LCH Investments have updated their estimates of the world’s greatest money managers to 31 December, 2023 and the list is attached.
The top 20 managers made $67.0 billion net of fees for their investors in 2023 and have made $755.4 billion net of fees for their investors since inception.
Hedge fund managers overall made $218.0 billion in 2023. This brings the net gains since inception to $1,638 billion, of which 46.1% has been made by the top 20 managers. The top 20 managers managed 18.9% of the total assets at end 2023.
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Comments from Rick Sopher
Commenting on the data, Rick Sopher said:
On the 2023 results of hedge funds:
“In 2023 the top 20 managers made gains for their investors of $67.0 billion”.
“Over the past three years, the top 20 managers have generated 83% of the gains made by all hedge fund managers. In most cases this reflects an ability to limit the downside in adverse conditions and to make money when conditions are favourable, as they were toward the end of 2023.”
“The top 20 managers generated returns of 10.5% in 2023, significantly outperforming the average hedge fund which returned 6.4%. In most cases, these managers have been generating above average performance over several decades reflecting the persistence of their superior returns.”
On the large multi-strategy firms generally:
A significant component of the gains of the top 20 managers have been made by the large multi-strategy, multi-portfolio firms like Citadel, Millennium and DE Shaw, which are the top 3 firms in our ranking. Over the past 3 years, these 3 firms alone generated $71.2 billion of gains representing 38.3% of the total gains of hedge funds. This is an especially remarkable performance as these firms only accounted for 4.6% of the assets under management of hedge funds (at 31 December 2023).”
“These managers have been able to combine strong performances from several sources including macro, quant, equity dispersion and commodity trading strategies, and all generated significant returns both in the down markets in 2022 and the up markets in 2023 through controlled exposure to market direction and trading short-term.”
“These firms are clearly also able to pay more aggressively to attract the best talent.”
“These firms run with leverage levels far higher than the average hedge fund, which has helped boost their performance. Their strong net returns have been achieved after passing on substantial operating costs, which continues to be tolerated by their investors. The sustainability and acceptability to investors and regulators of the risks involved in these models is rightly coming under scrutiny.”
On the top 20 managers gains relative to their AUM:
“The top 20 managers have generated more gains since inception ($755.4 billion) than they currently have assets under management ($665.5 billion). In most cases, this is because the manager has at times either closed to new subscriptions or returned capital. The top managers have generally recognised that carefully controlling asset growth is a good basis for generating significant gains for investors over time.”
(Note: the top 20 referred to above are the top 20 at 31.12.23)
On the changes in the top 20:
“Pershing Square re-enters the ranking of the top 20 greatest money managers of all-time. This is a remarkable comeback, as Pershing Square had dropped off the list in 2015. It has generated $12.3 billion of net returns for investors over the past 5 years, an impressive result generated from substantial gains through identifying several equities with unrealised potential, combined with judicious hedging of the portfolio from time to time.”
“Pershing Square replaces Moore, which had in any case returned all outside capital and whose gains had therefore been frozen in our ranking.”
Basis of Preparation
Our sources are a combination of meetings and contacts with the founders and managers of the respective firms, audited and management reports, internal estimates and other confidential sources. Net gains typically include money made by the founder or manager on their own investment in the firm’s investment vehicles. We have included the gains made by firms after the official retirement of the founder, provided the investment approach remains substantially unchanged. Our criteria for inclusion include that the founder or manager should be the lead investment manager of an investment vehicle or vehicles which are mainly open ended or invested in liquid assets.
When the manager formally ceases to manage money for outside investors, the net gains are typically frozen at that point. Gains generated by discretionary investment managers who also manage “long only” investment vehicles are included; gains made in investment vehicles which are structurally linked to the performance of an index, as well as gains made in closed end vehicles designed to be structurally long a specific class of assets, such as CLOs, are excluded.
About Leveraged Capital Holdings (LCH)
LCH is the world’s oldest fund of hedge funds, launched on 30 November 1969. The value of one share at launch has multiplied by 160 times, representing a return of 9.9% per annum to 31 December 2023. LCH is a part of The Capital Holdings Funds plc, which is led by Edmond de Rothschild.
About Rick Sopher
Rick Sopher is Chairman of LCH Investments NV, the investment advisor of LCH. He is also CEO of Edmond de Rothschild Capital Holdings Limited.
