FUNanc!al for Investors

List of Best Hedge Funds

The Best Hedge Funds for Exceptional Investment Returns

Introduction:


Selecting the right hedge funds can be a game-changer for your portfolio. This comprehensive guide has compiled a list of the 17 best hedge funds that have consistently (or close enough) delivered exceptional performance.
We will delve into their performance history, introduce you to their top executives, provide a snapshot of their portfolio(s) and key holdings, and discuss what investors love about them and any potential drawbacks. Whether you are a novice or a seasoned investor just starting your hedge fund journey, this list will help you make informed investment decisions. 

Why should you trust these reviews?

  • I have over thirty years of investment management experience:
  • I have seen critical down cycles, bears and bulls, outperformed and then underperformed, sometimes dramatically. In the process, I have made all the mistakes possible and imaginable.
  • But some key players, including top hedge funds and celebrated investors like Warren Buffett, Ray Dalio, Ken Griffin, James Simmons, Cliff Asness, Bill Ackman, Carl Icahn, etc., seem to beat the market consistently over a long period. Investing with them or emulating their portfolio can power up your own financial performance. Namely, a hedge fund's portfolio may constitute a terrific source of investment ideas (although you should still apply due diligence before actually investing). Conversely, you may want to ask yourself why is a stock you have fallen in love with is not owned by any star fund?
  • I am the founder of MLI (www.ml-inc.com) and other ventures whose customers or prospects have included numerous tech, fintech, and biotech institutions, as well as many of the funds listed below.

Specifically, we will compare and review things like:
    • Investment strategies & risk management frameworks;
    • Fund managers' reputation and longevity of firm;
    • Key holdings and performance of the fund's portfolio;
    • Investment rationales and strategic positioning;
    • Fees, minimum capital required, and other investment criteria.

Table of Contents



Disclaimer 1: We are not a financial advisor. If you're looking for trusted and comprehensive support in managing your finances, consider speaking to a professional financial advisor. This list, which incorporates several objective metrics but is subjective by nature, is intended to be a starting point for research, not a final destination. 

Disclaimer 2: While we did our best to inform readers, some information may need to be revised or rapidly decaying. The following list of best hedge funds is best construed as a living organism - constantly evolving and subject to various updates regularly. Some information divulged may need to be corrected, pending confirmation, or completed. We welcome feedback/input, including from hedge funds themselves, at https://funanc1al.com/pages/contact.

Disclaimer 3: A hedge fund's past performance does not guarantee future performance. Returns may vary considerably from year to year. 

Disclaimer 4: A couple of hedge funds have approached me, but I have never used the services of one. I manage my portfolio of stocks independently; however, examining leading investors' portfolios provides invaluable insight into the market and offers terrific investment ideas. I wish I had sometimes emulated them instead of erring the way I did (at least during some cycles).

Disclaimer 5: Although this is not the case at the time of writing, this post may later incorporate affiliate links. If you choose to invest with any of the hedge funds or other firms mentioned, we may earn a commission.

Disclaimer 6: Hedge funds are complex, loosely regulated vehicles. You must be an accredited investor before investing with many of them. Exceptions that we are aware of are duly noted below.  

Acknowledgment: To assemble the information below, FUNanc1al has gathered data from multiple sources, including the hedge funds's respective websites (mentioned below), Wikipedia, and a few other websites (in particular, https://smartasset.com/financial-advisor/, in particular for relevant delineation of fees).

Note: We've considered including Paulson & Co., George Soros, and a few other top players in the list, but those managers and their entities have often converted into family offices and no longer qualify as active hedge funds.

Contact: We welcome constructive feedback from both hedge funds and our readers, as well as inquiries of all sorts (sponsorship, etc.). Any questions or comments should be directed to  https://funanc1al.com/pages/contact.  

 
What Are the Best Hedge Funds for Exceptional Investment Returns?

Here are my picks for the best hedge funds to consider this year.

1. Citadel Llc.

Best For

High profitability some years, quants
 

 

Fred’s Take


One of the largest hedge funds, Citadel can outperform many, if not most, rivals in some years, sometimes dramatically. But it has underperformed at other times. Expect volatility. Fees are relatively high. It has attracted criticism for barring investors from withdrawing funds in 2008. Big on quants.

A top ten recommendation for its performance potential/risk management profile

9.5 out of 10 (tied)

Profile:


  1. Founded in 1990 by Ken Griffin.
  2. US$62.3 billion (lead fund, December 31, 2022) in Assets under Management (AUM); as much as $244 billion across all funds.
  3. Over 2,500 professionals.
  4. Invests on behalf of the world's leading universities, healthcare organizations, and other institutions to deliver best-in-class long-term returns. 
  5. High-frequency trading arm Citadel Securities, the world's biggest algorithmic "market-maker," handles over a quarter of all U.S. stocks bought and sold daily, and serves more than 1,600 clients, including some sovereign wealth funds and central banks.
  6. Global Quantitative Strategies, one of the largest quantitative trading teams, leverages proprietary research, advanced statistical and modeling techniques, and leading-edge technology, to build and execute algorithmic strategies and delineate new investment opportunities across Equities, Fixed Income, and other products.
  7. Sold a $ 1.15 billion stake in Citadel Securities to venture capital firms Sequoia Capital and Paradigm.
  8. Citadel is evaluating the prospects of an initial public offering.


Key Strategic Focus:


  1. Commodities: lead markets include energy (oil, power, refined products), agriculture, etc. - 165 professionals.
  2. Credit and Convertibles: top products traded include corporate and convertible bonds, preferreds, credit and equity derivatives, bank loans, and Collateralized Loan Obligations - the unit is growing fast, with close to 50 professionals.
  3. Equities: Takes a market-neutral approach and pursues optimal returns regardless of market conditions. The investment rationale is grounded in fundamental research and disciplined risk management. Long/short, event-driven, and volatility plays - 400+ investment professionals as of Oct. 2023. 
  4. Global Fixed Income & Macro: the focus is on rates (interest rate swaps, sovereign bonds, inflation), currencies, emerging markets, equities, commodities, and credit. Market positioning reflects takes on macroeconomics, monetary policy, and relative value strategies -160+ professionals.

Risk Management


  1. Citadel lost an astonishing $8 billion in the financial crisis of 2007-2008. It was highly leveraged (7:1). The firm's most sizable fund(s) finished 2008 down 55%. Citadel barred its investors from withdrawing funds for ten months, attracting severe criticism. However, the fund rebounded with a 62% return in 2009; some years, it does outperform most rivals.
  2. Risk management practices focus on stress exposure, risk capital allocation, and liquidity management. Citadel's risk management center monitors thousands of instruments traded within the firm's portfolios. The hedge fund runs stress tests daily to simulate the impact of potential economic crises, geopolitical threats, and other dislocations. 

Top Executive: Kenneth C. Griffin


  1. Serves as Founder, Chief Executive Officer, and Co-Chief Investment Officer. 
  2. Started investing when a freshman at Harvard, where he got an A.B. in Economics. Griffin had a satellite dish deployed on the roof of Cabot House, a dormitory, to receive stock quotes just before the Black Monday crash of 1987 - this after convincing school administrators to suspend a ban on running businesses from campus. He was betting on stocks falling and made a killing. Griffin's returns attracted the attention of hedge fund pioneer Frank Meyer, who bankrolled the launch of Citadel.
  3. As of April 2023, Griffin had a net worth of approx. $35 billion, making him the 38th-richest person in the world. 
  4. Included in Forbes's 2023 list of the United States' Most Generous Givers. He has donated more than $1.5 billion to charitable causes ranging from education to economic mobility, medical research, and other domains. In April 2023, Griffin donated $300 million to the Harvard Faculty of Arts and Sciences.
  5. Griffin has contributed large amounts of money to political candidates and causes, usually Republican or conservative in ideology.
  6. Griffin is an avid collector of modern and contemporary art from mainstream artists. His portfolio may approach $1 billion in value and includes several of the most expensive paintings ever sold.

 Funds:


  • Wellington Fund – Citadel's flagship fund.
  • Citadel Global Equities
  • Tactical Trading
  • Global Fixed Income

Portfolio: Top 12 holdings 

Top 12 Holdings - Citadel Fund

Source: https://hedgefollow.com/funds/Citadel+Advisors

  1. Highly diversified - with no position constituting more than 2% of total portfolio (at the time of writing);
  2. More than 5,000 positions;
  3. Many mainstream investments include Big Tech (AAPL, MSFT, NVDA, etc.) and other blue chips.

    Minimum Investment


    The minimum investment required (for several funds) is $10 million. The firm may waive these minimums at management's discretion.

    Fee Structure:


    Citadel charges a combination of a sum approaching 5% of the fund’s assets every year (equivalent to a management fee) and 20% of all gains (performance fee, if applicable). Citadel’s Wellington fund has significantly outperformed in some years but must deliver consistently to justify any premium compensation.


    What I Like/Dislike About Citadel:


    Like:
    • Citadel has delivered a remarkable performance in some years. 
    • One of the most profitable hedge funds of all time, Citadel generated $16 billion in profits for its investors in 2022. Citadel has earned $65.9 billion in net gains since 1990, making it the top-earning hedge fund ever.
    • Strong quants and risk management.
    Dislike:
    • High Fees.
    • High Volatility - Major losses some years are in the realm of possibilities.
    • Difficulty to withdraw cash at difficult times, although this has been and may continue to be a one-time event.

    Fund Updates:


    • In a message sent to employees in June 2022, the firm announced it was relocating its headquarters to Miami, Florida, due to a more favorable business climate and a rise in crime complaints in Chicago.
    Visit Citadel. 
     

    2. Bridgewater Associates.

    Best for: Performance, Macro, Risk Management
     
    bridgewater-logo.svg

    Bridgewater Associates 

    Fred’s Take


    As of 2022, Bridgewater has achieved the second heftiest gains of any hedge fund since its foundation in 1975. But it has, at times and more recently, underperformed. The hedge fund has pioneered several concepts, including risk parity and the separation of alpha and beta strategies. It reportedly accepts funds from institutional clients only or primarily. Bridgewater is big on global macro as well as systemic and rules-based investment management. 

    A top ten recommendation for its performance potential/risk management profile

    9.5 out of 10 (tied)

    Profile:


    1. Founded in 1975 by Ray Dalio. 
    2. Headquartered in Westport, CT.
    3. Bridgewater has 1,200 professionals (as of August 2022).
    4. US$123.5 billion in AUM, as of Jan. 31, 2023 - good for No. 2.
    5. Bridgewater reportedly accepts funds from primarily, if not only, institutional clients such as pension funds and central banks rather than private investors. 

    Key Strategic Focus:


    1. Dalio depicts Bridgewater Associates as a "global macro firm." The fund invests in economic trends, such as inflation and GDP growth. Currency and fixed-income markets are other key investment parameters. 
    2. The hedge fund does not seek to invest in individual shares of companies, unlike Warren Buffett and many other fund managers. 
    3. Founder Dalio endorses the risk parity approach, which Bridgewater resorts to for risk management and diversification. The hedge fund takes positions across uncorrelated assets (long or short, in all markets) internationally to further derisk and diversify.
    4. Leverage, external diversification, and short selling are paramount strategic foci allowing Bridgewater to use any asset combination and seek an optimal risk target level. Risk management supersedes capital allocation.

    Risk Management:


    1. Global macro firm uses a quantitative investment approach to identify new opportunities and seeks uncorrelated investment returns across assets based on risk allocations.
    2. The company divides its investments into Beta pursuits assuming passive management and standard market risk, and Alpha endeavors assuming active management and seeking higher returns uncorrelated to the general market. 
    3. Dalio was one of the rare few financiers who forecasted the global financial crisis of 2008.

    Founder: Ray Dalio, now retired 


    1. Founded Bridgewater two years after graduating from Harvard (MBA, 73') from his two-bedroom apartment in New York City.
    2. Dalio began investing at age 12 and tripled his investment in Northeast Airlines after the airline merged with another firm.
    3. Developed a strong reputation after turning a profit from the 1987 stock market crash.
    4. Dalio had a net worth of approximately $20 billion as of January 21, 2022. He ranked 88th on the Forbes billionaires list and 36th on the Forbes 400 list. 
    5. Dalio is the author of Principles: Life & Work, which reexamines corporate management and investment rationales (featured on The New York Times bestseller list).  

    Funds:


    • Pure Alpha. Bridgewater launched its flagship fund, Pure Alpha, in 1989. Through active management, it invests across various asset classes and balances risk amongst multiple non-correlated assets. It includes dozens of simultaneous trading positions in bonds, stock indexes, currencies, and commodities to prevent overexposure in specific areas. The fund was closed to investors in 2006. As of 2019, it achieved an average annualized return of 12 percent since its foundation, losing money in only three of its 20 years. However, Pure Alpha has more recently underperformed major indices.
    • All Weather, Bridgewater's second fund, started as the founder's trust fund in 1996, focusing on low fees, global inflation-linked bonds, and fixed-income investments. The fund was later opened to clients. The goal was to achieve risk-adjusted returns that exceeded the general market's return. The All Weather fund qualifies as one of the largest funds in the U.S. (with more than $46 billion in AUM).
    • After the collapse of Lehman Brothers in April 2009, the fund switched to "safe portfolio" mode, focusing on nominal and inflation-linked bonds (40%), treasury bills (30%), treasury bonds (20%), and gold (10%) instead of equities. 
    • Bridgewater started its first Chinese investment product targeting qualified investors in mainland China in 2018.
    • The hedge fund started the Pure Alpha Major Markets in 2011 with approx. $2.5 billion from existing clients and opened to outside investors with an advance commitment of $7.5 billion. The fund, intended to replicate Pure Alpha but with enhanced liquidity, reportedly qualified as the largest hedge fund launch at the time. 
    • As of early 2023, Bridgewater had raised $800 million for its new Defensive Alpha strategy, which aims to help investors weather bear markets.

