The 50 largest US managers

US5O The 50 largest US managers

The US50 In association with Newedge Prime Brokerage Group BILL McINTOSH Welcome to the third edition of The Hedge Fund Journal s US50 published in association with Newedge Prime Brokerage Group. Much like its European equivalent, the Europe50, the US50 is a listing of the 50 largest US single hedge fund managers ranked by assets under management at 31 December 2011. Since the second edition of the US50 was published in March 2010 the hedge fund industry has recovered further in terms of assets under management, returning to just over the $2 trillion level, according to data from Hedge Fund Research. The third edition of the US50 comes after a period of initially strong investment performance followed by a more volatile market environment, punctuated by brief periods of gains and sudden investment losses. Many of the US50 from two years ago are still present in the third edition, although the relative ranking of many has certainly changed. On a comparative basis, most hedge fund firms have gained assets over the past two years though there are a number that have shrunk notably. Sometimes this is due to investors withdrawing cash after a period of fund drawdowns, other times it is because a particular strategy may have fallen out of favour. Conversely, the attractions of a strategy can certainly help to attract investors. Macro attracts investors This is clearly the case with global macro and the rise of Bridgewater Associates to pole position in the US50 and indeed the global hedge fund sector. Founded by Ray Dalio in 1975, Bridgewater rose to the number one position in our 2012 survey: it now manages $76.1 billion in hedge fund assets (plus a further $45 billion in non-hedge strategies). That marks a stunning 69% rise in assets from 31 January 2010. The rise of Bridgewater and its reputation for being a firm with a unique culture of excellence coincides with the continued burst of allocations to macro strategies. This has also happened in Europe where macro specialist Brevan Howard Asset Management is near the top of the leader board with $33 billion in AUM. Macro strategies continue to be popular with investors, says Robert Kaplan, chief investment officer of Permal Asset Management. You have to have a global perspective with an appreciation of economic and political factors. It is a strategy that continues to attract most of the assets. We are in a period of lower volatility, but between events on the calendar. There are events that will cause investors to have jitters. In the fourth quarter the US election. Post-election, the end of the Bush tax cuts. And in the meantime there will be ongoing news from Europe on refinancing. Investors are cognisant of all the macro factors playing on markets, so they are allocating more to macro strategies than to all the others. The surge of investors embracing macro managers was more than enough for Bridgewater to dethrone J.P. Morgan Asset Management, the leader in the previous US50. This time JPMAM had $45 billion in AUM, down from $54 billion in the 2010 survey. Coming in third and fourth place respectively were Och-Ziff Capital Management and BlackRock. Och- Ziff moves up to third place from fifth with a rise in assets to $29 billion, while BlackRock jumps to fourth from eighth with assets of $28 billion. Residing at fifth place in the US50 is the venerable Soros Fund Management. It has estimated AUM of about $25 billion. With the firm recently converting to a family office and returning funds to investors, Soros FM will be disappearing from the league table of leading managers. Indeed, in early April it was confirmed that Jonathan Soros, the son of founder George Soros, now 82, is setting up a family office of his own. Changing regulations, including registration and asset position disclosures affecting hedge funds in the US, are expected to drive the evolution of new structures for the foreseeable future. Being less burdensome with respect to regulation and disclosure, the family office structure looks certain to enjoy growing appeal for both established wealth creators and investors able to allocate substantial sums of capital. Varied strategy hedge funds The flow of funds to macro and commodity trading advisor strategies reflects how managers in these areas feel comfortable providing investors with active liquidity. Macro funds, in particular, have matched that liquidity with strong returns even if CTAs have found it much more difficult to find trends and harness them to generate performance. Post-2008 it is no surprise why investors continue to prefer strategies concentrated on the liquid end of markets. Among the hedge fund firms in the top half of the US50, in particular, there are a substantial number which employ a multi-strategy approach to running money. BlackRock, for example, has expanded far beyond its roots and now offers a wide variety of strategies. Its single manager hedge funds sit within BlackRock Alternative Investors, a $100 billion-plus colossus that also includes funds of hedge funds, commodities and real estate. The leading hedge funds are by and large firms with a multi-strategy flavour, says a portfolio manager with a major fund of hedge funds, who notes that these firms have lots of infrastructure and access to plentiful liquidity. It shows the way forward is to be a multi-strategy fund. If investors want to avoid funds of funds they can go to the big names and get a lot of options. The top hedge funds have become, shall we say, varied strategy with the name recognition that investors can feel comfortable with. It is not to say, however, that all firms embracing a multi-strategy investment style have performed well or grown assets. Perhaps the most notable among these firms is Paulson & Co. Though John Paulson profited mightily from the US sub-prime implosion, a raft of new funds and new strategies in existing funds have endured an extremely chequered run. The result is that Paulson s assets fell to $22.6 billion from $32 billion in 2010, lowering its ranking to seventh from third. In a similar vein, DE Shaw Group has lost substantial ground in terms of AUM even though the firm has introduced more advantageous terms on some funds for its institutional investor client base. AUM, fund numbers growing But the overall picture for US hedge funds is one of growth, both in terms of the new funds being launched and the assets being allocated to managers, data from HFR shows. Indeed, there is growing anecdotal evidence that funds of hedge funds are investing more and more in smaller managers in order to bolster their value proposition to investors. The first thing to say about flow trends is that we see investors coming back to hedge funds, says Stefan Keller, head of managed account platform research and external relations with Lyxor Asset Management. The third quarter of 2011 was terrible for outflow, but the fourth quarter saw recovery and that carried on through January and February. March was stabilising but on a rising trend. Overall, the first quarter of 2012 shows a stronger continuation of what we saw begin in the fourth quarter of last year. Many readers will realise that the US has a stringent legal framework in terms of what information funds can and cannot provide. For this reason, many of the hedge funds contacted for this survey were anxious to avoid doing anything that could be construed as solicitation. Though a majority of firms were prepared to provide AUM data, they were more reluctant to provide information about fund names, strategies and portfolio managers. As a result, The Hedge Fund Journal has sourced this information from other sources and sought to verify it where possible. In closing, we would like to thank Newedge Prime Brokerage Group for its continued support of this survey. THFJ 2

