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Matt Levine

The Old Hedge Funds Are the Good Ones

Also PG&E, Tesla, dark pools and AIG.

Fund-of-funds LCH Invesments NV does an annual ranking of the top 20 hedge funds measured by the total profits that they have made for investors since inception; this year’s version came out recently and you can read about it here or here or here or here. The perennial champ is Bridgewater Associates, which has made $57.8 billion for investors since it started in 1975, adding $8.1 billion last year. Second place is Soros Fund Management, at $43.9 billion from its founding in 1973 until, um, 2017, “even though in 2011 Soros announced he was returning all outside money to investors.” It’s not an exact science. Renaissance Technologies is way down in 17th place at $16.7 billion, but that “does not include the gains generated by Renaissance’s oldest fund, the Medallion Fund, which has been closed to outsiders for more than a decade and now manages money only for partners and employees.” 

Still the orders of magnitude are useful. You can measure hedge fund managers’ performance in different ways. The fund with the highest compounded rate of return (or Sharpe ratio or alpha or whatever) over a long time is, arguably, the best at investing. The fund with the most money is arguably the best at marketing (a key skill), and the hedge fund manager with the largest personal fortune  is probably best at the subtle combination of skills—investing, marketing, structuring and negotiating fees and lockups, etc.—that, I would argue, is the ultimate measure of a hedge fund manager.