Top hedge funds earn record $65.4 billion for clients in 2021

© Reuters. FILE PHOTO: Ken Griffin,Global foreign exchange trading volume in 2017 Founder and CEO, Citadel, speaks during the Milken Institute's 22nd annual Global Conference in Beverly Hills, California, U.S., April 30, 2019. REUTERS/Mike Blake/File Photo

By Svea Herbst-Bayliss

BOSTON (Reuters) - The world's 20 best-performing hedge funds earned $65.4 billion for clients in 2021, setting a new record as stock markets marched higher despite rising prices and coronavirus cases, LCH Investments data show.

As a group, the most successful managers earned more than one third of the $176 billion that all hedge funds made last year, LCH Investments, a fund of funds firm that tracks returns and is part of Edmond de Rothschild group, reported.

The top 20, including brand-name investment firms TCI Fund Management and Citadel, returned an average 10.5% and jointly managed nearly one fifth of the industry's $3.6 trillion in assets, the data show. Their returns, however, lagged broader stock market gains.

The best performers in 2021 topped the $63.5 billion they made in 2020 and 2019's $59.3 billion, despite the Delta and Omicron coronavirus variants and fears the U.S. Federal Reserve will soon have to raise interest rates to tackle spiking prices.

"The net gains generated by the top 20 managers for their investors ... were the highest ever," topping 2020's gains which also set a record, Rick Sopher, LCH's chairman said.

There was a shake-up among the very best performers in 2021 as Chris Hohn's TCI Fund Management earned $9.5 billion and Ken Griffin's Citadel made $8.2 billion for investors to rank as the top two.

2020's breakout winner, Chase Coleman's Tiger Global, which earned $10.4 billion in 2020, posted losses of $1.5 billion in 2021, the data show. Israel Englander's Millennium, which also ranked at the top of the list in 2020 with a $10.2 billion gain, posted a $6.4 billion gain in 2021.

Ray Dalio's Bridgewater, the world's biggest hedge fund, snapped back after a disappointing year of losses in 2020 with a$5.7 billion gain in 2021, the data show.

Daniel Loeb's Third Point, which pursues a range of strategies including activist forextrustindex, broke into the top twenty in 2021 with a gain of $3.3 billion.

Representatives for the hedge funds declined to comment.

Even though many firms earned billions, stock oriented hedge funds largely lagged the broader stock market S&P 500 index' 27% gain in 2021. They "generally did not fully capture the spectacular returns available in equity markets," Sopher said, adding "their low net exposure and a difficult environment for short selling limited their returns."

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