Emerging markets are lifting hedge funds to huge profits

As stock markets soared in 2023, so did the fortunes of many of the world's largest hedge funds.

The 20 best-performing hedge funds posted profits of $67 billion last year, triple what they reported in 2022, according to data released by LCH Investments, a so-called fund of funds that ranks the top 20 companies based on their lifetime profits, after deduction of fees. .

The strong performance of elite financiers follows the rally that stock markets have experienced over the past year. The S&P 500, Wall Street's most followed benchmark, hit a record last week.

This has benefited hedge funds, especially those that make targeted investments in individual stocks. Many in the industry have done so heavily invested in the “magnificent seven” technology stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – although some on Wall Street are increasingly concerned about too many investors betting on the same companies.

In some ways, the data reflects the growing divide between the industry's top players and everyone else. The top 20 firms oversee just under 19 percent of the industry's $3.5 trillion in assets under management, yet represent 46 percent of the industry's total lifetime profits.

Topping the list for 2023 performance was TCI, an activist hedge fund run by financier Christopher Hohn, which reported net income of $12.9 billion. Other top performers from last year include Citadel, DE Shaw, Millennium and Elliot Management.

Major companies reporting losses last year include Bridgewater Associates, the company founded by outspoken billionaire Ray Dalio, and Caxton Associates.

Returning to the top 20 by lifetime returns in the latest rankings was Pershing Square Capital Management, the firm led by William A. Ackman, who is perhaps best known recently for demanding the resignations of the presidents of MIT, Harvard and the University of Pennsylvania. about concerns about their handling of anti-Semitic acts on campus.