Scouring the Earth for Hedge Fund Returns

Bill Ackman rebounded to a blowout year -- his publicly traded fund jumped 58% in 2019 -- but Ray Dalio is having his worst run in two decades at his best-known hedge fund. Ken Griffin’s ready to celebrate the 30th year of Citadel with its Wellington fund beating multistrategy hedge fund peers, and some of his firm’s alumni are raising major sums for new hedge funds that we’ll be watching closely. With the S&P rising 29% last year and the purge of funds deepening, here are some of the winners and losers as tracked by our investing team:

• Tiger Cubs rally. Chase Coleman’s Tiger Global returned 33%, while Institutional Investor reports that Tiger “Grandcub” Dan Sundheim had a 22.4% gain in his firm’s most popular share class. Both firms increased despite a Juul drag. Andreas Halvorsen’s Viking hedge fund climbed 18% and Philippe Laffont’s Coatue rose as well.
• Gabe Plotkin, a Steve Cohen protege, had a 47% increase. His Melvin Capital Management is a standout as most equity hedge funds trailed the market, my colleague Hema Parmar notes. Still, David Einhorn bounced back with a 14% gain, while Dan Loeb’s Third Point said its offshore fund was up 17% for the year.
• Here’s where Citadel stood in relation to Millennium, Point72 and Balyasny.
• The download on Dalio, plus our read-through for Bloomberg Television, where we talk through Ken Griffin’s gains as well.

Meanwhile, it’s time to ask: Have we reached peak quant? Cliff Asness’s AQR has faced assets slipping by almost 20% and headcount has dwindled to well below 1,000, where it was at the end of 2018. He’s cutting 5% to 10% more of his workforce, according to a story Bloomberg’s Saijel Kishan broke this week. We explain the under-performance for Bloomberg TV.

He’s not the only quant facing troubles. Igor Tulchinsky’s WorldQuant cut about 130 employees and is shuttering offices, Bloomberg’s Katia Porzecanski reported. Others -- D.E. Shaw and Renaissance Technologies, according to the FT -- have been faring a lot better.

More in Banking

The biggest U.S. banks raked in more than $100 billion in profit for the first time ever at the end of 2018. It’s expected that they will just barely keep up. Can the good times keep rolling? Wall Street estimates that $10 billion in profit will be erased by the end of 2020. We’ll find out what the CEOs believe when they start to report earnings next week.

Jefferies, for one, says its pipeline for investment banking is stronger than ever. Richard Handler’s firm surpassed Deutsche Bank on Bloomberg’s league tables last year and landed work on high-profile deals such as Anadarko’s sale to Occidental, and Refinitiv’s sale to the London Stock Exchange. We discuss the company’s trajectory here for Bloomberg TV. Trading also held strong -- a good sign for the end of the year for its largest competitors.

The CEO of Virtu, meanwhile, had a word of caution for the industry overall. Speaking in a TV interview, where he also addressed the new stock exchange he’s backing, Doug Cifu said:

“The theme of 2020 will continue to be price compression in terms of commissions, and then how do institutions like Virtu and others deal with that in terms of managing your expenses and developing scale and efficiency in your business.”

On a separate note, we broke that UBS’s wealth heads are making shifts at the $2.5 trillion manager. That includes shedding three layers of management to bring Tom Naratil and Iqbal Khan, who joined recently from Credit Suisse, closer to clients. Here’s our scoop on a plan that includes cutting about 500 jobs.

Your Weekend Reads

• Don’t miss our Businessweek magazine cover on the concentration of power among the Big Three -- BlackRock, Vanguard and State Street -- as passive investing surges.
• SoftBank startups cut thousands of jobs, from Oyo letting go of employees in China and India to robotic pizza maker Zume cutting half its staff and Getaround shrinking as well (according to The Information).
• Bain is seeking as much as $7 billion for an equities fund, while TPG is raising money to invest in public companies. More in P.E.: Equinox is close to securing an investment from Silver Lake and other investors to expand digitally.|
• We're waiting on the next class of IPOs. Casper filed for a listing today, led by Morgan Stanley, Goldman and Jefferies.
• Google is expanding quietly in New York in the wake of Amazon’s stumbles. Here’s how much headcount can rise in the next eight years.
• I co-anchored a show on Bloomberg Television this week. You can find “What’d You Miss?” here.

Looking forward to bank earnings next week -- and Davos the week after. If you’re going or know people I should meet over at the World Economic Forum, don’t hesitate to let me know! More to come. -- Sonali