    Portfolio: Top 12 holdings 

    Bridgewater_Top 12 Holdings

    Source: https://hedgefollow.com/funds/Bridgewater+Associates

    1. Highly diversified
    2. 740 holdings
    3. Lots of mainstream investments including major stock indices (emerging markets, S&P 500, etc.), blue chips (PG, KO, MCD, JNJ, etc.), and mostly defensive plays. 

      Minimum Investment


      The firm offers investment management services primarily to pension funds, governments and central banks, university endowments, charitable foundations, funds of funds, Union/Taft Hartley plans, etc. 

      Bridgewater prioritizes institutions, not retail clients, and generally requires a minimum of $7.5 billion of investable assets. 

      Fee Structure:


      Bridgewater grew in size using the standard hedge fund model, which takes a 2% management fee of assets and 20% of yearly profits accrued from an investment system. Fees are competitive.


      What I Like/Dislike About Bridgewater:


      Like:
      • Solid performance since fund's inception.
      • Fees are competitive 
      • Strong on macro. Bridgewater's portfolio can provide insight into major economic trends, which, in turn, can shed light on diversification foci (industry verticals, individual stocks) and resulting position sizing.
      Dislike:
      • Prioritizes institutions over retail (high-net-worth) investors.
      • Financial returns have lagged more recently.
      • Stock picks aren't necessarily what the fund is known for.

      Fund Updates:


      • Nir Bar Dea was named Bridgewater’s co-CEO in January 2022. Before joining Bridgewater in 2015, he served as Advisor to the Israeli Mission to the United Nations in the General Assembly. He also ran a multinational real estate investment operation and founded a drone technology start-up. Originally from outside Tel Aviv, the retired major and platoon leader (Israeli Defense Forces) received his MBA from Wharton.
      Visit Bridgewater. 
       

      3. Renaissance Technologies.

      Best for:
      Overall Performance, Quants
       
      Renaissance Home
       

      Fred’s Take 


      The results speak for themselves. From 2001 through 2013, the Fund’s worst yearly performance was a 20+ percent gain (excluding fees). Lead fund Medallion put the Standard & Poor’s 500 to shame in 2008, reaping a 98.2 percent gain vs a 38.5 percent loss. Unfortunately, Medallion is not open to private investors and not subject to the same regulatory reporting requirements as publicly available funds; the owner thus maintains strict control over strategy and execution and protects its proprietary intellectual property. Other funds are open, but they may not perform as well. Secrecy and the resulting dearth of information is an integral part of the Fund's modus operandi.
      A top ten recommendation for its performance potential/risk management profile
      9.5 out of 10 (tied)

      Profile:


      1. Founded in 1982 by James Simons. The mathematician used to be a code breaker during the Cold War.
      2. Headquartered in East Setauket, New York, on Long Island.
      3. Renaissance specializes in automated, systematic trading leveraging quantitative analysis derived from mathematical and statistical modeling.
      4. Renaissance has three hundred+ professionals (2021). Many Ph.D.s include AI experts, computational linguists, statisticians, mathematicians, astronomers, etc. The firm does not hire the typical Wall Streeter.
      5. US$106 billion in AUM. 

      Key Strategic Focus:


      1. According to The Man who Solved the Market: How Jim Simons Launched the Quant Revolution by Gregory Zuckerman, the ability to "scrutinize large, confusing data sets and discover subtle phenomena" is readily deployed by statisticians and scientists (astronomers, etc.) to identify overlooked market patterns.
      2. The Fund analyzes hundreds of financial metrics, social media feeds, online traffic data, job listings, "and pretty much anything that can be quantified and tested (...) new factors, some borderline impossible for most to appreciate."
      3. Engages in equity, bond, commodity, and currency trades; makes money from trending and reversion-predicting signals.
      4. Per Zuckerman, "The gains on each trade were never huge, and the fund only got it right a bit more than half the time, but that was more than enough." Zuckerman also quotes Robert Mercer, one of the Fund's executives, "We're right 50.75 percent of the time... but we're 100 percent right 50.75 percent of the time. You can make billions that way."  
      5. When Renaissance wins, someone loses. Who is on the other side of the trade? Probably not long-term investors, per Renaissance's management, as reported by Zuckerman. One of the executives pointed to "traders infamous for both their excessive trading and overconfidence when it came to predicting the direction of the market." 

      Risk Management


      1. Renaissance uses mathematical, computer-based models to predict price changes in financial instruments and perfect trades. These models rely on analyzing as much data as possible and then looking for non-random movements to make predictions.
      2. Intricate mathematical models comb through vast volumes of financial data, seeking inefficiencies and patterns that elude human perception.
      3. Renaissance relies on advanced algorithms, high-frequency trading techniques, and big data analytics to boost performance and qualifies as one of the most innovative players in the financial vertical.
      4. Renaissance deploys a range of algorithms and mathematical concepts, including stochastic calculus and probability theory, to model market behavior and potential opportunities. Quants and data scientists continuously work to identify and exploit market inefficiencies.
      5. Various risks are embedded in the firm's quantitative approach to mitigate potential downsides. Advanced risk models help quantify and manage exposure, ensuring that trading positions are carefully calibrated to meet risk appetite targets.

      Founder: James Simons, now retired 


      1. Simons founded Renaissance Technologies after serving as the head of the Department of Mathematics at Stony Brook University for a decade.
      2. In 1976 he was awarded geometry's highest honor (the American Mathematical Society's Oswald Veblen Prize). 
      3. Simmons founded and ran Renaissance until his retirement in late 2009.
      4. Served as non-executive chairman long after that but stepped down in 2021.
      5. Simons remains invested in Renaissance's funds, particularly the Medallion fund.
      6. Simons had a net worth of approx. $30 billion in 2023, qualifying him as the 25th wealthiest person on the Forbes 400 list.
      7. In 1994, Simons (along with wife Marilyn) founded the Simons Foundation, which supports various causes in education, health, scientific research, etc. The foundation is the top benefactor of Stony Brook University, Marilyn's alma mater, and is a significant contributor to his alma maters - MIT and UC Berkeley. Simons has given well over $4 billion to philanthropic causes.
      8. In 2016, the International Astronomical Union named asteroid 6618 Jimsimons (discovered by Clyde Tombaugh in 1936) after Simons for his contributions to mathematics and philanthropy.
      9. Simons got a bachelor's degree in mathematics from MIT and a PhD in mathematics from Berkeley. 

      Funds:


      • Flagship Medallion fund has the best performance (and arguably reputation to match) of any fund on Wall Street, yielding more than 66 percent annualized returns before fees (and nearly 40% after fees) over three decades from 1988 to 2018. Unfortunately, the only customers are fund employees.
        1. Holds thousands of short and long positions at any time (Source: The Man Who Solved the Market, Gregory Zuckerman).
        2. The holding period ranges from 1 or 2 days to 1 or 2 weeks (ditto).
        3. Lots of fast (high-frequency) trades, many of those to hedge or build positions (ditto).
      • Renaissance offers a couple of other portfolios to outside investors—including:
        • Renaissance Institutional Equities Fund (RIEF), which employs a net-long trading strategy with exposure to both U.S. and non-U.S. equities, as well as certain derivatives.
        • Renaissance Institutional Diversified Alpha (RIDA), best described as pooled investment vehicles focusing on equity securities publicly traded on global exchanges, as well as derivatives.
        • Renaissance Institutional Diversified Global Equities (RIDGE), which shares similarities to the RIDA funds. 
        • The Kaleidoscope fund is a fund of funds for employees and investors related to employees. It invests in the Medallion, RIEF, and RIDA fund families.
      • Medallion surged 76 percent in 2020, one of its best years ever. But other Renaissance funds — two of which had their worst years ever — underperformed. RIEF, which launched in 2005, lost approx. 22% through December 25. RIDA, launched in 2012, fell even more: 33.5% through the same period. Those two funds made HSBC's top 20 losers list for 2020.
      • RIEF underperformed during the financial crisis: The Fund lost 35.73 percent between May 2007 and April 2009. But RIEF has at other times delivered double-digit returns for extended periods (although it may have lagged the Standard & Poor's 500 stock index depending on the period considered).
      • RIEF has a 6-month to one-year holding time and uses factor-based risk models to hedge risk. The COVID-19 crisis and subsequent stimulus and relief efforts undertaken by the U.S. government created a unique pattern of stock price movements that couldn't be adapted to by quant models built on historical patterns, as there had not been a pandemic in over a century.
      • Medallion has a much shorter holding time and adapts more quickly to market changes. Despite dramatic volatility at the outbreak's inception, the Fund was able to capitalize on the market's rebound. It also uses more leverage than RIEF, which boosted returns as markets bounced back.

      Portfolio: Top 12 holdings 

      Renaissance Technologies - Top 12 Holdings

      Source: https://hedgefollow.com/funds/Renaissance+Technologies

      1. Highly diversified. More than 3,500 holdings.
      2. The top 12 positions only constitute around 13% of the portfolio (if that).
      3. Holds thousands of short and long positions at any time (Source: The Man Who Solved the Market, Gregory Zuckerman).
      4. The holding period ranges from 1 or 2 days to 1 or 2 weeks (re: Medallion, ditto).
      5. There are lots of fast (high-frequency) trades, many of which hedge or build positions (ditto).
      6. Many mainstream investments include blue chips and big tech (AAPL, BRKA, NVDA, etc.). 

      Minimum Investment


      Medallion has a closed-door policy; the Fund is unavailable to outside investors. Minimum investments (estimates, to be confirmed) vary across the firm's other funds and fund families: 

      • REIF Fund Family: $25,000 to $50 million
      • RIDA Fund Family: $100,000 to $50 million
      • RIDGE Fund Family: $5 million to $50 million 

      Source: https://smartasset.com/financial-advisor/renaissance-technologies-review.

      Fee Structure:


      The firm's reputation and Medallion's exceptional performance warrant high fees, but Renaissance's other funds' performance may weigh on them.

      Medallion charges a management fee of 4% of funds invested and a performance fee of 36% - 44% of net profits.

      RIEF Funds charges a management fee of 0.20% - 1.50% of net asset value and a performance fee of 0% - 10% of net capital appreciation.

      RIDA Funds charges a management fee of 0.85% - 1% of net asset value and a performance fee of 10% of net capital appreciation.

      RIDGE Funds charges a management fee of 0.85% - 1% of net asset value and a performance fee of 10% of net capital appreciation.

      Source: https://smartasset.com/financial-advisor/renaissance-technologies-review (to be confirmed).

      What I Like/Dislike About Renaissance:


      Like:
      • Renaissance has achieved exceptional performance since the Fund's inception.
      • Renaissance may qualify as the lead quant on Wall Street.
      • Strong on macro. The portfolio can provide insight into major economic trends, which, in turn, can shed light on individual (vertical, individual stock) position sizing.
      Dislike:
      • The flagship fund (Medallion) is closed to retail (accredited or high-net-worth) investors.
      • Other funds open to high-net-worth investors may not perform as well. Medallion surged 76% in 2020, but other funds tanked.
      • Performance is difficult to replicate for individual investors flying solo, given short-term positioning and proprietary trading prowess.
      • Exclusivity and secrecy result in little transparency.

      Fund Updates:


      • Peter Brown, a computer scientist specializing in computational linguistics, now runs the Fund. He joined Renaissance in 1993 from IBM Research.
       

      4. Elliott Investment Management L.P. 

      Best for: 
      One of the savviest activist investors. Great Investment Ideas. ompelling website 


      Fred’s Take

      Elliott is one of the oldest hedge funds under the same management team. Skilled activist investor, one of the last of its kind. Robust arbitrage delineator and highly skilled risk manager. Elliott seems currently closed to new investors.
      A top ten recommendation for its performance potential/risk management profile
      9.5 out of 10 (tied)

      Profile:


      1. Paul Elliott Singer created Elliott (his middle name) Associates in 1977, starting with $1.3 million from family and friends. 
      2. Elliott is one of the oldest hedge funds, having operated under the same management team since its inception.
      3. Relocating to West Palm Beach, FL.
      4. As of June 30, 2023, Elliott manages approximately $59.2 billion in assets.
      5. Approximately 550 employees, nearly half dedicated to portfolio management and analysis.

      Key Strategic Focus:


      1. From its roots in convertible arbitrage, the firm has transitioned into a multi-strategy hedge fund pursuing a broad range of strategies, including equity-oriented, private equity/credit, distressed and non-distressed securities/debt, real estate-related securities, commodities trading, hedge/arbitrage, and portfolio volatility protection.
      2. The firm's distressed securities trading strategies typically refer to the debt of bankrupt or near-bankrupt companies. They are highly contingent on deep skill sets and intensive hands-on efforts. They pursue uncorrelated situations requiring due process, complexity, negotiations, and factors unrelated to the forces impacting stocks and bonds generally or business-value-driven situations. 
      3. Non-distressed debt consists of highly complex products, including first-lien bank debt, unsecured corporate debt whose servicing is unlikely to require restructuring, and structured credit products. They often demand methodical analyses of multi-layer securitization and are poorly understood by many investors. Elliott's expertise in these products allows the firm to identify attractive opportunities where securities can be mispriced significantly. It's unlikely that most retail investors, even accredited, will be able to uncover similar opportunities independently.
      4. Elliott's portfolio also leverages hedge/arbitrage positions and focuses on event arbitrage, related securities arbitrage, convertible arbitrage, volatility arbitrage, and fixed-income arbitrage. Hedge/arbitrage seeks and benefits from often minor disconnects between related instruments and achieves overall portfolio risk management objectives on an opportunistic basis.
      5. Elliott also pursues equity positions that help garner control of or a substantial minority stake in, often private companies or, on occasion, companies with a small public float (one of its other bread and butter). It may then use its influence and voting rights to induce change. Elliott may also buy or source credit and preferred equity positions in companies (often less liquid than listed securities with longer investment horizons). Special purpose vehicles, joint ventures, or similar arrangements may be deployed to pursue opportunities related to a particular sector, industry, or strategy.
      6. The firm often takes long positions to achieve the strategic objectives mentioned above. It rarely builds long equity stakes driven by valuation considerations (unlike Warren Buffett, for example). Elliott pursues positions uncorrelated with others in the portfolio or with the general risks of equities or where the firm's manual efforts can enhance protection against risk. High asymmetry of risk/reward creates some degree of optionality and guides investments.
      7. Elliott resorts to credit, equity, volatility, interest rates, gold, and currency instruments to achieve Portfolio Volatility Protection; the strategy helps hedge Elliott's portfolio against certain adverse market conditions. 
      8. The firm also engages in commodities trading and real estate-related securities.

