The Hedge Funds That Changed the Game
Hedge-fund titans Steve Cohen, Izzy Englander and Ken Griffin are killing it. Their imitators are having trouble keeping up. The big three’s advantage comes from having pioneered what has become the hedge-fund industry’s hottest strategy over the past few years: Known as multimanager firms, they divvy up money across as many as hundreds of specialized investment teams with the aim of producing steadier returns that are uncorrelated to broader markets.
Their method turns on its head the original idea of a hedge fund as the strategic vision of just one manager. Cohen’s Point72, Englander’s Millennium Management and Griffin’s Citadel notched returns of around 10% or more last year. That is not nearly the 26% return, including dividends, of the S&P 500 last year, but hedge funds typically don’t mark their success against the overall market.
They aim to make money in any type of market environment. A broad hedge-fund index returned 7.5% last year, according to research firm HFR. The top three’s competition, meanwhile, struggled to beat the return any investor can get by stashing cash at the bank and earning interest.
Balyasny Asset Management finished up 2.7% in its flagship fund. Schonfeld Strategic Advisors gained about 3% in its main fund. Walleye Capital, founded in Minnesota, returned about 4%.
London-based LMR Partners generated returns of 2.9% in its main fund. Huge sums of money have flowed into multimanager firms in the past few years, defying what has otherwise been a period of tepid asset growth in the hedge-fund industry. Assets at multimanager funds ballooned from $185 billion at the end of 2019 to $350 billion at the end of last year, according to Barclays.
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