In 2013, hedge fund managers and traders bet on an economic revival in Japan, laid siege to corporate boards, invested in hospitals that could benefit from Obamacare and helped make General Motors a hot stock. They waged an epic battle over a seller of diet shakes, drew the ire of actor George Clooney and were blamed for the problems of a 111-year-old American department store chain. In the end, the vast majority of hedge fund managers were yet again unable to keep up with the U.S. stock market as equities boomed from New York to Tokyo.
But prominent hedge fund managers and traders did not have to match the 32% return of the Standard & Poor’s 500 index to make a lot of money in 2013—and many of them increasingly argued they should not even be measured against such a benchmark during a bull market. In fact, the legend of one of the most famous hedge fund managers of all time grew last year even though he did not beat the performance of the U.S. stock market. George Soros tops Forbes’ list of the highest-earning hedge fund managers and traders, personally making an estimated $4 billion in 2013 as his Soros Fund Management generated returns of more than 22%. At 83, Soros is not involved in the day-to-day operations of Soros Fund Management, the family office that manages some $29 billion belonging to Soros and foundations to which he has given money. The firm is overseen by Scott Bessent, Soros Fund Management’s chief investment officer, but Soros remains involved and the firm’s big short bet on the yen at the start of 2013 was vintage Soros.
Perhaps the most remarkable performance of 2013, however, belongs to former Goldman Sachs trader David Tepper, who has been setting a new standard for hedge fund managers. His track record has long been phenomenal, but since the financial crisis his returns have reached a new level. In 2013, the 56-year-old founder of Appaloosa Management outperformed the U.S. stock market and the vast majority of hedge fund managers, with his biggest fund posting net returns of more than 42%. Over the last five years, Tepper’s main hedge fund has generated annualized net returns of nearly 40%—and gross returns of some 50%. In what has almost become an annual tradition, he gave back some cash to his investors at the end of the year. Tepper made $3.5 billion in 2013.
In total, the 25 highest-earning hedge fund managers and traders made $24.3 billion in 2013. The lowest earning hedge fund managers on our list made $280 million last year.
While the amount of money made by the top hedge fund managers in a year like 2013 is generally notable, the earnings of one hedge fund manager in particular is bound to raise a few eyebrows. Steve Cohen was the most highly scrutinized and watched hedge fund manager last year. His hedge fund firm, SAC Capital Advisors, pleaded guilty to criminal insider trading charges and agreed to pay $1.8 billion in fines and penalties to the federal government. That’s a big number, but it’s less than Cohen earned in 2013, when he made an estimated $2.3 billion. One of the most successful traders ever, Cohen is transforming his Stamford, Ct., hedge fund firm into a family office, returning billions of dollars to outside investors. Through all the legal headaches, Cohen, 58, continued to do what he does best—make profitable trades and earn plenty of money. SAC Capital knocked out net returns of about 19% in 2013. That was not as good as what the U.S. stock market returned, but it beat most other hedge fund managers.
The greatest comeback ever? After three very tough years, John Paulson, the hedge fund manager who once pulled off a legendary trade betting against mortgage securities, came roaring back in 2013. Many of his hedge funds performed very well, starting with his $2.7 billion Recovery Fund, which posted net returns of 63%. About 80% of the $20 billion in assets that Paulson’s hedge fund firm oversees are now above their high watermark, meaning the firm is charging rich performance fees again. The only trouble spot in 2013 was gold. The 28% plunge of the yellow metal in 2013 not only hurt the returns of his relatively small Gold Fund, in which he has a large stake, it also dented the returns of the gold-denominated holdings he personally keeps in his other hedge funds. Still, Paulson earned $1.9 billion in 2013.
Carl Icahn was everywhere in 2013. He battled with Michael Dell, helped push Aubrey McClendon out of Chesapeake Energy, made a killer trade on Netflix, fought with hedge fund manager William Ackman over Herbalife, and loudly lobbied for Apple to repurchase more of its stock. Icahn’s investment fund returned 31% in 2013, which is pretty impressive given that its portfolio was largely hedged. Icahn earned $1.7 billion in 2013 from his trading activities, a figure that does not include the gain of his shares in Icahn Enterprises, the publicly-traded investing vehicle he controls.
To determine the highest-earning hedge fund managers and traders of 2013, we examined hedge fund returns and worked to understand the fee and ownership structure of a wide array of money management firms. Hedge funds generally reap fees equal to 20% of profits and 2% of assets, but we found all sorts of variations on this theme. In addition, our earnings figures include the personal gain or loss of each manager’s interest in their funds. Our figures are pretax, account for firm expenses and profit-sharing arrangements, and exclude gains or losses stemming from ownership in the investment firms themselves or from investments held outside the managed investment pools.
James Simons, the 75-year-old king of the quantitative traders, is officially retired, but he continues to play a role at his legendary hedge fund firm, Renaissance Technologies, and benefit from its funds, particularly the secretive and consistently profitable black-box strategy known as Medallion. He made $1.1 billion in 2013. Ken Griffin continued his winning streak and made an estimated $900 million. The Kensington and Wellington funds at his Chicago-based hedge fund firm, Citadel, had a pretty good 2013, even though they trailed the U.S. stock market. The main funds at Citadel, which manages $16 billion in assets, returned about 19% net for the year, following a 25% return in 2012 and 20% return in 2011.
The king of the rich hedge fund industry, Ray Dalio, earned an estimated $900 million in 2013 even though it was a challenging time for his Bridgewater Associates hedge fund firm, which manages some $150 billion. Dalio’s All Weather fund follows a risk-parity strategy that is supposed to generate good performance just about all of the time, but it was down by about 4% in 2013. Bridgewater’s big Pure Alpha hedge fund was up in 2013 by about 5%. It was up by less than 1% in 2012, underperforming both the average hedge fund and the U.S. stock market for two straight years. Nevertheless, the recent underperformance has not diminished Bridgewater’s popularity or esteem with the investment community.
Names like Dalio, Griffin, and Simons are often found among the top 10 earning hedge fund managers. But in 2013 a new name is joining this elite group. Larry Robbins was arguably the hedge fund manager of the year in 2013. Robbins’ Glenview Capital hedge fund returned about 43% net and his smaller Glenview Opportunities Fund returned about 100% net. Robbins’ big bet in 2013 was investing in hospital stocks he thought would benefit from the Affordable Care Act. But he was also generally bullish in 2013, leveraging up his stock portfolio to boost his returns. Robbins, 44, founded his Glenview Capital Management hedge fund firm in 2001. It now manages some $7.5 billion. It was Robbins’ second big year in a row—Glenview Capital returned more than 24% net in 2012.
The man who helped nurture Robbins, hedge fund manager Leon Cooperman, rounds out the top 10 earning hedge fund managers of 2013. Robbins spent five years working for Cooperman, who introduced Robbins to the hedge fund business. Now 70, Cooperman has been bullish on stocks and guided his $9 billion Omega Advisors to net returns of 30% in 2013, following up on a 25% net gain in 2012.