      Risk Management:


      1. The firm's portfolio is atypical (given its listed objectives - see above), unlike most other hedge funds. Risk management is deep-embedded in the way the fund uncovers opportunities. 
      2. Elliott's culture highlights due process, tenacity, hard work, and creativity. 
      3. Elliott trades in securities across the entire capital structure. It often takes a leading role in event-driven situations to create value or manage risk. Elliott is one of the last genuine activists.
      4. Elliott seeks to generate a consistent, superior return by pursuing an opportunistic trading approach, the creation – not just the identification – of value (proactive), robust liquidity management, and counterparty/operational risk management. 

      Founder: Paul Singer


      1. Paul Singer is the Founder, President, and Co-Chief Executive Officer of Elliott. He also serves as Co-Chief Investment Officer. 
      2. Mr. Singer is also a member of the Management, Risk, Valuation and Global Situational Investment Committees. He is the Founder of The Paul E. Singer Foundation and Co-Founder of Start-Up Nation Central. He is also Chairman of the Manhattan Institute for Policy Research.
      3. Elliott is widely considered one of the most innovative fund managers (for good reason). He boasts a unique track record as a (so-called) vulture capitalist and an innovator in purchasing sovereign debt and pursuing countries for unpaid bonds. 
      4. As of June 2023, Paul Singer's net worth approximates US$5.5 billion.
      5. Singer's political/charitable activities include financial support for LGBTQ rights (amongst other causes). He's an active participant in Republican Party politics.
      6. Singer is the owner of AC MILAN, a top European soccer club.
      7. University of Rochester and Harvard Law School (J.D.) graduate.

      Funds


      1. Elliott Management has 2 funds, including Elliott Management Private Equity Fund.
      2. Access to new investors has yet to be confirmed.

      Portfolio: Top 15 holdings 

      Elliott's Top 15 Holdings (1)

      Elliott's Top 15 Holdings (2)

      Source: https://hedgefollow.com/funds/Elliott+Investment+Management

      1. The fund's concentrated portfolio has 40% of the total weight in 2 positions (TFPM and MPC at 20% each).
      2. As indicated above, the firm's portfolio is atypical (given its listed objectives) and unlike most other hedge funds. It contains few blue chips or big-tech investments. 
      3. Energy vertical is well-represented (somewhat reminiscent of Carl Icahn's vertical takes).
      4. 50+ holdings in total.

      Minimum Investment


        1. A $5 million minimum may apply. 

      Fee Structure:


        1. Elliott may have applied a 1.5% management fee and 20% performance fee, which are standard in the industry (to be confirmed). 
        2. Existing and prospective investors should consult offerings documents and contact the firm directly for details on access to funds, fee schedules, and other expenses. 

      What I Like/Dislike About Elliott:


        Like:
        • Elliott is one of the oldest hedge funds, having operated under the same management team since its inception.
        • Skilled activist investor, one of the last of its kind.
        • Elliott is an expert at deploying and lubricating distressed- and non-distressed-securities trading strategies.
        • Elliott is a robust arbitrage delineator and a highly-skilled, proactive risk manager. 
        • The fund is an excellent source of ideas (but often idiosyncratic).
        • Helpful website.
        Dislike:
        • Elliott seems currently close to new investors (to be confirmed).

        Fund Updates:


        1. Shares of Phillips 66 climbed toward the end of 2023 after activist Elliott Investment Management announced a $1 billion stake in the energy company. Along with the significant equity investment, Elliott is seeking two board seats to help drive improved execution and performance.
         

        5. Berkshire Hathaway

        Best for:
        Value & Quality Business Investing, Warren Buffett and now late Charlie Munger's wisdom. Not a hedge fund per se, but offers a remarkable benchmark for all investors. 

        BERKSHIRE HATHAWAY INC.

        Fred’s Take


        Berkshire Hathaway is not a hedge fund, but Warren Buffett and Charlie Munger have built a money-printing machine; investors can ride their coattails by buying shares (BRKA, BRKB). The cherry on top is no management fee, just a small commission to buy the stock.
        A top ten recommendation for its performance potential/risk management profile
        9.5 out of 10 (tied)

        Profile:


        1. American multinational conglomerate holding headquartered in Omaha, Nebraska, United States.
        2. Founded as a textile manufacturing company in 1839. Berkshire became a holding company in 1970.
        3. Its main line of business and source of capital is insurance. The firm invests the float or retained premiums in an extensive portfolio of subsidiaries, equity positions, and other securities.
        4. 383,000 employees (2022)
        5. Generated revenue of 302 billion and net income of 22.8 billion with $948 billion of total assets and $472 billion of total equity (2022).
        6. Chairman and CEO Warren Buffett and (from 1978 to 2023) vice chairman Charlie Munger have overseen the firm since 1965. 
        7. Under their direction, Berkshire's book value has compounded at an average rate of 20% (vs. about 10% for the S&P 500 index, dividends included).

        Key Strategic Focus:


        1. Warren Buffett and (now deceased) Charlie Munger embrace value investing principles.
        2. To quote Buffett, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
        3. Buffett also said, "The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage."
        4. Most holdings are long-term. To quote Buffett, "Our favorite holding period is forever." He added, "The stock market is designed to transfer money from the active to the patient." He also said, "Successful investing takes time, discipline, and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant." Similarly, "Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic."
        5. The firm employs large amounts of capital but minimal debt to achieve desired results.
        6. According to Buffett, "It is a terrible mistake for investors with long-term horizons -- among them pension funds, college endowments, and savings-minded individuals -- to measure their investment' risk' by their portfolio's ratio of bonds to stocks."

        Risk Management


        It is best to quote Buffett and Munger:

        1. "Diversification is protection against ignorance. It makes little sense if you know what you are doing." (Buffett)
        2. "An investor should act as though he had a lifetime decision card with just twenty punches on it." (Buffett)
        3. "Risk comes from not knowing what you are doing." (Buffett)
        4. "Widespread fear is your friend as an investor because it serves up bargain purchases." (Buffett)
        5. "The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd." (Buffett)
        6. "Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future." (Buffett)
        7. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital." (Buffett)
        8. "After 25 years of buying and supervising a great variety of businesses, Charlie [Munger] and I have not learned how to solve difficult business problems. What we have learned is to avoid them." (Buffett)
        9. "It is not necessary to do extraordinary things to get extraordinary results." (Munger)
        10. "It takes character to sit with all that cash and to do nothing. I didn't get to where I am by going after mediocre opportunities. (Munger)
        11. "In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time — none, zero. You'd be amazed at how much Warren reads – and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out." (Munger)
        12. "All I want to know is where I'm going to die, so I'll never go there." (Munger)

        Founder: Warren Buffett 


        1. As a result of his remarkable investment record, Buffett is one of the most celebrated investors in the world. As of December 2023, he had a net worth of $120 billion, making him the seventh-richest person in the world.
        2. A book borrowed from the Omaha public library when he was seven inspired Buffett's early entrepreneurial pursuits - selling chewing gum and Coca-Cola door to door. While still in high school, he made money delivering newspapers and selling golf balls and stamps, among other means. His father took time to educate his son's interest in business and investing, taking him to visit the New York Stock Exchange at age 10.
        3. The son of U.S. congressman and businessman Howard Buffett, he developed an interest in investing during his youth. He entered the Wharton School (University of Pennsylvania) in 1947 before graduating from the University of Nebraska. Rejected by Harvard Business School, he attended Columbia University, obtained a Master of Science in economics, and graduated from Columbia Business School, where Benjamin Graham taught value investing.
        4. Buffett worked as an investment salesman and a securities analyst before serving as a general partner at Buffett Partnership, Ltd. and as the chairman and CEO of Berkshire Hathaway starting in 1970.
        5. "In 1951, Buffett discovered that Graham was on the board of GEICO insurance. Taking a train to Washington, D.C., on a Saturday, he knocked on the door of GEICO's headquarters until a janitor admitted him. There he met Lorimer Davidson, GEICO's vice president, and the two discussed the insurance business for hours. Davidson would eventually become Buffett's lifelong friend and a lasting influence, and would later recall that he found Buffett to be an "extraordinary man" after only fifteen minutes. Buffett wanted to work on Wall Street, but both his father and Ben Graham urged him not to." (Source: Warren Buffett - Term Paper. https://www.termpaperwarehouse.com/essay-on/Warren-Buffett/72274)
        6. Buffett has pledged to give away the vast majority of his net worth (as much as 99%) to a range of philanthropic causes. The Bill & Melinda Gates Foundation is the lead beneficiary. He launched the Giving Pledge in 2010 with Bill Gates; billionaires pledge to give away at least half of their fortunes.

        Funds:


        Berkshire Hathaway is not a hedge fund. 


        Portfolio: Top 12 holdings 

        Berkshire Hathaway's Top 12 Public Holdings

        Source: https://hedgefollow.com/funds/Berkshire+Hathaway

        1. Auto-insurer GEICO and reinsurance leader General Re constitute the company's prime insurance brands. Non-insurance subsidiaries operate in railroads, confectionery, home furnishings, apparel, electrical power, etc. Berkshire partially owns Pilot Flying J (80%), Kraft Heinz Company (above 25%), American Express (close to 20%), Paramount Global (approx. 15%), Bank of America (around 12%), The Coca-Cola Company (just under 10%) and Apple (5.57%). 
        2. The firm's portfolio of publicly traded equities is highly concentrated. Buffett has 50% of his holdings in Apple (AAPL) and more than 90% in his top 10 positions (AAPL, BAC, AXP, K.O., CVX, OXY, KHC, MCO, DVA, HPQ) (see table above for detail).
        3. Many mainstream investments include blue chips and big tech (AAPL, BAC, K.O., AXP, CVX, etc.). 
        4. Holdings are usually very long-term. 

        Minimum Investment


        Berkshire Hathaway is not a hedge fund. Any investor can buy the stock of the New York Stock Exchange. This said, class A shares traded at $581,600 (as of 2/1/2024). The shares are the highest-priced on the New York Stock Exchange, having never incurred a stock split and having only paid a dividend once since Warren Buffett took over. The firm retains corporate earnings on its balance sheet (avoids double taxation). Berkshire Hathaway created a second class of shares, Class B shares; they traded at $386.44 (as of 2/1/2024).

        Fee Structure:


        No fee applies - just a small commission to buy and sell the stock.


        What I Like/Dislike About Berkshire Hathaway:


        Like:
        • Exceptional performance since Buffett took over Berkshire. 
        • Remarkable leadership, unique stock-picking abilities
        • Strong in ethics, risk management, and business rationale.
        • The portfolio can provide unique insight into defensive stakes in times of turmoil.
        • Lessons in position sizing.
        Dislike:
        • Sadly, Charlie Munger recently passed away; we can only hope Warren Buffett will survive him another quarter century.

        Fund Updates:


        • In May 2021, Warren Buffett selected Greg Abel as the new CEO of Berkshire Hathaway.
        • Investing legend Charlie Munger died on November 28, 2023 at 99.
         

        6. Pershing Square Capital Management

        Best for:  
        Overall Performance, Specific Deals, A Different Take on the Warren Buffett Ways. 

        Fred’s Take


        Founder Bill Ackman tends to invest the Warren Buffett way, which has often served him right. Some deals have been incredibly profitable. But not all revolve around stocks, and some bets are shorts. 
        A top ten recommendation for its performance potential/risk management profile
        9.5 out of 10 (tied)

        Profile:


        1. The American hedge fund management company founded and run by Bill Ackman is headquartered in New York City.
        2. US$18.5 billion (2022) in AUM.
        3. Ackman started Pershing Square in 2004, with $50+ million in funding from his personal funds and former business partner Leucadia National.
        4. Ackman may hire people outside of traditional finance backgrounds; for instance, his professionals have included a former fly fishing guide and a man whom he met in a taxi.
        5. The staff is small (<100 employees). 

        Key Strategic Focus:


        1. Ackman considers Warren Buffet a mentor and invests in quality companies offering both value and growth potential. He seeks to invest in typically 8 to 12 core investments and seeks minority stakes in publicly traded companies. Like Buffett, he'd rather invest in fewer firms he understands well, knowing that attractive opportunities are rare. Large diversified portfolios of investments may deliver suboptimal risk-adjusted returns.
        2. The firm sets no major restrictions on the securities or other financial instruments it uses. It also does not follow any particular asset allocation model.
        3. Pershing pursues midsize to large bets (but never so large that they may turn life-threatening) on various equities and other investment vehicles.
        4. Opportunistic, the fund may go short or long depending on profit potential.
        5. The activist investor has launched activist campaigns against McDonald's, Wendy's, and Herbalife.  
        6. Pershing Square has a long history of well-publicized deals, some very successful, others not. In the first quarter of 2016, Ackman's fund experienced its largest quarterly loss (25%) due in part to its near-10% stake in Valeant Pharmaceuticals International (now Bausch Health, BHC). Pershing Square sold all of its stake in Valeant with a total loss of $4 billion.
        7. Just before the 2020 stock market crash, Ackman invested $27 million to purchase credit protection (rather than selling off his holdings whose businesses he considers robust) to hedge Pershing Square's portfolio. The hedge generated an impressive $2.6 billion in less than one month.

        Risk Management


        1. Ackman may pursue bold, controversial investments. 
        2. Major bets have included shorting MBIA's bonds during the financial crisis of 2007-2008, a hefty stake in Valeant Pharmaceuticals' stock, and, from 2012 to 2018, a US$1 billion short against the nutrition company Herbalife, which he described as a pyramid scheme. Karl Icahn was long and saw the bet as misguided.
        3. After performing poorly in 2015–2018, Ackman told investors in January 2018 that he would be slashing staff and focusing on research. The following year, Pershing Square returned a market-beating 58.1%.
        4. Ackman admires short sellers such as Carson Block of Muddy Waters Capital and Andrew Left of Citron Research.

