Hedge funds lose money but managers make billions

TOP FIVE: Mr Kenneth Griffin at Citadel (above) and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander at Millennium to
TOP FIVE: Mr Kenneth Griffin at Citadel (above) and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander at Millennium took home more than US$1 billion apiece.
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons (above) at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander at Millennium to
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons (above) at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander at Millennium took home more than US$1 billion apiece.
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio (above) at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander at Millennium to
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio (above) at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander at Millennium took home more than US$1 billion apiece.
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper (above) at Appaloosa and Mr Israel Englander at Millennium to
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper (above) at Appaloosa and Mr Israel Englander at Millennium took home more than US$1 billion apiece.
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander (above) at Millennium to
TOP FIVE: Mr Kenneth Griffin at Citadel and Mr James Simons at Renaissance Technologies shared the top spot with US$1.7 billion each, while Mr Raymond Dalio at Bridgewater, Mr David Tepper at Appaloosa and Mr Israel Englander (above) at Millennium took home more than US$1 billion apiece.

BOSTON • Top hedge fund managers had a banner year last year, with five men making more than US$1 billion (S$1.4 billion) each, even though the funds themselves lost money for their investors.

According to an annual industry survey released last Tuesday, 25 best-paid fund managers took home a combined US$13 billion - 10 per cent more than in 2014.

The staggering figures contrasted sharply with how the sector itself has fared. The industry has been criticised by some for making too much money for itself and too little for investors.

Based on the 15th annual Alpha's Rich List, released by Institutional Investors, Citadel hedge fund's Kenneth Griffin and Renaissance Technologies' James Simons tied for top honours, earning US$1.7 billion each last year.

Bridgewater's Raymond Dalio, Appaloosa Management's David Tepper and Millennium Management's Israel Englander rounded out the top five spots, with each man making more than US$1 billion last year, the survey showed.

The high pay came "despite the fact that roughly half of all hedge funds lost money last year", said Institutional Investor editor Michael Peltz.

He said "about half of the... managers used computer-generated investment strategies to produce their investment gains".

The report was released a day before the SkyBridge Alternatives Conference in Las Vegas, where fund managers found themselves on the defensive after China's sovereign wealth fund highlighted their lacklustre performance.

This prompted some in the industry to call for a rethink when investing in hedge funds.

Not even encouraging words like "Don't be afraid to make money" by private equity titan David Rubenstein could brighten the mood. The billionaire co-founder of the Carlyle Group had told attendees that the industry had created a lot of jobs and made companies valuable.

Hedge fund managers are among the highest-paid in the finance industry, traditionally charging 2 per cent of assets as a management fee and 20 per cent of profits.

Yet, in the past two weeks, the US$2.9 trillion hedge fund industry has been criticised by billionaire money managers Steven Cohen, Warren Buffett and Daniel Loeb over lack of talent, the unbelievable fee structure and catastrophic performance, respectively.

Ms Roslyn Zhang, the managing director of China Investment Corp, the nation's sovereign wealth fund, highlighted the industry's lacklustre showing in recent years.

She cited the popular wager against China's yuan and questioned why investors are paying high fees.

"I'm kind of reflecting to myself that maybe we're not making the right decision" in investing in hedge funds, she said.

The industry posted an average return of 0.6 per cent this year through last month.

Rubicon Fund Management's Mr Paul Brewer said part of the problem was that some funds had simply become too big to find unique ways of making money.

"Everyone's chasing the same market opportunity" when they have billions of dollars under management, he said at the conference.

"I think investors need to rethink that model."

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on May 16, 2016, with the headline 'Hedge funds lose money but managers make billions'. Print Edition | Subscribe