Six hedge funds that went from zeros to heroes in 2019 - Financial News London

The hedge fund industry delivered a year of sharp performance divergence in 2019, with elite quantitative managers and select specialists capturing outsized gains while the broader industry lagged equity benchmarks. Renaissance Technologies, the $60 billion quant powerhouse founded by Jim Simons, and DE Shaw continued their multi-year winning streak through systematic algorithmic trading, solidifying their position at the top of the performance hierarchy. However, the industry-wide picture proved more complicated: while hedge funds posted their best performance in several years, the S&P 500 outperformed the majority of active managers, a comparison that has become increasingly damaging to the industry's narrative.

The compensation landscape underscored this winner-take-most dynamic. Fifteen of the industry's top hedge fund managers collectively earned $12 billion in 2019, with five individuals crossing the $1 billion threshold. Chris Hohn's TCI Fund led the profit generation with $12.9 billion in gains, followed by Ken Griffin's Citadel at $8.1 billion. Bill Ackman delivered a standout 58.1% return, ending a grueling four-year stretch of consecutive annual losses and proving that tactical skill could still drive exceptional value for committed investors. These performances reflected a small cohort of managers whose strategies—whether quantitative, activist-oriented, or systematically diversified—aligned with 2019's market dynamics.

Beyond the mega-funds, six emerging hedge funds captured attention as 2019 standouts: Quantedge Global (Quantedge Capital), the Lucerne Capital fund, the Golden China fund (Greenwoods Asset Management), Marshall Wace's Ucits Funds, and GAM's Systematic Multi-Strategy Master fund. These performers represented diverse strategic approaches spanning emerging markets, systematic multi-strategy execution, and geographic specialization, suggesting that alpha generation remained possible across multiple methodologies when properly executed.

The industry's structural challenges, however, overshadowed headline returns. Despite delivering better-than-usual performance, hedge funds recorded $97.9 billion in outflows during 2019—a 163% increase from $37.2 billion in 2018—signaling accelerating redemptions despite improved returns. This contradiction reflects institutional investors' fundamental reassessment: with passive equity strategies offering lower fees and superior returns in bull markets, and with hedge funds increasingly failing to provide capital preservation during downturns, the value proposition deteriorated. The industry's historic benchmark against the S&P 500, while contested by managers pointing to different asset class exposures and downside protection mandates, has become an unavoidable comparison that influences fee negotiations and investor allocation decisions.