There’s nothing like a good media narrative, and the current explanatory framework for the hedge fund industry is that the quants have won: The Wall Street Journal ran a high-profile series covering dorks like Alexey Poyarkov, the subject of a bidding war when seeking his first hedge-fund job, and the Wall Street jocks people like Poyarkov are displacing. At least one quantitative hedge fund is planning for both it and its employees to live forever. And Ken Griffin is slumming it on the wrong side of Cambridge, Mass., looking for some Poindexters to write his algorithms—making sure they understand the consequences of stealing them from him, we’re sure, but all the same. And right now, the numbers—in this case, Alpha’s annual ranking of the world’s largest hedge funds—are bearing the narrative out.
Five of the top six firms on the list rely largely or completely on computers and trading algorithms to make investment decisions – and all of them grew their assets last year.
Saying that the largest hedge funds grew their assets isn’t saying much, usually. But last year for the first time in basically forever, total hedge fund assets dropped. But AQR managed to grow by 48%, RenTech by 42% and Two Sigma by 28%. Future world robot overlord Ray Dalio had to settle for just a 17% bump, but that’s easier to take when you’re almost twice the size of the second-biggest hedge fund in the world.
Of course, it’s not all four-eyes and pocket-protector types: Izzy Englander’s Millennium Management is still in the top 10, slings and arrows and recruitment strategies of former top employees notwithstanding. So, incredibly, is the beleaguered Och-Ziff Capital Management. And Paul Singer is just lurking at number 11, waiting to take Och-Ziff’s spot after the next round of redemptions.
On that note: It bears remembering that the list is a snapshot of the state of play at the beginning of 2016. And as the list’s own publisher reminded us a couple of months ago, the Quantitative Era is already over and most of these firms are dead hedge funds walking. The next 18 months will belong to… someone else, maybe.