In 2018, the U.S. hedge fund industry experienced its largest decline in assets under management in nearly 10 years, with net redemptions of $35.3 billion for investors and hundreds of closed funds for the year.
However, even in such a market, Bridgewater, the world's largest hedge fund, still grew against the trend, making a net profit of $8.1 billion for investors in 2018, becoming the biggest winner of the year.
December "Kill"
In 2018, the Hedge Fund Composite Index fell 5.2 percent, slightly behind the S&P 500.
Last December, when the S&P 500 suffered its worst monthly decline since the Great Depression, the market was swept by panic redemptions.
In just one month, investors withdrew $19.6 billion from hedge funds, boosting the annual "drawdown" to $35.3 billion.
At the beginning of 2019, hedge funds had little excitement in the new year. In recent years, even some of the most reputable funds have faced the difficulty of providing returns to investors, and this pressure has prompted some funds to change the "twenty-twenty" robust management fee structure.
When investors are disappointed with the performance of hedge funds, they often don't spend much time waiting for the fund to turn things around. In recent years, there has been a lot of money outflows, and in some cases, hedge funds have even had to shut down completely.
Hundreds of hedge funds closed
In 2018, 21% of hedge funds returned at least 5%, while 59% of hedge funds had negative returns.
According to eVestment research, hedge fund assets shrank by $88 billion in 2018, the biggest decline in the size of assets under management in the industry since the financial crisis a decade ago.
Hedge fund research firm HFR said more than 400 hedge funds had been liquidated in the first three quarters of 2018. In fact, this is no longer a new trend. Nearly 3,000 hedge funds have been shut down since 2015, and hedge fund assets plunged $112 billion in 2016.
It is reported that several large funds decided to liquidate or convert into family businesses in the fourth quarter of last year, and when these funds close, the funds will be returned to investors.
Omega Capital
Billionaire investor Leon Cooperman's hedge fund, which manages about $3.8 billion in assets, announced plans to close traditional businesses in July. Cooperman revealed plans to turn the fund into a family office. A branch of the fund's credit opportunity fund, Omega, intends to remain open, but will be given a new name, per Bloomberg.
Highfields Capital
Founded in 1998 and managing about $12 billion, Boston-based Highlands is one of the largest funds that recently announced its imminent demise. For much of 2018, Highfield's various smaller fund branches fell by around 1% overall, with equity hedge funds returning an average of 2.3% as of August 2018.
Standard capital
San Francisco-based Critterion Capital Management, with $2 billion in assets under management, is another major fund firm that is about to close.
Tourbillion Capital Partners
Jason Karp, founder of Tourbillion Capital Partners, decided to close his fund after six years. In its October 2018 announcement, Karp said it plans to return more than $1 billion to investors by the end of 2018. Tingbillion did well in the first three years after its founding in 2012. In recent years, however, it has failed to meet the expectations of management and investors.
Crushing hedge fund technology stocks, oil prices
Industry insiders said that the influx of hedge funds into a handful of stocks such as Facebook (Facebook), Amazon (AMZN) and Alphabet (GOOGL) has accelerated the exposure of the problem. When everyone decides to sell at the same time, an overly concentrated position can exacerbate losses. When the NASDAQ market plummeted in 2018, tech stocks plummeted.
In 2018, equity hedge fund earnings fell nearly 8 percent, with a 4 percent drop in December alone.
Hedge funds have also been affected by oil prices. Commodity hedge fund earnings fell 6 percent last year.
Energy-focused hedge fund Brenham Capital reported a winding up at the end of November. Founder John Labanowski said in a letter to investors that "this cycle is getting shorter and more volatile." Our team has won battles and had great success, but the difficult circumstances have finally had an impact on the returns of the fund and for me personally. ”
TOP20 contributes nearly half of the industry's revenue
The LCH report shows that while hedge funds suffered their worst overall performance since the financial crisis last year and lost nearly 60 percent of their funds, the top 20 most successful hedge fund managers were not adversely affected.
Third-party data and risk management firm LCH ranks fund managers by net income after fees. LCH found that since its inception, the top 20 hedge fund managers have generated $500.3 billion in total returns, or 45.6 percent of total returns, though they account for only 17.9 percent of assets.
According to LCH, the hedge fund managers who made the most money for investors in 2018 were computer-driven managers who used systematic strategies without taking on huge stock market risks. In other words, they don't rely on the direction of the stock market to make money.
Interestingly, LCH's statistics include Jim Simons' Renaissance Technologies for the first time, and while it is widely regarded as the most successful hedge fund manager of all time, it has been excluded from the rankings in the past. Founded only in 2005, the young fund generated a total of $16.7 billion in returns for investors, ranking 17th overall.
It is worth mentioning that LCH does not include the proceeds generated by Renaissance's oldest fund, the Medallion Fund, which has been closed to the outside world for more than a decade and now manages funds only for partners and employees.
Soros's Soros Fund Management firm continues to rank second since its inception, with a total return of $43.9 billion, although Soros announced in 2011 that it would return all external funds to investors.
Following a $2.1 billion investment last year, Ken Griffin's Citadel has still ranked third since its inception, with a total price of $30.7 billion. Its signature products, Kensington and Wellington's multi-strategy funds, rose more than 9 percent last year.
Among them, the hedge fund Bridgewater was the biggest winner in 2018. First, it surpassed previous year's revenue, generating a net gain of $8.1 billion for investors. The company's Pure Alpha strategic net revenue increased 14.6%.
Since its inception in 1975, Bridgewater has been the most profitable hedge fund. With $150 billion in assets under management, the hedge fund earned $300 million in 2017 and a net increase to $8.1 billion in 2018.
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