2008-01-13 22:06:12
Ten of the Top Performing Hedge Funds of 2007
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In 2007, news of poorly performing hedge funds seemed to dominate the financial headlines. There was the Global Alpha fund, which dropped 38%; there was the Global Equity Opportunities Fund, which dropped by 30%; and there was the Highbridge Statistical Opportunities Fund, which dropped 14%. Many of the big brokerages have major exposure to hedge funds, and many of the big brokerages took sizable losses in 2007, both in their exposure to hedge funds and their exposure to the mortgage market. They are basically one in the same though, as the hardest hit hedge funds in 2007 mostly had bad years due to the struggling credit markets. "Quant funds" had terrible years in 2007 for the most part.
However, if some hedge funds took major losses, then you had to expect that other funds banked some large gains. The biggest year was had by Paulson & Co., which had four of its funds rank in the top ten. The Paulson Credit Opportunities Fund returned an eye-popping 589.9% in 2007, which is a ridiculous figure when you realize that we are talking about a fund that had billions in assets to start the year. Number two on the list was the Paulson Credit Opportunities Fund II, which returned 351.8%. The Paulson Event Arbitrage Fund returned 100%, and the Paulson Merger Arbitrage fund returned 52.0%.
The amount of money generated by Paulson and Co., both for themselves and their partners, is bordering on the ridiculous. This fund generated billions upon billions of dollars in profit in 2007. If the fund operates with a traditional "2 and 20" (that means, 2% management fee, and 20% performance fee), that means that the fund likely generated at least 3-4 billion dollars in profits for the principles. Not a bad year. You can expect that the company will have an influx of new capital to manage after these numbers leak. If I made $3-$4 billion in one year I would probably retire from the game, but that's just me.
The Passport Global Master Fund returned 219%, and the Harbinger Special Situations fund returned 170%.
How were these massive returns generated in 2007? The real blow-out performances came from betting against the subprime credit market in the United States. Not only did they bet against it, but they were leveraged to the hilt, which is how they returned hundreds of percentage points in one year.
It will be interesting to see how the top performing funds in 2007 are able to hold up in 2008. Are they still making outsized bets against the subprime credit market? Are they going to accept new capital? Are they going to change their performance fee structures after their mammoth years? We'll soon find out I guess. Here are ten of the top performing hedge funds of 2007. This is not a complete list, as this information can be hard to come by:
1. Paulson Credit Opportunities, 589.9%
2. Paulson Credit Opportunities II, 351.8%
3. Passport Global Master Fund, 219.0%
4. Harbinger Special Situations, 170.0%
5. Harbinger Capital Partners Fund, 118%
6. Paulson Event Arbitrage, 100.0%
7. Highside Capital, 57.7%
8. Paulson Merger Arbitrage, 52.0%
9. Highbridge long-short Equities Funds, 40%
10. Eton Park Master Fund, 35.0%
Source: Bloomberg
Filed under: Hedge Fund News | General Market News | General Knowledge
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