Management Firm, Location: Odey Asset Management, U.K.
Strategy: Macro
Assets (in billions): $2.1
YTD Total Return: +20%
2012 Return: +30.7%
28) Serengeti Opportunities Strategy (Joseph La Nasa, Vivian Lau)
Management Firm, Location: Serengeti Asset Management, U.S.
Strategy: Event driven
Assets (in billions): $1.0
YTD Total Return: +20.3%
2012 Return: +13.4%
27) Marcato International (Richard ‘Mick’ McGuire)
Management Firm, Location: Marcato Capital Management, U.S.
Strategy: Activist
Assets (in billions): $2.0
YTD Total Return: +20.7%
2012 Return: +28.8%
26) Senator Global Opportunity (Alexander Klabin, Douglas Silverman)
Management Firm, Location: Senator Investment Group, U.S.
Strategy: Event driven
Assets (in billions): $6.0
YTD Total Return: +20.9%
2012 Return: +14.4%
25) Litespeed Partners (Jamie Zimmerman)
Management Firm, Location: Litespeed Management, U.S.
Strategy: Event driven
Assets (in billions): $2.2
YTD Total Return: +20.9%
2012 Return: +21.8%
24) Paulson Advantage Plus (John Paulson)
Management Firm, Location: Paulson & Co., U.S.
Strategy: Merger arbitrage
Assets (in billions): $4.3
YTD Total Return: +21.0%
2012 Return: -19.0%
23) Egerton Long-Short Master (John Armitage)
Management Firm, Location: Egerton Capital, U.K.
Strategy: Long/short
Assets (in billions): $3.8
YTD Total Return: +21.0%
2012 Return: 13.7%
22) AQR Style Premia Strategy (Team managed)
Management Firm, Location: AQR Capital Management, U.S.
Strategy: Multi strategy
Assets (in billions): $1.2
YTD Total Return: +21.5%
2012 Return: N/A
21) Omega Overseas Partners A (Leon Cooperman)
Management Firm, Location: Omega Advisors, U.S.
Strategy: Long/short
Assets (in billions): $2.3
YTD Total Return: +22.4%
2012 Return: +28.0%
20) Kayne Anderson MLP (J.C. Frey)
Management Firm, Location: Kayne Anderson Capital Advisors, U.S.
Strategy: Long/short
Assets (in billions): $1.6
YTD Total Return: +22.4%
2012 Return: +5.5%
19) JANA Nirvana Master (Barry Rosenstein and David DiDomenico)
Management Firm, Location: Jana Partners, U.S.
Strategy: Event driven
Assets (in billions): $2.5
YTD Total Return: +23.5%
2012 Return: +33.4%
18) Paulson Partners Enhanced (John Paulson)
Management Firm, Location: Paulson & Co., U.S.
Strategy: Merger arbitrage
Assets (in billions): $6.4
YTD Total Return: +25.0%
2012 Return: +18.2%
17) JAT Capital Offshore (John A. Thaler)
Management Firm, Location: JAT Capital Management, U.S.
Strategy: Long/short
Assets (in billions): $1.9
YTD Total Return: +25.3%
2012 Return: -19.6%
16) Joho A (Robert Karr)
Management Firm, Location: Joho Capital, U.S.
Strategy: Long/short
Assets (in billions): $4.3
YTD Total Return: +25.9%
2012 Return: +8.8%
15) Lansdowne Developed Markets (Peter Davies, Stuart Roden, Jonathon Regis)
Management Firm, Location: Lansdowne Partners, U.K.
Strategy: Long/short
Assets (in billions): $8.9
YTD Total Return: +26.6%
2012 Return: +18.0%
14) Alden Global Distressed Opportunities (Team managed)
Management Firm, Location: Alden Global Capital, Jersey
Strategy: Distressed
Assets (in billions): $1.1
YTD Total Return: +26.7%
2012 Return: +12.1%
13) VR Global Offshore (Richard Deitz)
Management Firm, Location: VR Advisory Services, U.K.
Strategy: Distressed
Assets (in billions): $2.0
YTD Total Return: +27.4%
2012 Return: +20.6%
12) Third Point Ultra (Daniel Loeb)
Management Firm, Location: Third Point, U.S.
Strategy: Event driven
Assets (in billions): $2.3
YTD Total Return: +28.8%
2012 Return: +33.5%
11) Two Sigma Compass Enhanced (Team managed)
Management Firm, Location: Two Sigma Investments, U.S.
Strategy: Managed futures
Assets (in billions): $4.0
YTD Total Return: +29.2%
2012 Return: +8.2%
10) Pelham Long/Short (Ross Turner)
Management Firm, Location: Pelham Capital Management, U.K.
Strategy: Long/short
Assets (in billions): $3.2
YTD Total Return: +30.3%
2012 Return: +18.4%
9) Palomino (David Tepper)
Management Firm, Location: Appaloosa Management, U.S.
Strategy: Opportunistic
Assets (in billions): $7.3
YTD Total Return: +31.5%
2012 Return: +29.3%
8) Trian Partners (Nelson Peltz, Peter May, Ed Garden)
Management Firm, Location: Trian Fund Management, U.S.
Strategy: Activist
Assets (in billions): $7.8
YTD Total Return: +34.9%
2012 Return: +0.9%
7) Glenview Capital Partners (Larry Robbins)
Management Firm, Location: Glenview Capital Management, U.S.
Strategy: Long/short
Assets (in billions): $3.2
YTD Total Return: +37.4%
2012 Return: +24.2%
6) Owl Creek Overseas (Jeffrey Altman, Daniel Krueger, Jeffrey Lee)
Management Firm, Location: Owl Creek Asset Management, U.S.
Strategy: Event driven/multi strategy
Assets (in billions): $3.2
YTD Total Return: +38.1%
2012 Return: +11.1%
5) The Children’s Investment (Christopher Hohn)
Management Firm, Location: The Children’s Investment Fund Mgmt., U.K.
Strategy: Activist
Assets (in billions): $7.3
YTD Total Return: +39.7%
2012 Return: +30%
4) Lansdowne Developed Markets SIF (Stuart Roden, Peter Davies, Jonathon Regis)
Management Firm, Location: Lansdowne Partners, U.K.
Strategy: Activist
Assets (in billions): $7.3
YTD Total Return: +39.7%
2012 Return: +30%
3) Paulson Recovery (John Paulson)
Management Firm, Location: Paulson & Co., U.S.
Strategy: Long equity
Assets (in billions): $2.4
YTD Total Return: +45%
2012 Return: +4.9%
2) Matrix Capital Management (David Goel)
Management Firm, Location: Matrix Capital Management, U.S.
Strategy: Long/short
Assets (in billions): $1.6
YTD Total Return: +56.0%
2012 Return: +20%
1) Glenview Capital Opportunity (Larry Robbins)
Management Firm, Location: Glenview Capital Management, U.S.
Strategy: Long/short
Assets (in billions): $1.8
YTD Total Return: +84.2%
2012 Return: +54.3%
I am a writer based in London, specialising in finance, trading, investment, and forex. Aside from the articles and content I write for IntelligentHQ, I also write for euroinvestor.com, and I have also written educational trading and investment guides for various websites including tradingquarter.com. Before specialising in finance, I worked as a writer for various digital marketing firms, specialising in online SEO-friendly content. I grew up in Aberdeen, Scotland, and I have an MA in English Literature from the University of Glasgow and I am a lead musician in a band. You can find me on twitter @pmilne100.
