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A year full of volatility and chaos ended up going pretty well for many hedge funds.
The average hedge fund has made more than 13% this year's first 11 months, after a strong November, according to Preqin — besting the S&P 500's return, of 12.1% over the same time period. Next year, with ample distress opportunities on the horizon and uncertain timelines on vaccine distribution, seems to be much of the same.
"It should be a pretty good environment for hedge funds in general," said Chris Walvoord, Aon's global head of hedge fund portfolio management and research.
Still, this year's returns have been uneven across different strategy types. Big-name equity managers like Coatue Management and D1 Capital have soared, while some well-known quants Bridgewater and Winton Group have struggled to find their footing. Macro managers have sparked renewed interest from allocators thanks to their resilience during the early days of the pandemic in the US.
While investors spent the first part of the year getting out of their hedge-fund investments — not all of which was driven by manager performance but also fears of a liquidity crunch — the industry saw net inflows in the third quarter, according to Hedge Fund Research. The $13 billion net new money in hedge funds in the third quarter brought the overall industry to just over $3.3 trillion — though the industry has still lost $30 billion more than it has brought in for the year.
The 12 managers below are a mix of those who have performed well this year, struggled, or are making a name for themselves.
Bridgewater Associates
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Bridgewater, the world's largest hedge fund founded and run by Ray Dalio, would like this year to end.
The $140 billion firm was in a public pay dispute with its former co-CEO Eileen Murray, one of the most well-know women in finance. In the summer, legal filings revealed its arbitration dispute with two former employees where the fund "manufactured false evidence" against the start-up manager.
And performance has been a drag — down more than 18% in its flagship fund through October, according to Bloomberg.
Coatue Management
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Billionaire Philippe Laffont's $25 billion Coatue has blown 2020 out of the water.
Up more than 50% through November, the massive Tiger Cub has enjoyed successes in its public equity portfolio as well as its private bets, like one-time unicorn Snowflake.
The year hasn't been all smooth sailing for the New York-based manager however. As Business Insider reported, the now-closed quant fund and the data science team that ran it have been a source of turmoil internally.
CQS
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Less than two years after its CEO said it was hoping to expand in the US with new products, CQS has spent 2020 trying to get back on track and refocus on its core credit strategies.
The manager, run by Sir Michael Hintze, is in the midst of succession planning but lost its head of global credit Nick Pappas, who is launching his own fund, this month. The multi-billion-dollar firm was down big in several funds at the beginning of the year as the coronavirus spread across the US and Europe, and cut 50 jobs over the summer, according to Bloomberg.
Still, several funds have recovered nearly all of their losses, even though this year was "arguably the most turbulent year in financial markets for a generation," Hintze told investors in a recent letter. Now he's trying to find his replacement after former CEO Xavier Rolet lasted less than a year in the role.
Verition Fund Management
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It's hard to make money in any strategy, much less five, but that's just what Nick Maounis' Verition Fund Management has done this year.
The $2 billion manager is up in the firm's five strategies through October — equity, quant, credit, event-driven, and convertible arbitrage. Through the first ten months of the year, the firm is up 22.3%, Business Insider previously reported.
This performance doesn't include November's returns, which many managers were quite happy with: Thanks to vaccine news and certainty around the US presidential election, hedge funds were up, on average, 6.2%, according to Hedge Fund Research — the biggest monthly gain since December of 1999.
Tudor Investment Corp
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Billionaire Paul Tudor Jones said people were better off getting their financial advice from TikTok than standard economic models in June after he was humbled by the markets' rebound.
A half-year later, Jones seems to have figured some things. The longtime macro manager was up more than 9% in his BVI Global fund through the end of October, and that number is likely higher now thanks to one of Jones' key portfolio holdings: Bitcoin.
The cryptocurrency, which Tudor said was "the best inflation trade" in October, is up more than 40% since the end of October — with a single Bitcoin priced at more than $24,000 as of December 17.
Laurion Capital
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Founded by former JPMorgan traders more than 15 years ago, New York-based Laurion Capital has had a banner year, according to industry sources.
The $8 billion firm was up more than 31% through November, after returning more than 10% last month, sources say. The manager, run by Benjamin Smith and Sheehan Maduraperuma, closed its macro fund in 2016 to focus on its core strategy.
D1 Capital
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Not even a pandemic could slow down Dan Sundheim.
The billionaire is the founder of D1 Capital, which was up more than 30% through August of this year on the back of some savvy public and private market bets. The former Viking Global chief investment officer has his hands in nearly every notable private company, including Stripe, Robinhood, SpaceX, and more, and has expanded his personal investment portfolio beyond that.
His art collection resembles that of a small museum, and he and Melvin Capital founder Gabe Plotkin are minority owners of the NBA's Charlotte Hornets.
York Capital
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Billionaire Jamie Dinan's York Capital made waves in November when the firm announced it was largely backing out of the hedge-fund game.
The firm's European hedge funds and flagship US offering are going to run internal money only after a string of poor performance (the strategies had less than $3 billion when the announcement was made). The firm's Asian hedge fund business is planning to spin off into an entirely new business, and Credit Suisse is going to keep its interest in that new business.
The Swiss bank though was hit hard by its York investment; Credit Suisse pumped nearly $500 million into York in 2010, and said in November it was planning on taking a $450 impairment for its stake in the hedge fund.
Emerald Ridge Advisors
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With a resume that includes an executive position at Steve Cohen's SAC Capital, Tom Conheeney sparked a lot of industry chatter when it came out he was starting his own fund.
Details are still scarce about the firm, named Emerald Ridge Advisors, but two big names have signed on to work at the new fund: Porter Collins and Vinnie Daniels, former Citadel portfolio managers best known for their appearance in "The Big Short."
Avenue Capital
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Billionaire investor Marc Lasry, who just handed Giannis Antetokounmpo the largest contract in NBA history, is gearing up for more than just basketball.
The distressed debt investor said in during the summer that there could be $1 trillion in opportunities this cycle, largely due to the pandemic, which has accelerated bankruptcies and foreclosures.
He expects there to be ample opportunities in the Asia and Europe as well, where there's less competition from distress power players with large war-chests.
Massar Capital
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Marwan Younes' Massar Capital is putting the finishing touches on another solid year.
Up more than 20% through October of this year, the $300 million macro manager has been able to follow up its 23% returns from 2019, despite a drastically different investing environment. Younes did some of his best work when markets were melting down during the spring, making 14% through March.
If this year was any indication, volatility has returned after several sleepy years. This should be music to the ears of macro managers like Massar, according to JPMorgan. The bank found that the average hedge fund loses money when the VIX — an index that tracks volatility — spikes.
But macro managers outperform during these periods, and investors have taken notice.
CastleKnight Management
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If macro managers are in-demand, then a new launch from one of the best macro managers of all-time should be able to rake in the cash.
CastleKnight Management was started by Aaron Weitman this year with $100 million, and backed by a serious player: Appaloosa founder and Carolina Panthers owner David Tepper.
Weitman, who is Tepper's nephew, worked at Appaloosa for 15 years, starting as an intern and leaving as a senior partner. He focused on cyclical industries like housing, chemicals, and industrials, Business Insider reported previously, and his new fund invests across equities and credit.