2013 was a great year to be in the stock market, and nearly all long-biased hedge fund managers did very well last year. Long-short hedge funds or short-biased hedge funds, however, had a more difficult year, with quite a few reporting losses.
Insititutional Investor’s Alpha produces “The Rich List” every year — a list of the highest-earning hedge fund managers over the previous year — and Appaloosa Management’s David Tepper has come in on top of the list again.
The Rich List: David Tepper back on top
Earning $3.5 billion put David Tepper back on top of the The Rich List this year, a position he has held for two years in a row and three out of the last five years. Tepper cut his chops at Goldman Sachs Group inc (NYSE:GS) in the late 80s and early 90s and founded Appaloosa in 1993.
Although David Tepper was known earlier in his career for investing in junk bonds and distressed assets, his outsize profits over the last couple of years have resulted from shrewd sector bets made with impeccable timing. In 2013, his two main funds — Appaloosa and Palomino — returned a combined 42% with well-timed investments in the airline, financials and auto-related sectors.
Disgraced Steven Cohen of SAC Capital Advisors came in second place on The 2013 Rich List with earnings of $2.4 billion. Cohen’s multi-strategy fund gained 20.5% last year.
Legendary John Paulson of Paulson & Co. came in third this year, with his $2.3 billion in earnings just edging out fourth place finisher James Simons (formerly of Renaissance Technologies) who earned $2.2 billion.
Reflecting the tough trading conditions for hedge funds throughout most of the year, there was a big drop off to fifth place Kenneth Griffin of Citadel, who took home just under $1 billion in earnings in 2013.
Raymond Dalio of Bridgewater Associates came in 10th with $600 million in 2013 earnings.
Cohen’s last year on list
This will be Stevie Cohen last year on The Rich List as he will no longer be working as a public hedge fund manager. SAC Capital Advisors agreed to return all client funds as part of a settlement with the SEC regarding alleged insider trading in Elan Corporation, plc (ADR) (NYSE:ELN) and other companies. Cohen has not been charged with any crimes, but sources say an investigation is still ongoing.