Hedge funds are a risky business. Managers of these funds take an active investing approach which includes taking short positions, using leverage and participating in derivatives, options and futures markets.
That being said, in downward market conditions, a helping hand from experts can be worth the extra fees for some. Here are some of the top hedge funds to choose from and what they’re best for.
Elliot Management — Best for Management Experience
Elliot Management is considered one of the best hedge funds internationally. It has a 55-year-long history with over $50 billion in assets under management. It won the awards for both Multistrategy Hedge Fund Manager of the Year and Institutional Hedge Fund Manager of the Year in 2022.
The firm targets certain sectors — energy in particular. As such, Elliot Management faces superior potential upside if commodities such as oil continue their upward trajectory. But, similarly, there could be major downsides should the price of oil start to slip.
- Core Equity Holdings: Howmet Aerospace (HWM), Marathon Petroleum Corporation (MPC), Peabody Energy Corporation (BTU), Nielsen Holdings (NLSN), Suncor Energy (SU) and Twitter (TWTR).
- Why it stands out: Elliot Management is an award-winning hedge fund with holdings revolving around communications, finance and energy.
- Longstanding history
- Concentrated risk to the energy industry
Bridgewater Associates — Best for Emerging Markets Exposure
Bridgewater Associates is one of the top hedge funds in the world, with more than $235 billion in assets under management. Its founder, Ray Dalio, started the firm back in 1975 and has become one of the best-selling authors in the financial space.
The firm’s first hedge fund was launched in 1991 and since then it has had an average annualized return of 11.4%. Fast-forward to 2022 and Bridgewater has delivered returns of 32% in the first half of this year.
One of the primary drivers of Bridgewater’s 2022 success so far has been taking short positions against major European stocks. Some of these include global apparel giant Adidas (ADS) and the enterprise resource planning software company, SAP (SAP).
- Core Equity Holdings: Procter and Gamble (PG), Alibaba (BABA), Johnson and Johnson (JNJ) and Coca-Cola (KO).
- Why it stands out: Main areas of focus by Dalio and Bridgewater have included emerging markets, how debt crises affect investments and ESG investing.
- A greater understanding of long-term market trends
- Strong track record
- European exposure is limited
Man Group — Best for ESG Investing
Man Group offers a mix of long-short funds, private market funds, real estate funds, multi-asset funds and fixed funds. All of these are available through Man Group and its subsidiaries, which include AHL, Numeric, GLG, GPM and FRM. One of Man Group’s core values is responsible investing, which it achieves through its funds’ compliance with ESG investing goals.
Man Group’s quant fund has gained 29.2% this year, its second-best performing year since it launched in 1999. It’s important to note these types of actively managed funds can perform particularly well in both bull and bear markets by analyzing price trends. As a result, it may attract investors for the foreseeable future given current economic conditions.
AUM was just shy of $150 billion at the end of 2021, but Man Group has clawed a further $13.7 billion worth of inflows to its funds in recent months.
- Core Equity Holdings: Microsoft (MSFT), Apple (AAPL), Taiwan Semiconductor (TSM), CSX Corporation (CSX), Amazon (AMZN) and Google (GOOG).
- Why it stands out: Man Group stands out for its quantitative approach to managing capital. Man’s use of algorithmic trading and mathematical models assists in predicting major market trends and stock price movements.
- Employs unique predictive models
- Outsized performance is supported by current market volatility
Blackrock — Best for Risk Management
Blackrock provides a wide array of funds focusing on different secular and industry trends across global markets. Its investing approach revolves around the economic transition to net zero carbon emissions. It has 190,000 financial advisors hand-selecting portfolio assets, and the firm has helped 44 million Americans arrange suitable retirement plans.
Remaining bearish on the market, some of the firm’s top hedge funds are predicting stock prices will continue to fall in 2022. As inflation is one of the key themes highlighted, Blackrock’s funds have altered their approach so as to take advantage of hedging strategies.
Accommodating excessive volatility and unrelenting inflation makes it a favorable choice for the foreseeable future.
