The Endless March Of The Billionaire Boys Club

Sep 19 • Between the lines • 2520 Views • Comments Off on The Endless March Of The Billionaire Boys Club

man-champagne-planeSo dear reader, did you feature in the recent Forbes 400 rich list when it was published earlier this week? No? Me neither, but we can’t really say it’s not for lack of trying, as despite our best efforts reaching that elevated position will always be out of reach.

Having said that it’s a known fact that several of the richest people in the USA are hedge fund managers, and a few are FX traders, so we can still afford to dream can’t we? Not only did hedge fund managers appear in the list, but technology providers ranked highly. But there is one point regarding the hedge fund managers in the list, their number in the top echelons of wealthy Americans is falling, but only very marginally…

28 members of the illustrious list made their fortunes in the hedge fund industry, making up seven percent of the total wealth of the 400, this was down from 31 on the list in 2012.

Twenty four of the 28 added to their wealth over the past year, amongst the few that are worth less than last September is John Arnold, because he expanded his philanthropic investments at a furious pace. The 39 year old, who closed his Centaurus Advisors in May of 2012 (and his wife) have given away more than $1.2 billion to make his current net worth an estimated $2.8 billion.

So how well are the ‘hedgies’ doing? Well they’re only up an average of 3.4% whilst the SPX has ballooned by circa 12% in the same period since the start of the year. And according to the Forbes’ list the average return net of fees was 5.85% which, when you consider that the SPX has gained a spectacular 150% since the lows of 2009 as the fed ballooned its balance sheet to busting point with its monetary expansionary polices, makes the hedgies performance look extremely weak, particularly when they’re supposed to be the self entitled ‘masters of the universe’.

Naturally they’ll have the perfect excuse; “as iconoclastic, fighting against the trend, contrary investors” they don’t follow the herd. What a shame for their investors who would have enjoyed better gains if their fund had just gone all in ‘on tilt’ and parked their entire funds into ‘hotel’ Apple (APPL) shares.

John Paulson‘s Recovery Fund was up more than 25% net of fees through to the end of June. Paulson set an earnings record in the hedge fund industry in 2010 when he made $4.9 billion. Investors, who had piled into Paulson & Co.’s funds after Paulson successfully shorted subprime mortgage securities in 2007, showed little patience when he struggled in 2010 and 2011, withdrawing billions and bringing the AUM, assets under management, down to $18 billion from a peak of $36 billion in early 2011. Paulson is now worth circa $11.4 billion, the fourth richest hedge fund manager in the USA.

Ray Dalio, of Bridgewater Associates, is the largest hedge fund on the planet, running about $150 billion. The firm’s All Weather fund, intended to flourish in all market conditions, lost 8% net of fees through the first six months of the year. Dalio’s $80 billion Pure Alpha fund fared better, managing to break even over the same period. Dalio is the richest active hedge fund manager in the world, with a net worth of $12.9 billion. The only man ahead of him on our list of the wealthiest American hedge fund managers is the retired George Soros, who is worth a commanding $20 billion.

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