A little more than one year ago, Steve Cohen’s SAC Capital Advisors pleaded guilty to insider-trading related charges stemming from a sweeping federal investigation into the hedge fund firm. Cohen’s SAC Capital, one of the most successful hedge fund firms ever, agreed to pay $1.8 billion to the federal government and stop managing money for outside investors. Instead, Cohen, who was never criminally charged, converted SAC Capital into a family office that manages his personal fortune and rebranded it Point72 Asset Management. Cohen tops Forbes’ list of the highest-earning hedge fund managers and traders, making an estimated $1.3 billion in 2014.
In the end, not a lot has changed for Cohen. Prior to pleading guilty, much of the money managed by SAC Capital already belonged to Cohen. Point72 Asset Management, which has some 800 employees, still functions like a major hedge fund and manages more than $10 billion. Cohen has continued to successfully trade in a way that is consistent with his excellent performance track record, but his earnings in 2014 especially stand out because so many hedge fund managers struggled mightily in 2014. The average hedge fund returned 3.3%, according to HFR, while the Standard & Poor’s 500 index returned 13.7%. Forbes estimates that the top six earning hedge fund managers each made slightly more than $1 billion last year and they are bunched together at the top of the list. But Forbes believes that Cohen edged out the other five top earners.
Cohen’s leading hedge fund earnings highlight an important emerging development in the rich hedge fund industry as some of the most successful and closely watched hedge fund traders increasingly focus on mostly, or even exclusively, managing their own wealth. Legendary hedge fund manager George Soros is tied for second on the Forbes list of the highest-earning hedge fund managers and traders, making $1.2 billion in 2014, but he stopped managing external funds in 2011. In fact, even before 2011, the amount of outside money overseen by Soros was relatively tiny in comparison to his own capital. Soros remains involved in managing Soros Fund Management, but Scott Bessent handles the firm’s day-to-day operations.
PLEASE CLICK HERE TO SEE THE FULL LIST OF THE TOP-EARNING HEDGE FUND MANAGERS AND TRADERS.
All of the top hedge fund earners on the Forbes list initially made their fortunes by scoring big returns with other people’s money and collecting fees, but for many of them a big chunk of their earnings these days comes from compounding their own capital, whether they manage lots of external money or not. It is hard for hedge fund managers who did well in 2014 but haven’t grown large fortunes to compete in the earnings race.
Still, there are many hedge fund managers that remain very focused on gathering fee-paying assets. Ray Dalio has built Bridgewater Associates into the industry’s biggest manager of investor capital. Bridgewater Associates manages $160 billion and generates lots of fee revenue. Bridgewater's big Pure Alpha macro hedge fund returned 3.6% net of fees in 2014 and its Pure Alpha Major Markets fund returned 8.7%. His All Weather fund returned 8.6% net of fees in 2014. Dalio made an estimated $1.2 billion in 2014.
To get a sense of what a bad year in the hedge fund industry looks like, in 2014 the 25 highest-earning hedge fund managers and traders made a combined $12.5 billion. That’s $11.8 billion less than what the top 25 earning hedge fund traders made in 2013, when they collectively earned $24.3 billion as the stock market boomed. The vast majority of hedge fund managers have been unable to keep up with the U.S. stock market’s rise for the last six years. But one prominent hedge fund manager trounced the stock market last year. William Ackman, who runs hedge fund firm Pershing Square Capital Management, is tied for fourth on the Forbes list after earning an estimated $1.1 billion in 2014. His main hedge fund posted net returns of more than 37% in 2014. Following his previous setbacks at JC Penney and Herbalife in 2013, last year was an important one for Ackman. He continued to wage his battle against Herbalife, which went much better for him in 2014, and scored with bets on Burger King and Canadian Pacific. But by far the most important trade Ackman made last year was his aggressive activist position in Allergan. It was so controversial that Allergan accused Ackman of hatching an illicit insider-trading scheme with Valeant Pharmaceuticals. Ackman countered that he had operated fair and square. Allergan beat back Valeant’s hostile takeover effort and accepted a $66 billion purchase offer from Actavis. The Allergan trade made up 19.1% of Pershing Square’s gross returns in 2014.
Ken Griffin’s Citadel is another hedge fund firm that had a great year in 2014. Griffin’s main hedge funds returned nearly 18% net of fees in 2014. He also worked to expand his Chicago empire, which increased its assets under management last year to $24 billion from $16 billion. Griffin made an estimated $1.1 billion in 2014. Quantitative hedge fund manager James Simons, who no longer runs his Renaissance Technologies but remains involved in its operations and still benefits from its funds, also made an estimated $1.1 billion last year.
Larry Robbins, founder of Glenview Capital Management, has been one of the hottest hedge fund managers in recent years. In 2014, he again beat the stock market and most other hedge fund managers. His flagship hedge fund returned 14.4% in 2014 net of fees. His Glenview Opportunity Fund returned 25%. Robbins has been betting on hospital stocks like HCA Holdings and Tenet Healthcare that he thinks are benefiting from Obamacare. He has also taken positions in managed care companies like Humana. Another stock he likes: Monsanto. Robbins made an estimated $600 million in 2014.
PLEASE CLICK HERE TO SEE THE FULL LIST OF THE HIGHEST-EARNING HEDGE FUND MANAGERS AND TRADERS.
The top earning hedge fund managers list is reported by Agustino Fontevecchia, Dan Fisher and Thomas Van Riper. To determine the highest-earning hedge fund managers and traders of 2014, we examined hedge fund returns and worked to understand the fee and ownership structure of a wide array of money management firms. Hedge fund firms generally charge management fees of 2% and performance fees that give them 20% of the trading profits, 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 of the managed investment pools.