- Core Equity Holdings: Apple (AAPL), Microsoft (MSFT), Amazon (AMXN), BP (BP), Tesla (TSLA), Google (GOOG) and Nvidia (NVDA).
- Why it stands out: Blackrock stands out for choice and risk management. There are more than 900 Blackrock iShares ETFs that are spread across equities, bonds, commodities, real estate and fixed income. It also has its own operating system, Aladdin, which prioritizes risk management and portfolio selection.
- Huge selection of funds
- Inflationary resistant approach
- ESG investing
- A bearish stance could be overly conservative
Tiger Global — Best for Long-Term Growth
While top hedge funds that choose to invest in value stocks have outperformed benchmark indexes such as the S&P 500, Tiger Global hasn’t been so lucky. The hedge fund’s assets have been cut in half in 2022, as it topped 50% losses year-to-date. However, it does display some interesting characteristics that could prime it for a rebound.
Its focus on innovation in both private and public markets — primarily through internet, software, consumer and fintech companies — has proved favorable over the long term. The top equity holdings across its portfolio illustrate this, showing multiple growth stock winners.
- Core Equity Holdings: JD.com (JD), Sea Limited (SE), CrowdStrike (CRWD), Nu Holdings (NU), Snowflake (SNOW), ServiceNow (NOW) and Shopify (SHOP).
- Why It Stands Out: Tiger Global dedicates a hefty portion of capital to early-stage ventures which have reaped astronomical returns. Some of the top names include Facebook (META), Airbnb (ABNB), Peloton (PTON) and Microsoft’s (MSFT) LinkedIn.
- Strong track record in venture capital
- Significant underperformance this year
Hedge funds have been judged harshly for historical underperformance relative to their benchmarks. However, this year, they have collectively outperformed the market. This demonstrates the ability of hedge funds to manage risk in volatile, downward markets more effectively.
Hedge Funds FAQsHere are some common questions investors ask about hedge funds.
- What is the number one hedge fund?
- Based on assets under management, Bridgewater Associates is the largest hedge fund in the world, with more than $235 billion being managed.
- What are the top 5 hedge fund stocks?
- The largest holdings by hedge funds are Facebook -- now known as Meta Platforms (META), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT) and Google (GOOG).
- What are the top 10 stocks held by hedge funds?
- The top 10 stocks held by hedge funds are Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), Google (GOOG), Visa (VISA), MasterCard (MA), Uber (UBER), UnitedHealth Group (UNH), Apple (AAPL) and Berkshire Hathaway (BRK.B).
Information is accurate as of July 21, 2022.
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- Institutional Investor. 2022. "These Managers Are Finalists in the 2022 Hedge Fund Industry Awards."
- Reuters. 2022. "Hedge fund Elliott chases oil and gas deals, bucking Wall Street."
- SWFI. 2022. "Top 100 Hedge Fund Manager Managers by Managed AUM."
- Bloomberg. 2022. "Bridgewater’s Flagship Hedge Fund Gains 32% for First Half of Year."
- Fortune. 2022. "How Bridgewater’s flagship hedge fund beat the bear market in the first half of 2022 when most others tanked."
- Bloomberg. 2022. "Man Group Assets Hit a New High as Clients Add $13.7 Billion."
- Markets Insider. 2022. "A top BlackRock hedge fund has shifted its portfolio to put more bets on falling stock prices."
- Yahoo Finance. 2022. "Value Hedge Funds are Winning in 2022 Thanks to These 15 Stocks."
- CNBC. 2022. "Tiger Global drops 14% in May during the tech sell-off, pushing hedge fund’s 2022 losses to over 50%."
- AEI. 2021. "The SP 500 Index Out-performed Hedge Funds over the Last 10 Years. And It Wasn’t Even Close."
- Institutional Investor. 2022. "The First Half of 2022 Was the Worst in 50 Years. Here’s How Hedge Funds Did.."
- Forbes. 2022. "For Better Or Worse, These Are The Stocks Hedge Funds Bought And Sold In Q1 2022."