Biggest Hedge Funds Post Slow Growth

Sep 9 2008 | 1:09pm ET

For the first time in recent memory, the biggest hedge funds in the world are not getting bigger.

Some of the world’s largest hedge funds actually saw their assets under management fall in the first six months of the year, leading to a shakeup at the top, according to Absolute Return magazine. Since January, 35% of the 268 hedge fund managers with more than $1 billion in assets have lost assets; overall, the billion-dollar club grew by just 4.3%, the smallest increase in the biannual survey’s six-year history, and less than half the 10% growth posted in the second half of last year, itself the smallest growth rate at the time.

“It has been a tough year for just about everyone, except the few who correctly anticipated that the financial crisis would continue to deepen—and thus bet that financial stocks would continue to fall and that the credit markets would fail to recover,” Michelle Celarier, editor of Absolute Return, said.

JPMorgan Asset Management remained the biggest hedge fund in the world with $48.1 billion in assets, a 7.6% increase. But that is still 14.4% less than the $56.2 billion the firm was managing one year ago. Meanwhile, Connecticut’s Bridgewater Associates consolidated its hold on second place as its assets soared by 48.6% to $43.5 billion.

January’s third- and fourth-place firms fell out of the top five due to a decline in their assets. Long Island-based Renaissance Technologies’ assets fell by 14.7% to $29 billion, and San Francisco-based Farallon Capital Management shrunk by 8.3% and now manages $33 billion.

Taking their place in the top five are D.E. Shaw Group, which boosted its assets by 15.1% to $37.1 billion, and last year’s headliner Paulson & Co., which continued its ascent with a 20.1% increase in assets to $34.94 billion. The firm ranked just 69th in the Absolute Return survey last June.

Och-Ziff Capital Management held on to the fifth spot in the rankings; its assets were essentially flat at $33.3 billion.

Other notable movers in the top-10 included Goldman Sachs Asset Management—the second-largest hedge fund firm just a year ago—which saw its assets fall another 7.9% to $26.9 billion, and activist shop Harbinger Capital Partners, which saw its assets soar 33.9% to $24 billion, earning a place in the top 10 for the first time. Six months ago, it ranked 16th.

The top-10 firms as a whole grew by just 5.3% to $337 billion. All told, the world’s billion-dollar hedge funds managed $1.68 trillion at the end of June.

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