        Founder: William (Bill) Albert Ackman


        1. Ackman serves as the Founder and CEO of Pershing Square Capital Management.
        2. Received a B.A. magna cum laude in social studies from Harvard College in Cambridge, Ma. In 1992, he received an MBA degree from Harvard Business School. 
        3. As of June 2023, Ackman's net worth was estimated at $3.5 billion by Forbes.
        4. A signatory of The Giving Pledge, Ackman intends to give away at least 50% of his wealth by the end of his life to charitable causes.

        Funds:


        1. Pershing Square and Pershing Square International are the firm's core funds. 
        2. Ackman launched its UK-based closed-end fund, Pershing Square Holdings, on the London Stock Exchange in October 2014.
        3. Target investors are pension funds, endowments, high-net-worth individuals, trusts, estates, charitable organizations, corporations, and foreign sovereign wealth funds (amongst other investors). But shares of Pershing Square Holdings (ticker: PSHZF) can be bought over the counter.

        Portfolio: Top 12 holdings 

        Pershing Square's Holdings

        Source: https://hedgefollow.com/funds/Pershing+Square+Capital+Management

        1. Highly concentrated portfolio, with 45% of holdings in three stocks (CMG, QSR, HLT) (as of the end of 2023).
        2. Pershing Square has a total of only seven positions.
        3. All holdings are highly familiar names (including the above three, Alphabet, and Lowes Co.).
        4. Verticals revolve around restaurants, hotel & entertainment services, real estate operations, railroads, and tech.
        5. Holding times vary significantly from a few weeks to a few years.  

        Minimum Investment:


        Pershing Square L.P. may have a minimum investment requirement of $5 million (to be confirmed).
        As indicated above, Pershing Square Holdings (ticker: PSHZF) is a public fund whose shares can be bought over the counter.

        Fee Structure:


        Pershing Square Capital typically charges an annual management fee of 1.5% of AUM and a performance-based fee, which starts at 20% of the increase in net asset value (after certain costs and losses have been deducted). 


        What I Like/Dislike About Pershing Square:


        Like:
        • Inspired deal-making.
        • Solid performance over the years. 
        • High transparency - any investor can check the fund's performance records here. Annual and semiannual reports, financial statements, letters, notices, and presentations to shareholders are also available online at the fund's website.
        • Strong in ethics and risk management.
        • Pershing Square's portfolio can provide unique insight into defensive stakes in turmoil.
        • Lessons in position sizing.
        Dislike:
        • Not a dislike per se, but some of the most remarkable deals Ackman has initiated had nothing to do with stocks (corporate credit, bonds/bills, etc.).
        • Similarly, not all positions are long, as the fund is happy to bet against the market when deemed promising.

        Fund Updates:


        • In August 2023, Pershing Square took a short position on 30-year Treasury Bills through options instead of shorting the bonds outright, betting that long-term inflation would settle about 100 points higher than the Federal Reserve's 2% target. He closed the position less than three months later, citing geopolitical risks and a slowing economy, earning $200 million.
        Visit Pershing Square.  
        Press Releases / Shareholder Letters can be found here.
         

        7. AQR Capital

        Best for: 
        Overall Performance, Diversification, Quantitative, Disciplined risk management.
         


        Fred’s Take


        Along with The D.E. Shaw Group, AQR constitutes one of my favorite sources of investment ideas (individual stocks and portfolio construction). Great fund, solid reputation. 
        A top ten recommendation for its performance potential/risk management profile
        9.5 out of 10 (tied)

        Profile:


        1. Global investment management firm founded in 1998 and headquartered in Greenwich, CT, United States.
        2. AQR stands for applied quantitative research.
        3. US$100 billion (as of November 2023) in AUM.
        4. Approx. 1,000 employees. 

        Key Strategic Focus:


        1. AQR relies on fundamental investing and sound economic analysis to deliver long-term, repeatable results and deploys both qualitative and quantitative tools to construct portfolios.
        2. AQR offers 40 diversified strategic profiles across equity and alternative investments.
        3. The firm pioneered factor investing, applying value, momentum, defensive, and carry styles to build portfolios offering low correlation to traditional equity-dominated strategies.

        Risk Management


        1. Quantitative research and a disciplined approach to risk management to identify reliable sources of returns underpin portfolio construction.
        2. AQR avoids any major bet on individual stocks. Diversification is key.
        3. AQR offers a low-correlation alternative to traditional, equity-dominated portfolios via multiple funds and instruments (alternatives).

        Founding Team:  Cliff Asness, Robert Krail and John Liew


        1. Three of AQR's founding principals met in the University of Chicago's Ph.D. program, where they incubated the foundation of AQR's investment philosophy.
        2. Managing and Founding Principal Cliff Asness was a Managing Director/Director of Quantitative Research at Goldman Sachs & Co. (Asset Management Division) before co-founding AQR. He has won multiple awards and was named one of the 50 Most-Influential People in Global Finance by Bloomberg Markets magazine.
        3. Mr. Asness started the Goldman Sachs Global Alpha Fund, a systematic trading hedge fund considered one of the industry's earliest quant and high-frequency traders; it leveraged short-selling and computerized modeling to identify underpriced equities, bonds, and other assets and make money regardless of market direction.

        Funds:


        1. AQR caters to a wide range of equities-oriented investment needs by offering single-style (defensive, momentum, value, etc.) and multi-style investing (blending). Some vehicles seek to outperform particular benchmarks, while others leverage long/short equity strategy like limited shorting in a 130/30 configuration (ratio of 130% of starting capital allocated to long holdings achieved by deriving 30% of the starting capital from shorting stocks) combined with beta-1 ( S&P 500-aligned) products. Others factor in country and currency considerations. 
        2. AQR also offers a wide range of alternative investing vehicles. Some products seek near-zero correlation to traditional markets (via absolute returns). In contrast, others provide convertible, merger, and event-driven arbitrage strategies or pursue a global macro focus. Inflation-hedging and identifying highly undervalued securities drive yet other vehicles.
        3. AQR offers a variety of investment products (from offshore limited partnerships to mutual funds and UCITS funds) to reflect different strategies. 
        4. The company serves institutional investors—including pension funds, defined contribution plans, insurance companies, endowments, and foundations—with private funds, separate managed accounts, and other vehicles to suit its client organization's governance, pricing, and liability needs.
        5. AQR also serves individual investors through AQR-sponsored mutual funds and offers options for investors in Europe and Australia.

        Portfolio: Top 10 holdings 

         Top 10 AQR Capital Management Holdings

        Source: https://hedgefollow.com/funds/Aqr+Capital+Management

        1. Highly diversified portfolio, with no position constituting more than 3% of total weight.
        2. The vast majority of holdings constitute around 1% or significantly less of total weight.
        3. Many positions are familiar names (including big tech and other blue chips).
        4. Holding times vary considerably from a few weeks to a few years. Some long-term positioning.
        5. The stocks differ, but the approach to portfolio construction is reminiscent of D.E. Shaw's and even Renaissance's (see separate profiles).

        Minimum Investment:


        • Many funds have a minimum investment requirement of $5 million and may only be available to accredited retail customers. 

        Fee Structure:


        • There are various fee arrangements for funds at AQR. As is the case for most hedge funds mentioned in this article, a combination of asset-based management fees and performance-based fees often applies. Advisory fees for AQR funds approach 1.45% of AUM; fees for AQR UCITS around 1.40% (add a performance fee that may approach 15% of profits), and sponsored funds charge an annual management fee of up to 2% of AUM plus a performance-based fee that may approach 30% of profits. Managed accounts charge a similar performance-based fee; the fixed asset-based free varies by fund and may approximate 1.00%.


        What I Like/Dislike About AQR Capital:


        Like:
        • AQR has a solid quantitative background and risk management arsenal. 
        • Many investment-style options are available (both traditional and alternative) for qualified investors. AQR was one of the first hedge funds to offer alternative mutual funds (launched in 2009).
        • Strong ties to academia and interesting research and data sets are available online.
        • Diversified portfolio can provide unique insight into defensive stakes in times of turmoil.
        • Lessons in position sizing.
        Dislike:
        • As is the case for most, if not all, players mentioned in this list, some years, the funds have underperformed significantly. After AQR's Annual Profit plunged 34% in 2018, the firm announced job cuts in early 2019.

        Fund Updates:

        • For the seventh consecutive year, Pensions & Investments ranked AQR as one of the Best Places to Work in Money Management for 2023.
        Visit AQR.  
         

        8. D.E. Shaw & Co.

        Best for: 
        Overall Performance, quantitative 

        Fred’s Take


        Along with AQR, The D.E. Shaw Group constitutes one of my favorite sources of investment ideas (both regarding individual stocks and portfolio construction). Great fund, solid reputation. Big on quant.
        A top ten recommendation for its performance potential/risk management profile
        9.5 out of 10 (tied)

        Profile:


        1. Founded by David E. Shaw in 1988.
        2. Headquartered in New York City.
        3. US$60 billion (2023) in AUM.
        4. Approx. 2,500 employees.
        5. Amazon founder Jeff Bezos is an alumnus.
        6. 1 in 6 investment professionals is a published author.
        7. Staff includes 650 developers and engineers and scores 24 International Math Olympiad medals.

        Key Strategic Focus:


        1. Systematic, discretionary, and hybrid strategies mine three decades of research and infrastructure development and leverage quantitative and computational techniques.  
        2. Systematic equity strategies seek attractive long-term excess returns by applying a risk-aware framework to stock selection. Equity arbitrage opportunities identify technical, event-related, or fundamental inefficiencies. Systematic futures trading instruments place bets on equity indices, bonds, rates, currencies, and commodities.
        3. The hedge fund also relies on experienced staff to pursue discretionary investment opportunities across various asset classes (asset-backed, corporate credit, energy trading, private investing, reinsurance, renewable energy, fundamental equity, etc.). This process-driven investment approach often seeks to maintain a low correlation to broader indices and macroeconomic parameters.
        4. Some combination of strategies (hybrid) may apply. The firm uses the same rigorous quants-heavy framework to invest across several systematic, discretionary, and hybrid strategies. 

        Risk Management


        1. The D. E. Shaw group considers risk management a critical differentiator between winners and losers over the long run. The firm has tested and refined principles over three decades, including significant market disruptions and cycles.
        2. The firm's Risk Committee, which includes Members of the Executive Committee, Chief Risk Officer, and Rotating Managing Directors, evaluates risk in various dimensions and manages capital allocation among strategies. Every manager is considered a risk manager.
        3. The firm's website shares relevant literature. Check out the following for starters.

        Founder: David E. Shaw


        1. PhD from Stanford University.
        2. Former assistant professor in Columbia University's computer science department.
        3. David Shaw worked at Morgan Stanley in proprietary trading/technology.
        4. Several presidential appointments (Council of Advisors on Science and Technology, under both Bill Clinton and Barack Obama)
        5. David Shaw figures in the Forbes 1000 list of US billionaires (net worth: $8.3 billion, #105).

        Funds:


        1. As of December 1, 2023, the firm had over $60 billion in investment and committed capital. Investment activities fall into 1) alternative investments and 2) long-oriented investments.  
        2. Alternative investment funds pursue specific strategies or combine several and seek absolute returns, often with low targeted correlation to traditional assets like equities.
        3. Long-oriented strategies concentrate on major, tradeable asset classes. Started in 2000, Active Equity embraces various strategies that allow institutional investors to customize their exposures to specific stock indices. 
        4.  Founded in 2013, Orienteer aims to offer diversified exposure to global asset classes while pursuing select alpha opportunities.

        Portfolio: Top 15 holdings 

         

        Source: https://hedgefollow.com/funds/DE+Shaw

        1. Highly diversified portfolio, with no position constituting more than 4% of total weight.
        2. Most holdings constitute around 1% or significantly less of total weight.
        3. Many positions are familiar names (including big tech and other blue chips).
        4. Holding times vary significantly from a few weeks to a few years. Some long-term positioning.
        5. The stocks differ, but the approach to portfolio construction is reminiscent of AQR's.

        Minimum Investment


        1. As is the case for most funds included in this article, only accredited investors may invest in D.E. Shaw's hedge fund products. Accredited investors must generate a minimum of $200k of earned income ($300k for couples) and be expected to see income trend positively in the foreseeable future. Alternatively, an accredited investor may have a minimum net worth of $1 million (not including the value of their primary residence), either on their own or with their spouse. This said, many funds offered by DE Shaw have a minimum investment requirement of $1 million.
        2. Specific funds may have their own minimum investment requirements. Please get in touch with the fund for further information.

        Fee Structure:


        1. Fee schedules at D. E. Shaw vary based on the specific fund. However, most funds charge an asset-based management fee and a performance-based fee.
        2. The management fee is based on a ratio of the fund's market value. This fee may approach 3.5% for some funds.
        3. Performance-based fees are computed based on a percentage of the gain a given fund accrues and may approach 15% to 35% of net profits. Again, specific funds may have their own fee schedule. Please contact the fund for further information.

        What I Like/Dislike About D.E. Shaw:

        Like:

        • Best-in-class quantitative background and robust risk management make this quant trading pioneer a compelling choice.
        • Lots of investment style options are available (both traditional and alternatives) for qualified investors.
        • Helpful research and data sets are available online.
        • Diversified portfolio can provide unique insight into defensive stakes in times of turmoil.
        • Lessons in position sizing.
        Dislike:
        • As is the case for most, if not all, players mentioned in this list, some years, D.E. Shaw's funds have underperformed.  

        Fund Updates:


        1. In 2024, D.E. Shaw & Co. will relocate its Midtown headquarters from 1166 Avenue of the Americas to Two Manhattan West on the far west side of Manhattan, taking eight floors in the massive Brookfield Properties Hudson Yards office building.  
        Visit www.deshaw.com.
         

