While the fast-paced price action of 2016 took most traders by surprise, there was a good number who of market masters who were able to stay on top of their game and take advantage of big moves. Here’s a list of who hit it big this year.
- Bill Lipshcutz, Hathersage Capital Management
The forex market had no shortage of major moves in the past twelve months, as big themes such as the Brexit, US elections, OPEC deal, and FOMC rate hike contributed a lot of volatility among currencies. With that, Hathersage’s G10 Macro Access Strategy was able to rake in a whopping 41% return on its positions for the year.
Most of the fund’s gains were centered on the post-election rally for the US dollar, as Trump’s victory led to stronger confidence in fiscal policies that would greatly favor the corporate sector. This was followed by increased speculations of a Fed interest rate hike as the US economy moved closer to full employment, and the actual statement even featured hints of three more rate hikes for 2017. Another strategy called G10 Daily Access made 11% this year.
According to Hathersage founder and chief investment officer Bill Lipschutz, the new administration’s promise of infrastructure spending and tax reform have sparked a new leg higher for the dollar. According to a Hedge Fund Research Index, currency-focused strategies have gained 1.2% on average this year mostly in November.
- David Tepper, Appaloosa Management
Equities have been the bread and butter of Appaloosa Management this year, as fund manager David Tepper noted that markets have been supported by China’s stimulatory policy. He predicts that the US market could continue to grind higher as it contrasts with bad market events in other economies. As for Fed policy, Tepper believes that the US central bank would take its time and allow more inflationary pressures to come in before stepping in to contain it.
- George Soros
Proving that his currency chops are still looking pretty sharp, Soros raked in sizeable returns from the forex market this year by betting heavily against Asian currencies. These have taken considerable hits on a slowdown in China earlier in the year, the occasional slew of geopolitical tensions in the region, and expectations of Fed tightening that would dampen business investment and commodity prices. Soros continues to play contrarian themes, such as arguing that China would spark the next big financial crisis as it has been heavily reliant on consumer debt, similar to how the US was overleveraged in the housing market before the crash.
- Jorge Paulo Lehman, 3G Capital
Lehman is Brazil’s richest man who has made his fortune by wringing profits out of big food and beverage companies through aggressive cost cuts. He has made big bets on Restaurant Brands International, which he bought with Warren Buffet. At the moment, he is working on a merger between Anheuser-Busch InBev and SABMiller.
- BFAM Partners
Over in Asia, one of the top performers is BFAM Partners’ Asian Opportunities Master Fund, which is expected to close the year with a 16% gain to $2 billion worth of assets. Nearly a third of these returns came from credit trades that involved buying distressed commodity bonds during the first quarter, as well as debt restructuring of Chinese property developer Kaisa Group Holdings and selling credit default swaps on commodities firm Noble Group. Another chunk of its returns were made during volatile market times around the EU referendum and the US elections.
- Ivan Lee, Serica credit fund
Also in Asia, Serica’s credit fund run by Ivan Lee made 30% so far this year on the rebound in the value of the Indonesian currency and resource company bonds bought at the start of 2016. It also made money on distressed credit trades, similar to BFAM Partners.
- Don Ewer and Peter Warbanoff, LIM Special Situations Fund
The LIM Special Situations Fund with $304 million worth of assets made 10% so far this year by investing in high-yield bonds, particularly in commodities which saw a rebound as the OPEC moved closer to coming up with a deal to cap output. The fund also made money from distressed loans from the previous year which have rebounded this value only this year.
- Orchard Landmark Fund
The Orchard Landmark Fund is worth approximately $1 billion and has made roughly 13% in gains this year by making direct loans to small and medium-sized companies in the Asia-Pacific region. Other funds that made money in Asia includes those that bet on the Japanese yen and gold as risk aversion surged with high-risk events.
- Xiao Song, Contrarian Emerging Markets Offshore Fund
Credit hedge funds in the long/short category also performed significantly well throughout the year, led by the Contrarian Emerging Markets Offshore Fund which enjoyed a 23.65% gain and chalked up a higher than average annual performance of 90%.
- David Siegel, Two Sigma
Of course this list wouldn’t be complete without the quants, as Siegel predicted that computer-driven money managers will one day rule the markets. This was particularly evident in the sterling flash crash that drove algorithms into a frenzy and led to strong gains for many, including Siegel’s Two Sigma fund. Siegel has used AI to build his investment fund to $37 billion in assets and has incorporated machine learning in order to improve trading methods. Its Compass fund has returned 12.6% this year through August, compared with 2.2% in average gains for discretionary funds. In comparison, quants have gained 4.5% annually over the past five years, according to Hedge Fund Research Inc. Two Sigma processes 22 million gigabytes of data and uses more than 10,000 data sources to come up with its positions.