Many Hedge Fund Giants on the Upswing in 2009

2008 was an absolutely horrid year for the hedge fund industry.

The industry was hit by a "perfect storm" of problems - extremely weak equity markets, rapidly deteriorating credit markets, incredible investor anxiety (which led to a massive amount of capital outflows from the industry) and a number of hedge fund scandals led to one of the worst years on record for the hedge fund industry.

Hedge fund managers became pariahs almost overnight.

The once glamorous and high-flying industry had suddenly become the target of much scorn and finger-pointing. Many felt as though the industry was the source of many of the problems that we are still battling with today.

Many of the top names in the industry took an absolute beating last year. Steven Cohen. Kenneth Griffin. Carl Icahn. All legends in the industry in one way or another. All suffered through major losses in 2008.

According to a recent article in the New York Times, many of these giants of the industry are off to extremely strong starts in 2009.

Kenneth Griffin of the Citadel investment Group has been able to post the most startling turnaround of the year so far.

Citadel was seemingly melting away into oblivion when 2008 drew to a close.

The Kensington Global Strategies Fund, which is Citadel's flagship fund, suffered a 54.5% drubbing in 2008.

The results in 2009 have been much better for Griffin and his company, as the Kensington Global Strategies Fund is currently up over 20% through May.

Sure, Citadel has a long ways to go before regaining the confidence of its investors (and hitting its high-water marks), but it is still off to an impressive start in 2009.

Carl Icahn, whose fund was down 37% in 2008, is also on the upswing so far this year. Icahn's fund is up 16% through May.

Steven Cohen, who is one of the most respected and revered fund managers in the world, has guided SAC Capital Advisors to a 13.93% gain through May. Cohen has a long history of posting outsized gains in his funds, and the 18.5% drop that SAC Capital Advisors experienced in 2008 was an anomaly.

The always-successful John Paulson (of Paulson & Company) has managed to post an 8.75% gain in his flagship fund to start the year. Paulson seems to have the Midas touch - many onlookers are expecting his funds to finally have an off-year, but that doesn't seem bound to happen in 2009.

The industry as a whole is up nearly 10% in 2009, aided by an eye-popping 5.23% return in May alone.

You might be thinking to yourself "Big deal, the markets in general have done really well in 2009".

This isn't the case. The DJIA is basically unchanged in 2009, while the S&P 500 is up around 4% or so. It may seem as though the markets have done well this year, due to the fact that they have rebounded strongly off of the lows made in early March.

It should be interesting to see how the industry does in the second half of 2009. Many investors are still choosing to stay far away from the industry - will continued strong returns in the second half of 2009 lure them back?

Filed under: Hedge Fund News