The Greatest Of All Time Weren’t So Hot In 2020

As we mentioned last week, some hedge fund managers did very well, indeed, last year. A few of them even managed to do better than the Standard & Poor’s 500 Index, which as a reminder you can invest in at almost no cost whatsoever.

This post is not about those hedge funds. It’s instead about the very best hedge funds of all time, none of which managed anything like an impressive return in 2020 in spite of nearly every tailwind imaginable. So how did mediocrity affect the historic league table? Well, not very much. Renaissance Technologies fell off the list, replaced by the relatively young Tiger Global Management, which made an impressive debut in 14^th place, edging out Steve Cohen’s total profits over 28 years, dropping him two spots to 15^th. Izzy Englander’s big year bumped Millennium Management up five spots to seventh all-time, while Baupost Group’s rather dull one dropped it three spots to ninth. No other firm moved more than two places in LCH Investment’s ranking, which continues to be topped by a retiree (George Soros in second) and the firm that lost the most money ($12 billion!) of any the top 20 in 2020, Bridgewater Associates, in first. And so, as you might expect, Ray Dalio’s feeling a bit pessimistic.

“I believe we are on the brink of a terrible civil war,” Dalio wrote. “We are at an inflection point between entering a type of hell of fighting or pulling back to work together for peace and prosperity that addresses the big wealth, values, and opportunity gaps we’re now seeing….”

“Good words and spirit aren’t enough,” Dalio added. “People will have to agree on both how to grow the pie and how to divide it well. That will require revolutionary change.”

At least he’s still got $46.5 billion in total gains to rest on. Melvin Capital Management founder Gabe Plotkin no doubt hoped to join his mentor, Cohen, on the august LCH list one of these days, and looked well on his way to getting there, having annualized returns on its $12.5 billion in AUM of 30% or so over the last six years. However, those plans have been interrupted by an angry mob.

Melvin Capital Management is down 15% just three weeks into 2021, thanks to a series of wrong-way bets that stocks including GameStop Corp. would slump….

Many investors have complained about short squeezes that have left them nursing losses…. GameStop’s stock has soared 245% this year through Friday—including a 57% gain on Jan. 13. Its share price doubled from its Jan. 12 close to its Jan. 14 close. It was up almost 70% midday Friday from its Thursday close before stock exchanges temporarily paused trading in the stock to rein in volatility.

Of course, all’s not quite yet lost for Plotkin & co.

A person familiar with Melvin said its GameStop puts expired last week…. In recent days, Mr. Plotkin has been calling clients with chief operating officer David Kurd to inform them of and explain the losses thus far. One client said Melvin’s message was that the fund still liked its portfolio and that it had rebounded from past losses.

In October 2018 Melvin lost 15%, then lost more money the next month, ending the year down 6%. It made nearly 50% the following year, after fees.

Melvin plunged intra-month in March 2020 but ended the month and year up. Last year it made a little more than 50% after fees, a client said.

These Are the World’s Top-Performing Hedge Funds of 2020 [Bloomberg]
World’s biggest hedge-fund manager ‘thrilled’ with Biden’s inauguration speech but still believes America’s on ‘brink of a terrible civil war’ [MarketWatch]
Short Bets Pummel Hot Hedge Fund Melvin Capital [WSJ]