1 Bridgewater Associates $76.1 bn $45.0 bn Pure Alpha strategy Pure Alpha Major Markets strategy All Weather 12% strategy $57.1 bn $14.2 bn $4.8 bn Ray Dalio, Bob Prince, Greg Jensen Global Macro Ray Dalio Bob Prince Greg Jensen Location Westport, CT 2 JP Morgan Asset Management $45.0 bn $54.0 bn Relative Value Equity Long/Short Macro Distressed Securities Merger Arbitrage/Event Driven Short Selling 3 Och-Ziff Capital Management AUM 1 January 12 $29.0 bn $24.0 bn OZ Master Fund OZ Europe Master Fund OZ Asia Master Fund OZ Global Special Investments Master Fund Daniel Och Multi-Strategy Daniel Och 4 BlackRock $28.0 bn $21.4 bn (est) Diversified Fixed Income European Opportunities Credit Emerging Europe Natural Resources UK Emerging Companies UK Equity Larry Fink 5 Soros Fund Management $25.0 bn (est) $27.5 billion (est) Quantum Fund Global Macro George Soros 3

6 Baupost Group $24.0 bn $22.0 bn Equity Value Seth Klarman 7 Paulson & Co $22.6 bn $32.0 bn Paulson Advantage Funds Paulson Credit Opportunities Funds Paulson Partners Funds Paulson Recovery Funds Paulson Gold Fund John Paulson John Paulson 8 Angelo, Gordon & Co $21.1 bn $21.2 bn Multi-Strategy John M. Angelo Michael L. Gordon 9 Renaissance Technologies $20.0 bn (est) AUM 31 December 09 $15.0 bn Location East Setauket, NY Renaissance Institutional Diversified Alpha Fund Renaissance Institutional Equities Fund Renaissance Institutional Futures Fund Renaissance Medallion Fund Statistical Arbitrage Long/Short Equity Equity Market Neutral James Simons 10= Farallon Capital Management $19.2 bn $20.6 bn Location San Francisco, CA Credit Merger Arbitrage Long/Short Equity Special Situations Real Estate Thomas Steyer Andrew Spokes 4