        9. Baker Brothers Advisors LP 

        Best for: 
        Vertical Specific, Biotech and health care Investments, Superior Performance in a challenging sector.
        Baker Brothers Investments

        Fred’s Take

        The best-in-class healthcare and biotech investor enjoys a solid track record and reputation. Anyone looking to buy and sell stocks in the sector may find the fund a great option (or at least a source of inspiration) and its portfolio a superior source of ideas. Baker Bros. constitutes one of my favorite sources of biotech investment ideas (both individual stocks and investment rationale).  
        A top ten recommendation for its performance potential/risk management profile (biotech-specific)
        9.5 out of 10 (tied)

        Profile:


        1. Julian and Felix Baker founded the New York City-based hedge fund sponsor in 2000.
        2. Headquartered in New York City.
        3. Discretionary assets under management (AUM) of $23,154,517,129 (Form ADV from 2023-03-24)

        Key Strategic Focus:


        1. Baker Bros has developed unique, vertical-specific expertise in a sector that can be quite treacherous for novices.
        2. Baker and Bros is a long-term investor. The Fund holds investments for an average of three years or longer.  
        3. The portfolio is heavily weighted towards healthcare and life sciences, particularly biotech. 
        4. The firm's concentrated investment strategy has been a hallmark of its success, eschewing diversification in favor of significant positions in select leading enterprises.

        Risk Management


        1. Baker Bros may adhere to Warren Buffetts's words, "Diversification is protection against ignorance. It makes little sense if you know what you are doing." 
        2. Baker Bros is an atypical fund: mostly biotech. Fifty percent of the fund's total portfolio is in 2 stocks and 60% in 3.
        3. However, the concentrated portfolio often leverages remarkable insight. Significant investments are usually less risky than the sector would have you believe (commercial vs. development stage, profitability or strong prospects of reaching it, etc.). High conviction often pays off.

        Founders: Felix and Julian Baker 


        1. Brothers Felix and Julian Baker started their fund-management careers in 1994. The Tisch Family acted as a seed investor.
        2. Felix holds a B.S. and a Ph.D. in Immunology from Stanford University, where he also completed two years of medical school; has served as a director on the boards of several public companies (Seattle Genetics, now part of Pfizer; Alexion, now AstraZeneca; Genomic Health, now part of Exact Sciences Corporation; Kodiak Sciences, etc.)
        3. Julian holds an A.B., magna cum laude, from Harvard University. He serves on the boards of Incyte Corporation, Acadia Pharmaceuticals, Inc., Prelude Therapeutics, Inc., Everyone Medicines Inc., and Alumis, Inc. 
        4. Felix and Julian Baker's net worth is $2.8 billion each, ranking at #1142 globally (Forbes, end 2023).

        Funds:


        1. Baker Bros manages long-term investment funds focused on publicly traded life-sciences companies.
        2. Fund investors are major institutional clients.
        3. There is limited to no focus on retail investors. Baker Bros does not have a major website.

        Portfolio: Top 15 holdings 

        Top 15 Holdings - Baker Bros Portfolio

        Source: https://whalewisdom.com/filer/baker-bros-advisors-llc 

        1. Highly concentrated portfolio, with more than 50% of the total weight in two stocks (BGNE, INCY). Both biotechs are commercial-stage with a growing, diversified portfolio of therapeutics.
        2. The fund owns as many as 117 stocks, including many small biotechs, but most such positions are well under 1% of total weight, which helps Baker and Bros avoid unduly high risk investing in dilution-prone, developmental ventures.
        3. While Baker Bros's fund is often labeled as a healthcare-focused portfolio, there are very few managed healthcare (UNH, etc.) or big pharma (PFE, JNJ, etc.) plays.
        4. The average holding time is long-term. The firm may hold some positions for years if not decades. It started investing in INCY in Q4 2001.
        5. Baker Bros's investments offer great food for thought for biotech investors.

        Minimum Investment


        1. As is the case for most funds in this article, only accredited investors are eligible for investment.
        2. The Company provides investment advisory services to pooled investment vehicles (i.e., very few clients).
        3. There is limited to no focus on retail investors, be they accredited or not. 
        4. Baker Bros Advisors has no mainstream website.

        Fee Structure:


        1. It is largely irrelevant, as the hedge fund only has a few clients and it is hardly open to retail (even accredited) investors.

        What I Like/Dislike About Baker Bros:


        Like:
        • Baker Bros is a best-in-class investor in the healthcare and, in particular, biotech sector. 
        • The portfolio is an excellent source of ideas for investors looking to invest in the vertical.
        • Baker and Bros. has a knack for investing in buyout prospects pre-merger (Seattle Genetics, Alexion Pharma, etc.)
        • Diversified portfolio can provide unique insight into defensive stakes in times of turmoil, a critical point since the sector can compress dramatically in a bear (given the dearth of profits amongst small biotechs).
        • Lessons in position sizing for biotech-prone investors.
        Dislike:
        • Baker Bros offers a concentrated portfolio in one vertical/industry sector only; as a result, its portfolio should only be construed as one of many tools to deploy for global portfolio edification.
        • There is little focus on retail investors.

        Fund Updates:


        1. The Fund recently liquidated its stake in Seattle Genetics following its merger with Pfizer.  
        Baker Bros does not have much of an online presence.
           

        10. Balyasny Asset Management (BAM)

        Best for: 
        Equities Long/Short insight, increased focus on Risk Management 
        Balyasny Asset Management L.P. logo

        Fred's Take

        The key focus and related expertise remain Equities Long/Short, with secondary poles of interest in Macro, Equities Arbitrage, Credit, Commodities, and Systematic/Growth Equity.
        A top ten recommendation for its performance potential/risk management profile
        9.5 out of 10 (tied)

        Profile:


        1. BAM was founded in 2001 by Dmitry Balyasny, Scott Schroeder, and Taylor O'Malley.
        2. Headquartered in Chicago, IL.
        3. Sixteen global offices with 1,500 team members and 150+ investment teams (approx.).
        4. Manages approx. $120 billion in AUM.

        Key Strategic Focus:


        1. BAM seeks to achieve absolute returns in all market environments consistently. The firm relies on a multi-strategy, multi-portfolio manager model with six core strategies: Equities Long/Short (primarily), Macro, Equities Arbitrage, Commodities, Credit, and Growth Equity. 
        2. BAM's Equities Long/Short business attempts to generate alpha by leveraging a fundamental, bottom-up approach to analyzing the relative prospects of companies. Equities Arbitrage seeks uncorrelated equity investment opportunities in Event and Arbitrage Strategies.
        3. BAM's Macro teams capture opportunities across various geographies and asset classes through a diversified mix of complementary strategies. The firm harnesses the expertise and insights of its global teams to identify opportunities worldwide. 
        4. BAM's Commodities teams pursue alpha and diversified return streams for investors by investing across all commodities in multiple geographies. Credit teams identify opportunities across asset classes and geographies in liquid global credit markets.
        5. Growth equity is another focus. BAM Elevate seeks to leverage a sophisticated research and data analytics platform to detect unique opportunities in private tech and tech-enabled (high-growth) sectors and help portfolio companies prepare for an IPO.

        Risk Management


        1. Like others listed in this article, BAM views risk management as a competitive advantage. Decades of experience navigating challenging markets, innovative technologies, sophisticated portfolio construction, and rigorous hiring and training help Chief Risk Officer Alex Lurye and his team optimize risk management for alpha generation. 
        2. Investment teams deploy leading systems and technologies to evaluate and optimize investment portfolios quantitatively. The firm also closely monitors cash reserve levels to ensure sufficient capital under both normal and stressed market conditions.
        3. BAM systematically evaluates all potential stress factors to manage exposure across its portfolio. Economic and political event risk assessment allows the firm to identify and mitigate tail exposures to ensure the right balance between risk and reward, diversification across every investible sector, and the minimization of market volatility while delivering returns for investors.
        4. BAM ensures that even in more liquid asset classes, such as listed equities and sovereign bonds, the firm's positions do not become overly concentrated to breach liquidity thresholds. It also models liquidity scenarios during periods of market stress. It delineates the expected timescale to liquidate some or all of the positions.

        Founder (Lead): Dmitry Balyasny 


        1. Founded Balyasny Asset Management still owns more than 75% of the hedge fund. He now serves as the Managing Partner and the Chief Investment Officer.
        2. Balyasny started trading and got licensed as a stockbroker early; he landed a job at a tiny firm while earning a bachelor's degree in finance at Loyola University in Chicago. Early losses only served as a stimulant. Balyasny began his more mature trading career with Schonfeld Securities in 1994.
        3. Balyasny is a fan of writer Ayn Rand, whose philosophy prioritizes the right of individuals to pursue their self-interest. Ayn Rand's most famous novel, Atlas Shrugged - a nudge to individualism, limited government, and capitalism - inspired Balyasny's funds' names. 
        4. Balyasny has been involved in a variety of philanthropic organizations promoting access to education and seeking to improve public health.
        5. Co-founding Partner and President Taylor O'Malley is a member of the firm's Investment Committee and Management Committee and serves as Chair of the Global Macro Strategy Committee. He oversees Risk, Technology, Data Intelligence, Organizational Development & Operations. The Loyola alum also holds an MBA from Harvard Business School.
        6. Scott Schroeder heads Business Development and the legal and regulatory aspects of the firm. 

          Funds:


        1. Atlas Macro Master Fund, Ltd. has $88.7 billion in AUM with a zero minimum investment requirement.
        2. The list of BAM's investment vehicles also includes Atlas Enhanced Master Fund, Ltd. (AUM: $26 bn, minimum: $5 million, now close to 2,000 beneficial owners), Atlas Master Fund, Ltd. (AUM: $4 bn, minimum: $5 million, Beneficial Owners: 236), and Atlas Private Holdings, LLC (AUM: $63 bn, Minimum: $25 million, Beneficial Owners: 3).
        3. The firm rarely lost money during its first 16 years of operations, delivering an annualized return of 12 percent. It managed to post gains throughout the dotcom crash and the financial crisis of 2008. However, in 2018, BAM posted significant losses, its AUM dropping from $12 billion to $6 billion; client investors withdrew their funds. BAM then cut 20% of its workforce, hired Alex Lurye (formerly chief risk officer and leader of global portfolio construction at Citadel), integrated risk management into the portfolio management process, and made new hires on the portfolio management and analyst teams to limit downside in a challenging environment for long/short equity.

        h3>Portfolio: Top 15 holdings 

        Balyasny Asset Management's Top Holdings

        Balyasny Asset Management's Top Holdings (2) 

        Source: https://hedgefollow.com/funds/Balyasny+Asset+Management

        1. Highly diversified portfolio sees no position constituting more than 2.5% of total weight.
        2. The vast majority of holdings represent around 1% or significantly less of total weight.
        3. Many positions are familiar names (including big tech and other blue chips).
        4. Balyasny Asset Management's largest holding is iShares Russell 2000 ETF, itself a diversifying tool.
        5. The stocks differ, but the approach to portfolio construction is reminiscent of AQR's and the D.E. Shaw group's.

        Minimum Investment


        1. Investors in BAM's funds must be accredited. The hedge fund provides investment advisory services to institutional clients and high-net-worth individuals through privately offered pooled investment funds.
        2. Investors include funds of funds, investment companies, trusts, estates, charitable institutions, sovereign wealth funds, high-net-worth individuals, family offices, foundations, municipalities, corporate pensions, endowments, profit-sharing plans, endowments, family offices, high-net-worth individuals, as well as other institutional clients.
        3. Some funds have a $5 million minimum investment requirement. Minimum investments vary by Fund - see above (Funds, section 2).

        Fee Structure:


        1. BAM may charge fees to the Fund (not the client directly). Fees typically consist of an annual management fee based on AUM and an incentive portion calculated as a percentage of the portfolio's performance and consistent with SEC rules and regulations.
        2. Percentages vary depending on the Fund considered and the terms associated with the specific class of shares held.
        3. For information regarding actual fees charged to any specific Fund, it is best to consult the offering documents for that Fund. 

        What I Like/Dislike About BAM:


        Like:
        • Diversified portfolio can provide unique insight into defensive stakes in times of turmoil.
        • Renewed emphasis on risk management.
        • Resilient, quick to react and bounce back after Fund underperforms.
        Dislike:
        • As is the case for most, if not all, players mentioned in this list, Balyasny Asset Management does not have a perfect record (who does?). 2018 was a challenging year.  But the Fund did outperform in times of severe market stress (dotcom crash, 2008 financial crisis).

        Fund Updates:


        1. BAM continues expanding globally, including across Asia and the Middle East.
         

        11. Tiger Global Management, LLC 

        Best for: 
        Record performance some years, but very poor record in 2022, high volatility, technology investments

        Fred’s Take


        There have been some great years, but the hedge fund is not immune from high volatility and inconsistency of track record. Like many on this list, one of the world's largest and most closely watched portfolios can be a great source of investment ideas.
        A top fifteen recommendation for its performance potential/risk management profile
        9.4 out of 10 (tied)


        Profile:


        1. Often referred to as Tiger Global, the fund was formerly known as Tiger Technology.
        2. Not to be confused with Tiger Management (now closed) or Tiger Asia Management.
        3. Chase Coleman III, who used to work under Julian Robertson, Tiger Management's leader, founded Tiger Global in March 2001.
        4. Headquartered in New York City, NY.
        5. The hedge fund manages $58 billion in AUM (September 2022).

        Key Strategic Focus:


        1. Primarily focuses on internet, software, consumer, and financial technology companies.
        2. Tiger Global embraces two strategies that underpin approximately the same amount of capital: 1) The public equity offerings and 2) the private equity offerings.
        3. The public equity offerings leverage equity strategies to invest in publicly traded companies and outperform their benchmark. Tiger Global Investments is the firm's flagship long-short fund. Along with Tiger Global Long Opportunities (long-only), the funds constitute Tiger Global's two lead products and corresponding investment rationales.
        4. The private equity strategy seeks to identify leaders in their fields, i.e., high-quality companies that benefit from unique business models, cutting-edge technologies, powerful secular growth trends, and superior management. They are more likely to generate superior profitability and outperform their benchmark index.

