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Last year was, on the whole, a pretty piss-poor one for hedge funds. Sure, there were exceptions, such as those funds enjoying our lugubrious COVID-infected supply chains, but these were mostly of the kind that proved the rule, such as those hedge funds doing well by cosplaying as private equity firms.

[Third Point founder Dan Loeb’s] offshore fund climbed 25.7% through November and his top three money-makers were companies that Third Point invested in while they were still private and then went public within the past 13 months: Upstart Holdings Inc., SentinelOne Inc. and Rivian Automotive Inc.

Dan Sundheim’s D1 Capital returned 17% through November in a fund that can invest as much as 35% of its assets in private companies. It would have struggled without them.

And struggle his non-p.e.-players did, especially toward the end of the year, with November clocking in as the industry’s worst month since the coronavirus pandemic broke out in March 2020, and hedge funds desperately selling off bad bets to cut risk by the time the ball dropped. All told, the average hedge fund managed about an 8% return in 2021, just a couple thousand basis points behind the broader markets.

This was the fate of the world’s largest hedge fund, for instance, although given how things looked a month ago, an 8.14% return for a fund that’s averaged an annualized 1.6% over the past decade looks like an unqualified triumph.

Ray Dalio’s Bridgewater Associates posted a December return of 7.8% through Wednesday for its flagship hedge fund and is now poised to book its best annual performance since 2018, after a lackluster 11 months…. The S&P 500 gained 5% this month through Wednesday and is trading near a record high, and European stock indexes also advanced. Bridgewater could have taken profits on bets that the yield-curve would flatten following mid-December’s Federal Reserve meeting -- a trade that has been popular among fixed-income investors since May.

What’s more, the winds of change are once again whipping through the bewitched woods of Westport and chilling its tented residents, making money matters somewhat of a secondary issue.

The firm has established a so-called operating board of directors, replacing a group that had been serving less formally since Dalio stepped down as chief executive officer in 2017. It also added three new independent members to the board earlier this year…. The group already has plenty to do, starting with the likely search for a successor to McCormick, who’s raising money for a probable run as a Republican candidate for the U.S. Senate in Pennsylvania….

Dalio, 72, has said he wants to begin the “third phase” of his life. He’s still interested in managing money at Bridgewater but no longer wants to be encumbered by the responsibilities of running the $150 billion firm. McCormick’s decision to explore a future in politics has complicated that handover.

David Shaw isn’t worrying about such things, having handed off day-to-day management of his eponymous hedge fund to focus on computational biochemistry some years ago. But then again, he doesn’t have to worry about turning things around returns-wise, either.

The flagship Composite Fund rose 18.5% on the year, according to a person with knowledge of the matter, placing it among the top performing multistrategy funds. The vehicle, which invests across asset classes and geographies, is D.E. Shaw’s largest, the person said, and has posted just one down year since its debut two decades ago.

The firm’s Oculus Fund, which mostly makes macro investments, gained 15% last year, the person said, making it a standout while many peers in the strategy were tripped up by tumultuous Treasury markets. Oculus is the firm’s second-biggest fund, according to the person, and hasn’t posted an annual loss in its 16-year history.

Bridgewater Gains 7.8% in December as One Big Month Saves Year [Bloomberg via Yahoo!]
Bridgewater Boosts Board’s Clout for Life After Dalio, McCormick [Bloomberg]
D.E. Shaw’s Two Biggest Funds Post Double-Digit Gains for 2021 [Bloomberg]
Hedge Funds Protect Wealth Despite Having Their Worst Month Since March 2020 [Forbes]
Hedge Funds Kick Risk Addiction at End of Crazy Year for Stocks [Bloomberg]
Hedge funds ride wave in volatile year for shipping costs [FT]
Hedge Funds Salvage 2021 Gains as Private Investments Shine [Bloomberg]


Ray Dalio (Getty Images)

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