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英文财经 |
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The Secrets of Top Hedge Fund Performance |
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星期四, 五月 01, 2008 13:46:39 |
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by
Nicholas A. Vardy |
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It's now official: hedge funds as a group have recorded their worst quarter in six years. The HFRX Global Hedge Fund Index fell 2.78% in the first quarter of 2008. That may not sound bad compared to the S&P 500's drop of just more than 11%. But it's the worst performance for these new Masters of the financial Universe since the tail end of the dot-com collapse.
The first quarter of 2008 was a story of hedge funds whipsawed in and out of volatile markets. Certain strategies fared worse than others. Equity, event-driven and specialist, emerging market funds suffered particularly heavy losses. Specialist emerging market funds focused on last year's hottest markets of China and India dropped by as much as 30%. In contrast, managed futures were off to their best start in seven years. By betting on a falling U.S. dollar, rising commodities, government bonds and the Yen and Euro, the CS/Tremont Investable Managed Futures Index rose 9.28% in what otherwise was a painful quarter for almost all hedge fund strategies.
The Secrets of Top Hedge Fund Performance: Masters of the Universe Thrive
But don't shed any crocodile tears for the hedge fund managers just yet, though. The volatile markets made for a very good 2007 -- at least for the top dogs in the hedge fund business. Alpha Magazine recently published its list of the top 50 most highly paid managers in 2007. The top earner was John Paulson with $3.7 billion. Second-place finisher George Soros earned $2.9 billion and third-place money manager James Simons earned $2.8 billion. The stakes in the hedge fund world have become huge. Five of the hedge-fund managers on the list earned more than $1.2 billion each last year. That's more than J.P. Morgan Chase is paying for all of investment bank Bear Stearns. Back in 2002, it took $30 million to crack the top 25. Last year, it took $360 million. Even the No. 50 hedge fund manager on the 2007 list earned $210 million. And there was plenty of wealth to spread, even among the smaller firms. CEOs of single-manager fund firms took home average compensation of $3.8 million. Pay for a senior trader averaged $819,000 at multi-strategy firms, and topped $1.6 million at single-manager hedge funds. Average take-home pay for even junior traders at multi-strategy and single-manager firms topped $200,000 in 2007.
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How are hedge funds able to offer such remarkable compensation to their employees? Turns out that the hedge fund business is an even better business model than we originally thought. In a terrific piece for the Financial Times, John Kay calculated how Warren Buffett's $62 billion fortune would have been distributed had Buffett adopted a more conventional investment management structure to manage his own money by charging the 2% management fee and 20% of performance common among hedge funds. Through the miracle of compound interest, $57 billion of $62 billion of Buffett's wealth would have been the property of Buffett the "investment manager" and only $5 billion would have gone to Buffett "the investor." The effect of compounding at 14% (the returns after fees), rather than at 20% (Buffett's long-term investment track record), is to reduce the accumulated pot by more than 90%.
The Secrets of Top Hedge Fund Performance: How They Did It
The Wall Street Journal looked at how the 10 highest-paid managers made their money. The surprising conclusion? Like Frank Sinatra in New York, each did it "his own way."
Top alpha trader John Paulson made $3.7 billion last year by betting against subprime mortgage securities and collateralized debt obligations. Billions of dollars performed like well-timed option plays. One of Paulson's credit funds earned a 590% return last year. Another racked up a 353% return. Lone Pine Capital scored a 57% return through the tried-and-true long/short strategy -- buying some stocks while also shorting. Others like Viking Global Investors scored a 41% return betting on global equity markets. Traditional giants Citadel and SAC Capital pursued everything from vanilla equity investments to credit markets, convertible bonds and emerging markets. Some of the highest-compensated managers were the most secretive. How Renaissance Technologies Corporation's Medallion fund was up 73% and George Soros scored a 31.7% return last year remains a mystery.
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But as a wise man once observed: "Give a man $100 million, and you create a frustrated billionaire." All of this money splashing about has emboldened many hedge fund managers to strive for even more astonishing heights. That's what happened with Greg Coffey, the star emerging markets fund manager at GLG Partners, who forfeited about $250 million worth of shares to leave GLG and start his own fund. Coffey was the best-performing manager at GLG and one of the top-performing hedge fund managers in the world during the past two years. His main GLG Emerging Markets fund was up almost 51% last year and 60% the year before.
The Secrets of Top Hedge Fund Performance: The Next Big Thing
When you see managers like Coffey, who started out as a trading assistant at GLG only a couple of years ago, you can't help wonder whether he's confusing brains with a bull market. This year he has been having a tough time, with GLG Emerging Markets dropping 5.5% by the end of March and another 9% into the middle of April.
Indeed, the challenging markets of 2008 have sent many hedge funds scrambling for opportunities to make money. Hedge funds are pouring billions of dollars into commodities such as grain for relief from sliding equity markets and the credit crunch. As a result, the property boom in the United Kingdom has shifted outside of London, where farmland has soared 50% in the last 12 months. A new era of high agricultural prices has some fund managers I know raising money for buying up farms in countries as far afield as the Ukraine.
Here's what all top-performing hedge funds have in common: to win big you've got to bet big. It is the size of the bet that accounts for differences in hedge fund performance. All of the top-performing hedge fund managers made big bets on relatively few ideas in which they have conviction -- and on which they were right. But to bet big on one idea and win is "lucky." To do that consistently is "smart." And to tell the difference between the two? Almost impossible. But with the kind of money they are making, for many hedge fund managers, winning once is probably enough.
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文章来源：MoneyShowAsia.cn |
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