10= Elliott Management Corp $19.2 bn $16.4 bn Elliott Associates, L.P. Elliott International, Limited Multi-Strategy Paul Singer 12 King Street Capital Management AUM 1 January 12 $17.6 bn $19.2 bn King Street Capital, L.P. King Street Capital, Ltd $6.2 bn $10.5 bn Brian J. Higgins O. Francis Biondi Jr. Long/Short Credit Event Driven Brian J. Higgins O. Francis Biondi Jr. 13 Davidson Kempner Capital Management $16.0 bn (est) $10.0 bn (est) Davidson Kempner European Partners Fund Davidson Kempner Event Driven Equities Fund Davidson Kempner Institutional Partners Fund Davidson Kempner Distressed Opportunities Fund Event Driven Merger Arbitrage Long/Short Convertible Arbitrage Thomas Kempner Marvin Davidson 14 Goldman Sachs Asset Management $15.3 bn AUM 31 December 09 $17.8 bn (est) Global Alpha North American Equity Opportunities Long/Short Equity Macro 15= DE Shaw Group $22.0 bn (est) $23.6 bn D. E. Shaw Multi-Asset Fund D. E. Shaw Terella Fund D.E. Shaw Composite Fund D.E. Shaw Heliant Fund D.E. Shaw Oculus Fund Multi-Strategy Statistical Arbitrage Event Driven Macro Fixed Income Arbitrage David E Shaw 5

15= Moore Capital $15.0 bn $14.0 bn Moore Emerging Market Fund Moore Global Investors Fund Moore Macro Managers Fund Louis Bacon Greg Coffey Global Macro Emerging Markets Louis Bacon 17 AQR Capital Management $14.5 bn * Cliff Asness David Kabiller John Liew Location Greenwich, CT *Hedge Fund assets have been scaled to 10% volatility 18 Convexity Capital Management $14.0 bn $9.0 bn (est) Convexity Capital Offshore Multi-Strategy Jack Meyer 19 Viking Global Investors $13.8 bn $11.5 bn Viking Global Equities Long/Short Equity Andreas Halvorsen David Ott Location Greenwich, CT 20 York Capital Management AUM 1 January 12 $13.6 bn $11.4 bn York Multi-Strategy York Credit Opportunities York European Opportunities York Asian Opportunities York Total Return Event Driven James Dinan 6

21 Millennium Partners $13.5 bn $7.5 bn Millennium International / USA Multi-Strategy Israel Englander 22 Avenue Capital $13.2 bn AUM 31 December 09 $18.6 bn US Distressed Strategy Europe Distressed Strategy Asia Distressed Strategy $5.9 bn $4.1 bn $1.8 bn Rob Symington Richard Furst Mark R. Harris Distressed Marc Lasry Sonia E. Gardner 23 Canyon Capital Advisors $12.6 bn $11.9 bn Multi-Strategy / Event Driven (Credit Focus) Joshua Friedman Mitchell Julis Location Los Angeles, CA 24= Eton Park Capital Management $12.0 bn $13.0 bn Eton Park Overseas Fund Eton Park Offshore Fund Eton Park Master Fund Multi-Strategy Eric Mindich 24= Appaloosa Management $12.0 bn $12.0 bn Appaloosa Investment I Palomino Fund Thoroughbred Master Fund Thoroughbred Fund LP Distressed Event Driven David Tepper Location Short Hills, NJ 7

24= SAC Capital Advisors $12.0 bn (est) $12.5 bn (est) Location Stamford, CT International Fund Steven A Cohen Multi-Strategy Long/Short Equity Fixed Income Credit Global Macro Convertible Bonds Emerging Markets Steven A Cohen 25= Wellington Management $11.0 bn $10.5 bn (est) Archipelago Partners Bay Pond Partners Iguazu Partners Pagosa Partners Placer Creek Partners Multi-Strategy Long/Short Equity Commodities Emerging Markets Perry Traquina 25= Citadel LLC $11.0 bn $12.5 bn Citadel Kensington Global Strategies Fund Ltd. Citadel Wellington LLC Multi-Strategy Ken Griffin Location Chicago, IL 25= Highfields Capital Management $11.0 bn $9.3 bn Jonathon Jacobson 30 GoldenTree Asset Management $10.4 bn $9.8 bn Credit Steven Tananbaum 8

31 Tudor Investment Corporation AUM 1 January 12 $10.3 bn $11.5 bn The Tudor BVI Global Portfolio L.P. Tudor Tensor Portfolio Ltd. & Tensor Managed Accounts $8.1 bn $1.1 bn Paul Tudor Jones Steve Evans Global Macro Quantitative Managed Futures Paul Tudor Jones Location Greenwich, CT 32= Anchorage Capital Group L.L.C. $10.0 bn Anchorage Capital Partners Funds Anchorage Short Credit Funds Anchorage Illiquid Opportunities Funds Kevin Ulrich Tony Davis Dan Allen Credit-Focused Long/Short Distressed Special Situations Kevin Ulrich Tony Davis 32= Maverick Capital $10.0 bn (est) $10.0 bn (est) Location Dallas, TX Maverick Fund Maverick Levered Fund Maverick Long Fund Maverick Neutral Fund Maverick Neutral Levered Fund Lee Ainslie III Long/Short Equity Lee Ainslie III 32= ESL Investments $10.0 bn (est) $10.5 bn (est) ESL Partners Distressed Edward Lampet William Crowley Location Greenwich, CT 32= Pershing Square Capital Management $10.0 bn (est) Pershing Square Fund Pershing Square II Pershing Square International William Ackman 9