        Risk Management


        1. Tiger Global earned its investors $10.4 billion in 2020, a remarkable accomplishment. 
        2. But in the first six months of 2022, the firm's lead hedge fund and its long-only fund had declined more than 50% and 60%, respectively. These losses may have eliminated as much as two-thirds of the profits generated by the hedge fund and the long-only fund since their inception. The hedge fund's loss is considered one of the largest ever incurred in the industry.
        3. The firm snapped a two-year losing streak with a 28.5% gain in 2023. But like many of its rivals, Tiger Global has struggled to perfect its processes and practices in risk management.
        4. After its 2022 underperformance, Tiger Global overhauled its portfolios, cutting stakes in pandemic beneficiaries and other speculative plays and reining in Tiger's legendary risk appetite. It trimmed high-risk investments, seeking more stable names, including big tech (Microsoft, Alphabet, Meta, etc.) and other marquis enterprises (Servicenow, etc.). Significant new positions have emerged in China, which has also underperformed for years. Tiger has also boosted its short portfolio (which profits when stocks sell off). 

        Founder (Lead):  Chase Coleman III 


        1. Founder and Partner of Tiger Global Management.
        2. Coleman started his career under Tiger Management's Julian Robertson in 1997.
        3. In 2000, Robertson closed his fund and entrusted Coleman with over $25 million to manage. Tiger Global is one of the 30 or more so-called "Tiger Cubs", i.e., hedge funds that Tiger Management helped launch.
        4. As of July 2023, Coleman's net worth is estimated at US$8.5 billion by Forbes (258th richest person in the world). 

          Funds:


        1. Tiger Global currently manages 20 pooled investment vehicles; seven are hedge funds.
        2. Tiger Global Investments, LP is the largest hedge fund in the family (AUM: $35 bn, beneficial owners: 750+). 
        3. Other significant funds include Tiger Global Long Opportunities Master Fund, LP (AUM: $15 bn, beneficial owners: 450), Tiger Global, LP (AUM: $10 bn, beneficial owners: around 500), Tiger Global, Ltd., and Tiger Global Long Opportunities, LP. 

        Portfolio: Top 15 holdings 

        Tiger Global Management's Top 15 Holdings

        Source: https://whalewisdom.com/filer/tiger-global-management-llc

        1. Highly concentrated portfolio, with top two positions (META, MSFT) constituting nearly 35% of total weight. The top 5 positions approach 55% of the overall portfolio.
        2. The vast majority of holdings are big tech or marquis names in internet, software, consumer, and financial technology.
        3. The fund seeks to identify leaders in their fields, i.e., high-quality companies that benefit from unique business models, cutting-edge technologies, major secular growth trends, and superior management. They are more likely to generate superior profitability and outperform their benchmark index.

        Minimum Investment


        1. All five hedge funds listed above (see section on funds) have a minimum investment requirement of $1 million.

        Fee Structure:


        1. As is typical of hedge funds listed here, fees at Tiger Global Management include a combination of asset-based management fees based on AUM and fees based on performance.

        2. Asset-based management fees approximate 1.5% (yearly) of the net assets of the open-ended long/short fund and 1.25% (yearly) of the net assets of the open-ended Long Opportunities Fund. Asset-based management fees amount to 2% per year for the closed-end Private Equity Funds.

        3. Performance-based fees are 20% of profits for the TGI and Long Opportunities Funds and 20-25% for the Private Equity Funds (net).

        4. It is best for existing and prospective investors to consult offerings documents, which may list additional fees - including registration fees, maintenance fees, taxes, and regulatory expenses.

        What I Like/Dislike About Tiger Global:


        Like:
        • Some record years.
        • The Fund's concentrated portfolio can provide unique insight into the tech vertical and present and future market leadership.
        Dislike:
        • As is the case for most, if not all, players mentioned in this list, Tiger Global Management has severely underperformed in some years (2022).  
        •  High volatility.

        Fund Updates:


        1. In March 2022, Tiger Global raised $12.7 billion from close to 1,000 investors for a new fund seeking to back fast-growing technology companies in their early stages.   
         

        12. Millennium Management, LLC

        Best for: 
        Consistency of record, Diversification
        Image of Millennium Management logo shown in serif font in blackish grey color.

        Fred’s Take


        One of the most consistent performance records in the industry. Very diversified portfolio. The firm's public website shares little information.
        A top fifteen recommendation for its performance potential/risk management profile
        9.4 out of 10 (tied)

        Profile:


        1. Founded by Israel Englander in 1989.
        2. Headquartered in New York City, NY.
        3. Millennium manages $61 billion in AUM.
        4. 5,500 employees.

        Key Strategic Focus:


        1. The firm pursues four primary strategies: fundamental equity, equity arbitrage, fixed income strategies, and quantitative strategies.
        2. Millennium applies systematic and fundamental arbitrage across different parts of a firm's capital structure and a spectrum of derivatives, such as merger arbitrage, event-driven strategies, convertible arbitrage, and option-volatility trading.
        3. Fixed Income Strategies focus on rates, macro, credit, mortgage and asset-backed securities, and commodities.
        4. Quantitative Strategies cover the whole range of asset classes, including global equities, interest rates, foreign exchange instruments, and commodity-linked derivative instruments.

        Risk Management


        1. The portfolio is highly diversified. The rare few positions constituting more than 1% of the portfolio are index trackers [SPDR S&P 500 ETF Trust (US: SPY), Invesco QQQ Trust, Series 1 (US: QQQ), iShares Trust - iShares Russell 2000 ETF (US: IWM)].
        2. Risk management seems well-handled overall; consistency of performance records over the long term attests to this.
        3.  The firm's website could provide more specifics on risk management.

        Founder (Lead): Israel Englander 


        1. Englander founded the firm with $35 million. He still controls 100% of the firm and serves as Chairman and Chief Executive Officer.
        2. Before starting Millennium, Englander was a broker and trader on the American Stock Exchange; he owned a specialist venture. He chaired the Specialist Association. Englander has been on numerous American Stock Exchange committees, including Allocations, Options, Emerging Company Marketplace, etc.
        3. Englander graduated from New York University (with a BS in Finance). He attended the New York University Graduate School of Business Administration.

          Funds:


        1. As of 2022, Millennium had posted the fourth highest net gains of any hedge fund since its inception in 1989, having made $22.4 billion for its investors, an average of 14% annually since inception.
        2. Millennium does not share any specifics on the funds it offers its customer base.

        Portfolio: Top 15 holdings 

        Millennium's Top 15 Holdings

        Source: https://whalewisdom.com/filer/millennium-management-l-l-c

        1. The hedged portfolio is highly diversified, with stakes in close to 7,000 stocks.
        2. The top 4 positions (around 3 to 5% of total weight) are index trackers (SPY, QQQ, IWM).
        3. The portfolio also contains a number of highly recognizable names, including big tech, blue chips, and other industry leaders (TSLA, AAPL, MSFT, AMZN, GOOG, META, SGE, LLY, KO, etc.).

        Minimum Investment


        1. Millennium primarily serves private funds rather than individual clients. Minimum account sizes vary. Millennium does not provide specific dollar amounts.

        Fee Structure:


        1. Like most hedge funds listed here, Millenium generally charges its investment funds a combination of asset-based management fees and performance-based fees. The firm does not provide fee schedules or specific rates on its website or ancillary brochures.
        2. Existing and prospective investors should consult offerings documents and contact the firm directly for details on fee schedules and other expenses. 

        What I Like/Dislike About Millennium:


        Like:
        • Performance shows a very consistent record, which is distinctive and laudable in an industry known for erratic results and high volatility.
        • The hedge fund shows stable leadership (like many hedge funds listed here).
        Dislike:
        • As is too often the case for hedge funds, the firm's website only provides cursory information (primarily locations, leadership, general strategy, and career opportunities), which constrains transparency. 

        Fund Updates:


        1. In 2023, portfolio manager Diego Megia has secured $3bn of capital from Millennium and hired up to 30 of its investment staff to launch Taula Capital, a macro hedge fund with the potential to be the largest hedge fund launched in more than a year; it is expected to start trading in the first half of 2024.
         

        13. Two Sigma Investments, LP

        Best for: 
        First-rate returns, Great Investment Ideas, Compelling website 
        two sigma logo

        Fred’s Take


        Two Sigma has achieved unusually high rates of return over the years, comparable to archrivals Renaissance Technologies and D.E. Shaw & Co. Excellent source of investment ideas. 
        A top fifteen recommendation for its performance potential/risk management profile
        9.4 out of 10 (tied)

        Profile:


        1. John Overdeck, David Siegel, and Mark Pickard founded Two Sigma in 2001.
        2. Two Sigma refers to 1) the lower case sigma, σ, which designates the volatility of an investment's return over a given benchmark, and 2) an upper case sigma, Σ, which symbolizes sum. Two Sigma seeks to amplify forecast signals by adding together the volatilities of individual positions, as measured against the benchmark (Source: Company website).
        3. Headquartered in New York City.
        4. Two Sigma manages approximately $60 billion in AUM (per the firm's website).
        5. 2,000+ employees.

        Key Strategic Focus:


        1. The hedge fund follows principles rooted in technology and data science as much as those underpinning financial services. Fields like machine learning, AI (program code-named Halite), and distributed computing guide investment management and the firm's resulting performance. 
        2. Two-thirds of employees are in research and development roles. The hedge fund boasts 775k+ vCPUs and 5,000 terabytes of memory. The firm works with some of the most extensive data sets in the industry, originating from tens of thousands of diverse sources.

        Risk Management:


        1. The firm's portfolio is highly diversified (see below for details). 
        2. Two Sigma has embraced a quantitative approach to multi-asset portfolio risk management and investment decision-making.
        3. To such a point that it has developed Venn, which since 2017 has leveraged expertise in research, data science, and technology to help institutional investors optimize analytics.  
        4. Venn helps Two Sigma meet the unique needs of managers of multi-asset portfolios, who complain that manual solutions need more systematization and other portfolio risk tools to address their needs.  

        Founders: John Overdeck, David Siegel, and Mark Pickard 


        1. John Overdeck, David Siegel, and Mark Pickard founded the firm. 
        2. Siegel has a Ph.D. in computer science from MIT and worked for Tudor Investments. Overdeck is an International Math Olympiad Silver Medalist who also studied at Stanford University and worked for Jeff Bezos's Amazon in the early days. The two met at D.E. Shaw, where Siegel served as Chief Information Officer and Overdeck as managing director. They used seed funding from Paul Tudor Jones to co-found Two Sigma in 2001. 
        3. Pickard presided over the firm from its inception until his retirement in 2006.

        Funds


        1. Two Sigma has a number of funds, including Two Sigma Spectrum Portfolio (AUM approaches $15 bn.), Two Sigma Equity Portfolio (AUM around $12 bn.), Two Sigma Strategies Fund (AUM under $10 bn.), Two Sigma Equity Spectrum Portfolio (AUM under $10 bn.), and Two Sigma Equity Fund (AUM, >$8 bn.). 
        2. Most may now be closed to accredited investors (to be confirmed).

        Portfolio: Top 15 holdings 

        Two Sigma's Top 15 Holdings

        Source: https://whalewisdom.com/filer/two-sigma-investments-llc

        1. The highly diversified portfolio has no position constituting more than 1% of the total weight.
        2. Two top positions are index-tracking instruments (QQQ and SPY). Diversification is a top priority.
        3. The fund has as many as approximately three thousand four hundred holdings.
        4. The portfolio contains a number of highly recognizable names, including big tech and other marquis firms, blue chips, or industry leaders (PLTR, NVDA TSLA, NFLX, V, NKE, GOOGL, etc.).
        5. There are more speculative investments, but they usually constitute well under .35% of total weight.

        Minimum Investment


        1. Access to high-net-worth individuals and even institutional clients seems heavily constrained.
        2. The primary clients of the firm are the hedge funds it manages. 

        Fee Structure:


        1. Most clients at Two Sigma pay an asset-based management fee of between 2% and 4%. 
        2. Performance-based fees are generally between 20% and 30% of net yearly profits. 
        3. Existing and prospective investors should consult offerings documents and contact the firm directly for details on fee schedules and other expenses. 

        What I Like/Dislike About Two Sigma:


          Like:
          • Superior returns and solid risk management.
          • Highly diversified portfolio.
          • Lessons in portfolio sizing.
          • Two Sigma is one of the most proficient users of AI and other technologies (on par with Renaissance, D.E. Shaw, etc.).
          • Sophisticated website.
          Dislike:
          • Two Sigma is not the most accessible hedge fund to retail investors (even accredited) and possibly Institutions.
          • Personal disputes between co-founders may have a detrimental effect on long-term fund performance. In March 2023, the firm mentioned a deterioration of the relations between co-founders John Overdeck and David Siegel in a filing to investors. Both continue to own a large percentage of the company.  

          Fund Updates:


          1. In April 2023, Two Sigma Impact, a mission-driven private equity business, announced the close of its inaugural Impact Fund with $677 million in capital commitments. The fundraiser received support from various institutional investors, including pension funds, endowments, foundations, and family offices, along with capital from Two Sigma leadership.
           

          14. Viking Global Investors 

          Best for: 
          Diversification, Investment Ideas (Both Public and Private)
           
          https://vikingglobal.com/wp-content/uploads/2021/12/footer-logo-1-1.svg

          Fred’s Take


          The hedge fund's reasonably diversified portfolio offers insight into various possible public and private investment opportunities. Relatively consistent performance record, but the fund may have underperformed some peers and, at an earlier juncture, planned to scale down. However, it may have reopened its flagship long/short hedge fund last year (2023) for new capital, having closed it more than a decade ago.
          A top fifteen recommendation for its performance potential/risk management profile
          9.4 out of 10 (tied)


          Profile:


          1. CEO and risk manager Ole Andreas Halvorsen, Brian Olson, and David Ott founded Viking in 1999.
          2. One of approx. 30 so-called "Tiger Cubs," funds founded by managers who started their investment careers with Julian Robertson at Tiger Management.
          3. Headquartered in Greenwich, CT.
          4. The hedge fund manages under $50 billion in AUM.
          5. In June 2017, Viking announced it was returning $8 billion to investors but the firm may have reopened its flagship long/short hedge fund in 2023.

