The finance industry gets a lot of flack, but maybe one reason is nearly everyone is dependent on it. Hedge funds range from cowboy-like and risky to conservative and geared toward the long-term investor. In his book, More Money than God, Sebastian Mallaby traces the history of hedge funds from the 1940s to today.
1. Alfred Winslow – A.W. Jones & Co., founded in 1947
Winslow had a diverse career, from a public servant to a flirtation with Marxism before he raised $40, 000 of his own money and secured $60, 000 from others for his fledgling hedge fund. He was the father of the classic hedge fund strategy, which involves short selling to hedge risks from long positions. He saw a 5, 000% return in 20 years, but risks took their toll, and in the 1969 crash, he lost 35% of investors’ cash. However, he remains a pioneer manager. The number of hedge funds, thanks to his influence, rose from 40 in 1968 to 200-500 in 1969.
2. Michael Steinhardt- Steinhardt, Fine, Berkowitz & Company 1967-1994
Steinhardt was a contrarian investor who dealt with block traders and larger investments. He employed monetary analysis to predict interest rates, and his was the only profitable hedge fund in 1971. However, in 1994, the fund lost a significant amount in a European bond dump.
3. F. Helmut Weymar- Commodities Corporation 1961-1997
Weymar developed a mathematical and “quant” approach to investing, and was an expert price predictor of commodities like cocoa. He was one of the first to use computer trading. However, the fund went from $2.5 million to 900, 000 in just a week, but made it back and more with$30 million funds under management by the lat 1970s.
4. Bruce Kovner-Caxton Associates
Kovner was one of the first purely technical analysts and often used charts and no fundamental analysis. He predicted the Black Monday crash of 1987, and in 1990, was the highest earner on Wall Street.
5. George Soros-Quantum Fund, 1973-2011
Soros invented macro investing as we know it. His theory simplified strategies for investors, and centered on the notion that any imbalance would eventually correct. He would look for bubbles and bet on them popping. Although Soros lost quite a bit on Black Monday, he did well shorting the dollar in the 80s.
6. Julian Robertson-Tiger Management
Julian Robertson is an expert stock picker, and seemed to have a knack at finding the right investments and trades. In 1990, Tiger was only the third fund with over $1 billion, and Tiger beat the S&P 500 every year from 1988-92
7. Paul Tudor Jones II, Tudor Investment, 1983-present
Paul Tudor has been a master at watching market players and predict where stocks will go. He used psychology and empirical data. He made $100 billion from Black Monday, because he sold heavily on the Friday preceding the disaster.
8. Stanley Druckenmiller-Duquesne Capital 1981-2010
Druckenmiller made his name working for George Soros at Quantum and was hugely successful betting against foreign currencies and governments. His focus was influential in expanding hedge funds’ focus on global finance.
9. John Merriwether, Long-Term Capital Management, 1994-98
Merriwether used the quantitative strategy, and he made bets on volatility. However, the fund lost significantly on the Russian default, and since it was heavily leveraged, took large losses.
10. Tom Steyer- Farallan, 1985-present
Steyer focuses on event-driven investing and sees events as driving prices. His fund was the first to receive an investment from a University Endowment–Yale’s. By 2009, half of all hedge funds’ investments came from institutions rather than the majority comprised individuals as clients.
11. James Simons-Renaissance Technologies 1988-present
Simons began as a code breaker for the Pentagon before he was dismissed for his objection to the Vietnam War. Computers were used for his trading and Renaissance was a pure quant fund.
12. Ken Griffin- Citadel 1990-present
Griffin varies his tactics to cut down on risks, and matches strategies to diversify holdings.
13. John Paulson, Paulson & Company 1994-present
Paulson has made a fortune betting on doomsday scenarios that have come to pass. He sensed that the housing boom would come to an end, and did well in the subprime mortgage crisis, earnings $1 billion in just one day.
14. Jim Chanos, Kynikos Associates
Chanos is a master short-seller, and did well in 2007 betting against banks like Citigroup.