Institutional Investor's Alpha Magazine - May 2008 - (Page 49)

Research Center The Hedge Fund 100 Feeding the Beast(s) Our seventh annual ranking of the world’s 100 largest singlemanager hedge fund ﬁrms shows the biggest getting bigger. Together they manage a record $1.35 trillion. By Karl Cates H hedge fund’s 24.7 percent return in 2006. Highbridge’s ow the mighty have risen. Some of them, any way, as in the best returns came from some of the ﬁrm’s smaller funds. enviable instance of Highbridge Capi- The $2 billion Highbridge Long-Short Equity fund, for tal Management, the New York–based instance, was up 40 percent, though the ﬁrm’s $1.7 bilhedge fund ﬁrm whose founders, Glenn lion statistical arbitrage fund — like many quantitative Dubin and Henry Swieca, shrewdly sold 55 percent of the funds — was hit hard, down 14 percent on the year, and ﬁrm for $1.3 billion to JPMorgan Chase & Co. almost its $700 million event-driven fund fell 13 percent. It was simple brute capital four years ago in a move that’s infusion that fed the beast, as still paying off. The alliance Alpha’s Hedge Fund Top 5 institutional investors made ensures Highbridge of a backTotal capital ofﬁce heft it didn’t have before for what they perceived as a ($ millions) and a partner whose very name RANK FIRM safe harbor in turbulent mar1 JPMorgan Asset Mgmt $44,700 — especially when the markets. Here’s how the think2 Bridgewater Associates 36,000 kets go south as they did last ing went: At a hedge fund 2 Farallon Capital Mgmt 36,000 year — lends aid and comfort controlled by a venerable old 4 Renaissance Technologies Corp. 33,300 to investors. This helps exbank, one could assume that plain how Highbridge nearly managers weren’t taking wild5 Och-Ziff Capital Mgmt Group 33,200 doubled its capital in 2007, to eyed risks, because investment $27.8 billion from $15.7 billion when the year began. gambits would be sagely tempered by the staid banking “Highbridge was big before,” says James Bergstrom, a culture of the majority partner. Cayman Island–based partner with law ﬁrm Ogier, whose That combination of hedge fund risk and old-school main clients are hedge funds. “They simply have the back- conservatism is what helps Highbridge’s parent, JPMorgan ing now of arguably one of the biggest players out there.” Asset Management, top the chart, for a second year in a Most of Highbridge’s growth last year was fueled by row, in Alpha’s 2008 Hedge Fund 100, our seventh annew money, speciﬁcally new money from institutional nual ranking of the world’s biggest single-manager hedge investors, say those familiar with the ﬁ rm. It certainly fund ﬁrms. Highbridge, in fact, accounted for 62 percent didn’t come from investment returns, which were less of JPMorgan Asset Management’s $44.7 billion in hedge than sensational. The $14 billion ﬂagship multistrategy fund assets, up from 47 percent of assets a year earlier. Highbridge Capital Corp. fund was up 7.5 percent, beatThe competition is impressive but some distance back. ing the Standard & Poor’s 500 index, which had a total The two second-place ﬁrms, Westport, Connecticut–based return of 5.5 percent last year, but falling well short of the Bridgewater Associates and San Francisco–based Farallon MAY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 49

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - May 2008

Institutional Investor's Alpha Magazine - May 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Send in the Clones The Good Guys: Outside the Box Cover Story: Welcome to Oz Interview: The Tipping Point Regulation: When Sentinels Go Astray Strategies: Taking Credit Research Center: The Hedge Fund 100 Book Excerpt: Shoot the Messenger Alpha Bytes: VaR Enough? Unhedged: Commentary: Not Your Father's Activist

Institutional Investor's Alpha Magazine - May 2008

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