          Key Strategic Focus:


          1. Viking Public Equity seeks to invest in high-conviction long and short opportunities across sectors and geographies.
          2. Applies research-intensive, fundamental analysis to select compelling investments in pursuit of attractive risk-adjusted returns.
          3. Organized by industry verticals to optimize evaluation process (company valuation, industry trends, business models, etc.)
          4. Viking Private Equity seeks attractive illiquid investments, from early-stage companies offering significant secular growth opportunities to more mature businesses with a reliable path to profitability. Best-in-class management teams and long-term focus are considered paramount criteria. An extensive list of such investments (some of which have now become public) is available here.

          Risk Management


          1. The hedge fund's portfolio is reasonably diversified. 
          2. Risk management seems well-handled overall; the consistency of performance records over the long term attests to this, although some funds listed here have performed even better.
          3. The firm offers no specifics on risk management on its website.

          Founder (Lead): Ole Andreas Halvorsen 


          1. Norwegian co-founded Viking Global Investors.
          2. Halvorsen worked at Morgan Stanley (in investment banking) before moving to Tiger Management, where he was a senior managing director and served on the management committee. He also sat on the advisory board of Tiger and the supervisory board of its largest fund, Jaguar Fund N.V.
          3. Halvorsen graduated from Williams College with a degree in economics. Stanford MBA.
          4. Halvorsen's net worth is 5.9 billion USD (Forbes, 2024).

            Funds:


          1. Viking Global Investors has three families of funds. The Viking Global Equities Funds launched in 1999 are long/short hedge funds.
          2. The Viking Long Funds, launched in 2009, are a family of long (bullish) funds.
          3. The Viking Global Opportunities Funds launched in 2015 and are a set of liquid/illiquid funds.

          Portfolio: Top 15 holdings 

          Viking Portfolio's Top 15 Holdings

          Source: https://whalewisdom.com/filer/viking-global-investors-lp

          1. Reasonably diversified portfolio with approx. 30% of the portfolio in top 7 holdings;
          2. No position constitutes more than 5% of total weight outside Visa, which is just above (V: 6.5%); there are around 100 positions in total.
          3. The portfolio contains many highly recognizable names, including big tech and other marquis leaders or blue chips (V, AMZN, UPS, DHR, MSFT, UNH, META, etc.).
          4. There are more speculative investments (DNA, ADPT, etc.), but they usually constitute at most 1% of total weight. 

          Minimum Investment


          1. Investors in the firm's funds include charities, endowments, pensions, sovereign entities, other investment companies, trusts, and individuals
          2. The minimum investment for most Viking Global Equities funds and Viking Long Fund Master, Ltd. is $5 million.
          3. Viking Global Equities Master, Ltd. has the largest AUM ($27 billion).

          Fee Structure:


          1. Fees at Viking Global Investors are charged based on a percentage of the total value of a fund. All funds incur a management fee of 0.125% of the fund's total market value each month. 
          2. A performance fee (20% of net gains) also applies.
          3. Existing and prospective investors should consult offerings documents and contact the firm directly for details on fee schedules and other expenses. 

          What I Like/Dislike About Viking:


          Like:
          • Over the years, I have found some compelling investment ideas, but not all have worked out, at least so far (DNA, ADPT, etc.). 
          • Performance is consistent, but other funds have outperformed more recently.
          • Lessons in portfolio sizing.
          • Viking has had stable leadership (like many hedge funds listed here).
          Dislike:
          • The hedge fund has tended to scale down but may have reopened its flagship long/short hedge fund in 2023 for new capital.

            Fund Updates:


            1. As indicated above, Viking has tended to scale down but may have reopened its flagship long/short hedge fund in 2023 for new capital. We are watching for updates.
             

            15. Coatue Management LLC

            Best for: 
            Solid portfolio and performance to match, great source of investment ideas, compelling website.

            Fred’s Take


            Compelling portfolio - and source of investment ideas. The hedge fund focuses on the next big wave. Lots of private investments are worth checking out. 
            A top fifteen recommendation for its performance potential/risk management profile
            9.4 out of 10 (tied)

            Profile:


            1. Philippe Laffont founded Coatue in 1999.
            2. The Tiger Cub (led by a Tiger Management LLC alumnus) launched its first hedge fund with $45 million in capital.
            3. Headquartered in New York City.
            4. Coatue has under 200 employees and around $40+ billion in AUM.
            5. Coatue's yearly "East Meets West" conference invites tech entrepreneurs from around the world— from first-time founders to CEOs of global companies — and is considered a marquee moment that connects tech innovators.

            Key Strategic Focus:


            1. Coatue established its public equity strategy with the firm's launch in 1999. it focuses on disciplined, long-term investing across the most exciting trends in technology. It aims to identify these trends globally and back the likeliest beneficiaries as the market develops. The growth investor seeks to identify generational, technology-focused leaders building world-shaping companies.
            2. Coatue endorses founder-led enterprises and invests in disruptors and innovators—many early-stage plays. The fund's extensive portfolio of such investments is available here. Coatue seeks to provide world-class advice to founders.
            3. Coatue has developed deep expertise across several themes, such as climate technology and fintech, with a proclivity to disrupt incumbent sectors, create new use cases, and fuel increased adoption over the next decade.
            4. Coatue invests in the technology, media, telecommunications, consumer, and healthcare sectors (in public and private markets).
            5. In-house data scientists and engineers built a proprietary platform with over 200 unique datasets from thousands of companies to provide customized strategic insights, industry benchmarking, fundraising, and hiring.
            6. The fund's bespoke approach to structured capital allows it to provide companies and founders with tactical solutions tailored to their financing needs.

            Risk Management:


            1. As is the case for all funds listed here, risk management and preservation of capital are considered paramount.
            2. The fund's portfolio seems moderately concentrated, allowing for at least some measure of diversification.
            3. As indicated above, the fund owns an extensive portfolio of private investments. Still, many of its funds (see below) invest in large, often very profitable, publicly-listed leaders (big tech and more).

            Founder: Philippe Laffont


            1. Philippe Laffont graduated from MIT in computer science (1991). He worked as an analyst for McKinsey & Company in Madrid, Spain and as an independent consultant before joining Tiger Management LLC as a research analyst in 1996, focusing on telecommunications stocks.
            2. Co-founder Thomas Laffont leads Coatue's private equity investing.

            Funds


            1. The firm manages nearly 40 pooled investment vehicles; 10 are hedge funds.
            2. They include Coatue Offshore Master Fund LP (AUM: $22 bn., close to 2,000 beneficial owners); Coatue Offshore Fund, Ltd. (AUM: approx. $7.5 bn., close to 1,000 beneficial owners), Coatue Qualified Partners, LP (AUM around $6 bn., close to 1,000 beneficial owners), Coatue Long Only Offshore Master Fund Ltd. (AUM: around $5 bn.), and smaller funds like Coatue Long Only Partners LP (AUM: around $2 bn.). Add Coatue Hybrid Funds and privately oriented funds, including Coatue Private Funds II and Coatue Early Stage Fund LP. 
            3. Fund investors must meet specific suitability requirements per the fund's offering documents. 

            Portfolio: Top 15 holdings 

            Coatue's Top 15 Holdings

            Source: https://whalewisdom.com/filer/coatue-management-llc#google_vignette

            1. The moderately concentrated portfolio's top 5 holdings constitute almost 40% of total weight (300+ holdings). 
            2. The who's who of leading tech firms dominates (or at least figures prominently) in the fund. Top names are NVDA, META, AMZN, AMD, MSFT, and TSLA. The fund's largest biotech investment is (unsurprisingly) MRNA. Most holdings are blue chips. 
            3. Around 100 holdings in total.
            4. Still, Coatue offers another terrific source of ideas.

            Minimum Investment


            1. Minimum investment amounts may vary by fund, but most funds mentioned above require a $5 million minimum investment.
            2. Clients include U.S./non-U.S. private investment funds. Individual investors may not constitute a prime target customer of the funds.

            Fee Structure:


            1. Fees at Coatue Management include an annual fixed fee ranging from 0-2.5% of AUM (or invested/committed capital, the cost basis of private investments, or equivalent, as specified in the governing documents).
            2. Performance-based fees range from 10-33% of realized or unrealized net profits or capital appreciation of assets, as specified in the fund's governing documents.
            3. At its sole discretion, the firm may waive, reduce, or modify such fees for members and certain affiliates of Coatue Management (a clause you will find at many other hedge funds).
            4. Additional fees, including registration or maintenance fees, taxes, and regulatory expenses, may apply. Existing and prospective investors should consult offerings documents and contact the firm directly for details on fee schedules and other costs. 

            What I Like/Dislike About Two Sigma:


              Like:
              • Attractive portfolio with a compelling mix. A terrific source of investment ideas.
              • The private investment focus is paramount. 
              • Compelling website.
              Dislike:
              • None major identified. 

              Fund Updates:


              1. Coatue raised about $3 billion for a structured equity fund that allows closely held companies to avoid raising money at lower valuations. 

               

              16. Davidson Kempner Capital Management LP

              Best for: 
              Longevity, steady returns, solid risk management, but other funds have outperformed.  

              Fred’s Take


              Davidson Kempner has been around for 40 years. Solid risk management and steady returns are paramount. One of its worst years has been 2008; the Fund dropped less than 10%. 
              A top seventeen recommendation for its performance potential/risk management profile
              9.3 out of 10 (tied)

              Profile:


              1. Founded in 1983 by Marvin Davidson (retired in 2004); Thomas Kempner joined in 1984 (retired in 2020); now led by Anthony A. Yoseloff, who serves as Executive Managing Member and Chief Investment Officer.
              2. Headquartered in New York City.
              3. The Fund has approximately five hundred employees and $37 billion in AUM.

              Key Strategic Focus:


              1. Resorts to a bottom-up, fundamental approach to investing with an event-driven focus and multi-strategy framework.
              2. The firm invests globally in various credit and equity strategies and real assets. 
              3. Specifically, Davidson Kempner seeks opportunities in credit (corporate structured credit, convertible arbitrage, long/short credit, private lending), equity (merger arbitrage, special events, long/short equity, private equity), and tangible assets (real estate, infrastructure, renewables, aircraft, shipping).  
              4. Invests opportunistically across strategies, asset classes, geographies, and the capital structure in both public and private markets.
              5. The hedge fund offers custom structured capital solutions across various asset types and industries.
              6. Davidson Kempner manages evergreen (no fixed end date) and closed-end drawdown funds.

              Risk Management:


              1. Risk management and preservation of capital are priorities. The hedge fund has been around for 40 years.
              2. Steady returns are paramount. One of the Fund's worst years was 2008; the Fund dropped less than 10%.  
              3. Economic interests align with those of investors. Davidson Kempner's partners, managing directors, principals, and employees are substantial investors in the firm's funds (as is the case for some other funds listed here - think Renaissance, etc.).

              Founder: Marvin Davidson and Thomas Kempner (now retired)


              1. Thomas Kempner worked at Goldman Sachs and a couple of smaller firms before joining/co-founding the firm (launched by Marvin Davidson, who retired in 2004) in 1983 and retiring in 2020. Kempner graduated from Yale College (in computer science) and Harvard Business School.
              2. Anthony Yoseloff is Executive Managing Member and Chief Investment Officer at Davidson Kempner. He serves on the Board of Trustees of Princeton University. He is a member of the Board of Directors of PRINCO, the investment manager of the Princeton University endowment. Yoseloff also serves as a member of the Board of Trustees and on the investment committee of The New York Public Library. 

              Funds


              1. The firm manages a total of 45 funds or pooled investment vehicles. More than thirty are hedge funds.
              2. They include Davidson Kempner International, Ltd. (AUM: $10 bn, minimum: $3 million, Beneficial Owners: 515); Davidson Kempner Institutional Partners, LP (AUM, $9.7 bn, minimum: $5 million), Davidson Kempner Partners (AUM: $4.3 bn, minimum: $5 million, Beneficial Owners: 482), and Davidson Kempner Distressed Opportunities International Ltd. (AUM: #$2 bn, minimum: $2 million, Beneficial Owners: 190+).
              3. The firm's clients include private funds or pooled investment vehicles (including hedge funds).
              4. Investors in the Proprietary Funds are the firm's present and previous managing members, members of their immediate families, trusts, and certain eligible employees.
              5. Investors in some of the funds above may include individuals, banks, investment companies, pensions, trusts, charitable organizations, corporations, certain eligible employees, and affiliates of the firm. 

              Portfolio: Top 15 holdings 

              davidson kempner's Top 15 Holdings

              Source: https://whalewisdom.com/filer/davidson-kempner-capital-management-llc

              1. The Fund's diversified portfolio (300+ holdings) does place a couple of heavy bets. In particular, ATVI (now merged with Microsoft) constituted 20% of the total weight. 
              2. Most other positions represent less than 3% of total weight.
              3. A few holdings are widely held equities (META, WMT, etc.), but many others are more esoteric.
              4. Still, another great source of ideas...

              Minimum Investment


              1. The minimum investment required varies by fund but can range from $2 million to $5 million.
              2. Investors in these funds must be accredited investors.

              Fee Structure:


              1. Advisors charge management fees based on a percentage of AUM and annual performance-based fees.
              2. The Fund charges management fees at annual rates of 1%-1.75% of net assets (Multi-Strategy Fund, Distressed Fund), 1.5% of committed capital (Long-Term Fund), and 0.50% to 0.75% of net assets (Special Opportunities Fund). Fees are non-negotiable but may be adjusted depending on the status of particular investors.
              3. The Multi-Strategy Funds and Distressed Funds charge performance-based fees of 20% of net capital appreciation for the year. The Long-Term Funds charge a similar amount via carried interest. The Special Opportunities Funds charges up to 15% of net capital appreciation (also via carried interest).
              4. Additional fees, including registration or maintenance fees, taxes, and regulatory expenses, may apply. Existing and prospective investors should consult offerings documents and contact the firm directly for details on fee schedules and other expenses. 