36 Caxton Associates LP AUM 1 January 12 $9.3 bn $7.3 bn Caxton Global Investments A.R.T. International Investors Caxton HAWK (Diversified) Wadhwani Asset Management $7.1 bn Andrew E. Law Aaron Sosnick Jeffrey Enslin Sushil Wadhwani Global Macro Statistical Arbitrage Quantitative Macro Quantitative Macro Bruce Kovner (retired) Peter D'Angelo (retired) Andrew E. Law 37= Bain Capital/Brookside Capital Partners $9.0 bn (est) $10.5 bn (est) Brookside Capital Partners Fund Brookside Capital Partners Fund II Sanakty Advisors Prospect Harbour Absolute Return Capital Partners William Romney Coleman Andrews Eric Kriss 37= Grantham, Mayo, Van Otterloo (GMO) $9.0 bn (est) $8.5 bn (est) GMO Aggressive Long/Short Strategy GMO Emerging Currency Hedge Fund GMO Fixed Income Hedge Fund GMO Multi-Strategy Fund GMO Credit Opportunities Fund Long/Short Emerging Currency Fixed Income Multi-Strategy Credit Jeremy Grantham Richard Mayo Eyk van Otterloo 39 Cerberus Capital Management $8.8 bn (est) $8.8 bn (est) Cerberus International Cerberus Partners Styx International Styx Partners Stephen Feinberg Distressed Stephen Feinberg William L. Richter 40= Two Sigma Investments AUM 01 January 12 $8.5 bn John Overdeck David Siegel 10

40= INVESCO Asset Management $8.5 bn (est) Disclosed Location Atlanta, GA INVESCO ABS Oppoutunity Fund Invesco Absolute Return Fund Invesco Large Cap Core Directional Long/Short Fund Invesco Small Cap Core Directional Long / Short Fund Invesco US Equity Market Neutral Fund Charles Brady Martin L. Flanagan 42 Taconic Capital Advisors $8.2 bn (est) $7.0 bn (est) Taconic Capital Partners Taconic Capital Partners 1.5 Taconic Market Dislocation Fund II Taconic Offshore Fund Taconic Opportunity Fund Kenneth Brody Frank Brosens 43 Magnetar Capital AUM 1 January 12 $8.1 bn Multi-Strategy Event Driven Fixed Income Energy Alec Litowitz Ross Laser David Snyderman Location Evanston, IL 44 Mason Capital Management $8.05 bn Event Driven Kenneth Garschina Michael Martino 45= Adage Capital Management $8.0 bn (est) $9.0 bn (est) Adage Capital Partners Phil Gross Robert Atchinson 11

45= Marathon Asset Management $8.0 bn (est) Marathon Asia Fund Marathon Credit Opportunity Fund Marathon EM Opportunity Fund Marathon Securitized Credit Fund Marathon Special Opportunity Fund Opportunistic Credit Bruce Richards Louis Hanover 45= Lone Pine $8.0 bn $8.0 bn (est) Long/Short Equity Stephen Mandel Location Greenwich, CT 48 Graham Capital Management $7.7 bn Graham K4D-15V Portfolio Graham Discretionary-6V Portfolio Graham Discretionary-12V Portfolio Graham Proprietary Matrix-10V Portfolio $3.5 bn $680.8 m $911.1 m $764.6 m Macro Kenneth G. Tropin Location Rowayton, CT 49= Third Point Management $7.5 bn Third Point Offshore Fund, Ltd Third Point Partners L.P. Third Point Partners Qualified L.P. Third Point Ultra Ltd. $4.4 bn $269 m $1.2 bn $1.1 bn Daniel S. Loeb Event Driven Equity Special Situations Credit Daniel S. Loeb 49= Greenlight Capital $7.5 bn (est) Greenlight Capital Greenlight Capital Offshore Greenlight Capital Qualified Long/Short Equity Distressed David Einhorn 12