              What I Like/Dislike About Davidson Kempner:


                Like:
                • Davidson Kempner has been around for 40 years.
                • Solid risk management and steady returns are paramount.
                • Another compelling source of ideas.
                Dislike:
                • Other hedge funds may have performed better some years (granted, a rather generic statement.) 

                Fund Updates:


                1. In July 2023, Davidson Kempner closed its Davidson Kempner Opportunities Fund VI with $3.0 billion in capital commitments.
                 

                17. ARK Invest

                Best For

                High Growth, Disruptive Technologies, Transparency
                 
                Cathie Wood's ARK Registers the ARK Venture Fund (an ... 

                Fred’s Take


                Popular with portions of retail, which is why I am including Ark here. The growth-oriented Fund seeks to invest in disruptors, even in the early stages. Not all investments will work out, but there are some great ideas. The portfolio(s) tend to outperform when the stock market forecasts lower interest rates and underperform in the opposite scenario. Ark has suffered hefty setbacks given the Fed's recent policies, but outlook may/has started to turn around more recently. Expect volatility. High transparency. Retail-friendly.

                A top seventeen recommendation for its performance potential (but risk management has been subpar over the past 2 years)

                9.3 out of 10

                Profile:


                1. Founded in 1994 by Cathy Wood.
                2. Headquartered in St. Petersburg, Florida
                3. At the height of February 2021, the company had $50 billion in AUM. By May 2022, assets had dropped to $15.9 billion after a period of poor performance
                4. Small shop; under 100 professionals.
                5. Any retail investor can invest in Ark Invest's funds (including Ark Venture, which revolves around venture capital, an investment area all too often unavailable to mainstream retail investors). Most other funds profiled in this article are less liberal and require high minimum investments, which act as de facto barriers to entry.

                Key Strategic Focus:


                1. Ark Invest's active ETFs primarily invest in stocks. The Fund is a growth investor.
                2. Investments are usually held for extended periods. 
                3. Disruptive technologies are the prime theme. The best and most straightforward way to think about it is, what if you had invested in Amazon in 1997, which turned $1 invested into approx. $3,000 25 years later?
                4. Ark Invest invests in stocks it projects to double in value over five years (approx.).

                 Risk Management


                1. In its pursuit of best-in-class disruptive innovation investments, Ark Invest is willing to incur high levels of risk and experience market volatility.
                2. Wood & Co. are willing to see the worst to achieve the best. Think of Amazon, whose shares lost approximately 90% of their value from the peak they reached in 1999 to the bottom they hit in 2001 during the implosion of the tech bubble. However, investors willing to take it may reap high rewards and have an opportunity to build tremendous wealth. The same story applies to all growth stocks focused on disruptive technologies (from Netflix to Meta to Axon, etc.)
                3. As its funds cannot hold cash, the firm also invests in numerous Big Tech stocks it refers to as "cash-like innovation stocks."
                4. Past performance is not indicative of future returns. Investors chasing outsized returns delivered by ARK Invest one year may be disappointed the following year. In particular, high interest rates significantly impact the value of future profits. On the flop side, recent underperformance may suggest the Fund and at least some of its holdings may be screaming buys.
                5. Some (Morningstar) have voiced concerns over ARK's sizable ownership in several smaller holdings (DNA, NVTA, etc.)
                6. ARK publishes analyses, transactions, and portfolios and opens its research reviews to the public quasi-daily. Investors are usually well aware of the risks incurred by the funds. The level of transparency is unmatched in the industry - kudos to Cathy Wood.

                Founder: Cathy Wood 


                1. Born in Los Angeles, the eldest child of immigrants from Ireland. 
                2. Graduated from University of South California (summa cum laude) in 1981 (BS, Finance & Economics). One of Wood's professors and mentors was economist Arthur Laffer, advisor to Presidents Reagan and Trump. 
                3. In 2001, she joined AllianceBernstein as Chief Investment Officer of global thematic strategies, where she worked for 12 years, managing $5 billion. Underperformed during the 2007-2008 financial debacle.
                4. Wood exited AllianceBernstein in 2014 after management rejected her idea for actively managed ETFs based on disruptive innovation. Shortly after, she founded ARK Invest, named after the Ark of the Covenant (Wood was reading the Bible).
                5. Bill Hwang of Archegos Capital seeded ARK's first four ETFs.
                6. Wood's funds outperformed the market in 2020, only to underperform in 2021 and 2022. But they are regaining altitude and outperforming again in 2023. 

                Funds:


                • Ark Invest's flagship fund, ARKK or the ARK Innovation ETF, is an actively managed ETF that seeks long-term growth of capital by investing a minimum of 65% of its assets in domestic and foreign equity securities of firms pursuing disruptive innovation, including Artificial Intelligence, Genomics, Robotics, Fintech, etc.
                Ark Investment Funds
                 Source: Ark Invest  
                • ARKQ is an actively managed ETF that seeks long-term capital growth by investing a minimum of 80% of its assets in domestic and foreign equity securities of autonomous technology and robotics firms relevant to the Fund's investment theme of disruptive innovation.
                • ARKG focuses on domestic and foreign equity securities of firms across multiple sectors, including health care, information technology, materials, energy, and consumer discretionary, that are relevant to the Fund's investment theme of the genomics revolution (CRISPR, targeted therapeutics, molecular diagnostics, bioinformatics, etc.).
                • ARKW focuses on next-generation internet, and ARKF focuses on fintech (including transaction innovations, risk transformation, and blockchain technology).
                • Companies within ARKX are focused on innovation in the "space" vertical, including aerospace companies (satellites, launch vehicles, etc.), enabling technologies companies (artificial intelligence, robotics, 3D printing, materials, and energy storage), and aerospace beneficiary companies (agriculture, internet access, global positioning systems, construction, imaging, drones, air taxis, and electric aviation vehicles).
                • ARK 21Shares Blockchain and Digital Economy Innovation ETF (ARKD) is one of the first actively managed exchange-traded funds (ETF) that invests in both bitcoin futures and public equities of companies engaged in the blockchain industry and digital economy, providing holistic exposure to the growth of blockchain technology. ARKD focuses on a concentrated, high-conviction portfolio of equities through a proprietary valuation model.

                Portfolio: Top 25 holdings 

                ARKK Top 25 Holdings

                Source: https://ark-funds.com/funds/arkk/

                1. The following information (points 1 through 5) applies to ARKK.
                2. Reasonably concentrated. The top 3 holdings (as of 11/30/23, COIN, ROKU, TSLA) constitute nearly 30% of the portfolio; the top 10 represent almost two-thirds of total weight.
                3. Typical number of holdings: 35-55.
                4. Inception date: 10/31/2014.
                5. Net assets: $5.837 billion (toward end of 2023)).
                6. ARK Invest funds invest long-term. They trade (buy and sell) daily, but adjustments are usually minor. A recap of trades is sent to all interested parties, including investors, via email at the end of each day. Transparency is unlike any you'll find at most other hedge funds mentioned here.
                7. Lots of firms are at the forefront of significant innovation breakthroughs. Critical point: Some aren't profitable yet. In a rising interest rate environment deployed to combat inflation, the value of future earnings looks less attractive versus bonds that pay more competitive yields today; growth stocks may thus underperform, as has been the case of many ARKK constituents in 2020-22.
                8. Several companies (TSLA, COIN, PATH, ROKU, ZM, etc.) are key holdings across as many as 3 or 4 funds.  

                Minimum Investment


                The minimum investment required in an Ark Invest vehicle varies by funds. Unlike some of its peers, the Ark Venture Fund has a minimum investment requirement of $500. You can buy as few as a couple of shares of ARKK on NYSE ARCA.

                Fee Structure:


                The fee structure varies by funds. The total fee for ARKK is .75% of the capital deployed. The Ark Venture Fund has a management fee of 2.75% and a total net expense ratio of 2.90%.


                What I Like/Dislike About Ark Invest:


                Like:
                • Interesting, at times exceptional play on growth stocks.
                • Fees are competitive and reasonable.
                • High transparency, informative website.
                • Unique takes on innovations.
                Dislike:
                • High volatility. Growth stocks underperform in a rising interest rate environment, sometimes dramatically. Still, true market leaders will likely make unique winners over the long term.
                • Some non-profitable (operating cash flow negative) holdings may never make it. Be wary of those.

                Fund Updates:


                • ARK Invest recently added ARK Venture on 9/23/2022. It offers venture capital access for retail investors. The Fund aims to provide accredited and non-accredited investors access to a traditionally exclusive, private asset class (venture capital).
                  

                18. What Are Hedge Funds?


                Definition 


                1. A hedge fund operates as a limited partnership of private investors who entrust their money with professional fund managers deploying diverse strategies, including leverage and the trading of non-traditional assets, to earn above-average investment returns.
                2. Investing with a hedge fund is usually perceived as a risky proposition. The risk is worth incurring because the fund manager usually enjoys a notable reputation, is considered skilled, and thus capable of generating higher investment returns; many of the funds listed above have reached this goal rather consistently, although there is no guarantee they will in the future.
                3. Only accredited investors may invest with a hedge fund; they must show proof of net worth; investing with a hedge fund often requires a high minimum investment (which varies by fund).
                4. Hedge funds frequently resort to hedged bets by investing a significant fraction of assets in the opposite direction of the vehicle's focus to offset any losses in its principal holdings.

                Remuneration


                1. Hedge funds usually employ a standard "2 and 20" fee system, which combines a 2% management fee and a 20% performance fee - or some variation of this scheme (varies by fund). 
                2. The management fee amounts to a percentage of the net asset value of investors' shares. It compensates the fund manager to cover operations and administration and applies regardless of the performance of the investment.
                3. A performance fee applies and commonly approximates 20% of profits (but varies by funds). If an investment of $1 million increases to $1.25 million in one year, $50,000 is the performance fee owed to the fund. The fee may trigger beyond a specified minimum profit threshold (say 5%, but also varies by fund).
                4. Beware: Some multi-manager hedge funds must pay hefty bonuses to their traders to achieve consistently higher returns and charge expense fees approximately triple the size of peers, resulting in a 7-and-20 instead of the more typical 2-and-20 charge. Investors may thus achieve higher returns but at higher costs. 

                Strategies


                1. As mentioned above, hedge funds adopt various strategies to achieve their goals. Investment styles matter, as do investment rationales, risk management practices, and frameworks. 
                2. Many of the hedge funds listed above follow a long/short strategy (amongst other frameworks). A typical setting will see the fund go long and short on two competing companies/vehicles in the same industry (or not) based on their relative valuations (pair trading).
                3. An event-driven hedge fund strategy seeks to identify short-term stock mispricing, often triggered by corporate events like restructurings, mergers, or bankruptcies.
                4. Fixed-income hedge fund strategies may combine long and short trades to present investors with decent-to-stronger returns and minimal monthly volatility. Capital preservation is critical.

                Differentiation: Hedge Funds Are No Mutual Funds


                1. A hedge fund can invest in land, commodities, real estate, stocks, bonds, derivatives, and currencies - anything they see fit. Mutual funds focus on stocks or bonds as their primary instruments to achieve long-term investment returns.
                2. Mutual funds are a cost-efficient way to invest in a wide-ranging portfolio of stocks, bonds, and other investments; they are available to the general public. Mutual and exchange-traded funds have a reasonably low average expense ratio, usually around 0.40%. Hedge funds charge a significantly higher fee, usually a 2% management fee and a 20% performance fee - sometimes higher.  
                3. Hedge funds only accept funds from accredited investors, i.e., individuals with an annual income exceeding $200,000 or, alternatively, a net worth exceeding $1 million (excluding their primary residence). 
                4. Mutual fund investors can elect to sell shares at any time. Hedge fund investors may not be able to redeem shares before the expiration of a locked period (the duration of which varies by funds).
                5. The Securities and Exchange Commission regulates hedge funds, but less than they do mutual funds.

                What to Look for


                Investors seeking to invest with a hedge fund should research their management (hedge fund managers' bios and reputation), investment strategies and philosophies, risk management framework, location and track records (longevity), fees charged, minimum investment required to join, and the redemption terms of the fund (time restrictions for withdrawal) - all measured against the investor's goals. It is thus best to:
                • Read all hedge fund documentation thoroughly, which should comprise all of the above and more.
                • Dig on risks incurred, and how they relate to the investor's personal investing goals, time horizons, and risk tolerance. Determine if the fund is using leverage (margins) or speculative techniques, typically investing funds borrowed on top of the investors' capital to achieve returns. The more margin, the riskier the scenario.
                • Properly assess the value of funds, particularly concerning illiquid securities (private investments), which may impact fees charged.
                • Track performance thoroughly. How is it calculated? Some funds' track records are not readily accessible, as mentioned above. Opacity is not welcome when your funds are at risk.
                • Confirm the redemption terms of the fund (time restrictions for withdrawal). 

                19. Executive Summary 

                The analysis above lists some of the most successful hedge funds. Funanc1al is considering adding a few to our list; please check for updates. Hedge funds follow various strategies to offer investors a compelling, but risky investment alternative. It requires a high minimum investment and specific wealth profile (high net worth, high-income generation threshold) from accredited investors. Hedge funds charge (approx.) a 2% management and 20% performance fee. The idea or hope is that they are worth it. 

                Note 1: Funanc1al may profile Man Group, Lone Pine, and Farallon Capital Management next (to be confirmed). Also under consideration are Carl Icahn, George Soros (now less active, unfortunately), and David Einhorn's Greenlight Capital.
                 
                 
                 
                Tags: AQR Capital, Ark Invest, Baker Bros., Balyasny Asset Management, Berkshire Hathaway, best hedge funds, bridgewater, citadel llc, Coatue Management, D.E. Shaw & Co., Davidson Kempner, Elliott Investment Management, hedge funds, Millennium, Pershing Square, Renaissance, The Best Hedge Funds, The Top Hedge Funds, Tiger Global, Two Sigma, Viking Global Investors

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