Hedge Fund Rich List: Who Stayed Afloat in Worst Year Since 2008?
Every year, Institutional Investor’s Alpha documents the performance of the world’s most elite investors: hedge fund managers. The Hedge Fund Rich List, in its 14th year of publication, is a “who’s who” of the industry and highlights the performances of the most successful investment managers in the world.
Our infographic today is based on this report, and it breaks down the last year for this elite group.
The Worst Year Since the Financial Crisis
The performance of this collective of top-notch investors was the worst as a whole since the Financial Crisis in 2008. In the previous five years, their total earnings averaged $19.3 billion. Last year, the group brought in a paltry $11.6 billion. This brought average earnings per person down to $467 million over the year from $846 million in 2013.
This is counterintuitive based on the fact that the S&P 500 gained an impressive 13.7% on the year in 2014. Interestingly, only about half of the managers beat the index’s performance, with the rest falling into single-digit return territory.
The minimum amount of earnings to make the list dropped significantly from $300 million to $175 million. This is the lowest minimum earnings in the last three years.
David Tepper, of Appaloosa Management, is barely staying afloat. After having one of the best five-year stretches of performance in hedge fund history, he saw his earnings decline 88.6% in 2014. He had finished #1 overall in 2013, but only saw a 2.2% gain over the last year.
Many managers were not even lucky enough to get the “minimum wage”.
John Paulson of Paulson & Co., who famously made his fortune betting against the US Housing Market in 2007, ended up tanking in 2014 with his second worst year ever. His Advantage Plus fund fell 36% while his Advantage fund dropped 29%.
The Top 10 Investors
The managers that had the highest returns were as follows:
10. Charles (Chase) Coleman III of Tiger Global Management – $425 million
9. O. Andreas Halvorsen of Viking Global Investors – $450 million
8. David Shaw of D.E. Shaw Group – $530 million
7. Larry Robbins of Glenview Capital Management – $570 million
6. Michael Platt of BlueCrest Capital Management – $800 million
5. Israel (Izzy) Englander of Millennium Management – $900 million
4. Bill Ackman of Pershing Square Capital Management – $950 million
3. Ray Dalio of Bridgewater Associates – $1.1 billion
2. James Simons of Renaissance Technologies – $1.2 billion
1. Kenneth Griffin of Citadel – $1.3 billion
Profiles on those that broke $1 billion:
Ray Dalio, the legendary founder of Bridgewater Associates, along with two of his associates, made the full list of 25 earners. Bridgewater uses computers and humans to make decisions in 199 markets. Ray took home $1.1 billion.
Renaissance’s intense data focus helped James Simons qualify to the Rich List every year for the last 14 years. He finished #2 with $1.2 billion in earnings.
Kenneth Griffin has made the Rich List 13 times, however this is his first time finishing #1 overall. The founder and CEO of Citadel posted gains of 18.3% in its multistrategy funds driven largely by profits related to the equity markets.
What’s Ahead for 2015?
While 2014 was a tumultuous year for hedge fund managers, it is clear 2015 will be at least as challenging and interesting. Global headwinds such as the Greek Crisis and volatile Chinese equity markets will test even the most seasoned investors.
Visualizing the Importance of Trust to the Banking Industry
In the digital age, the issue of trust is emerging as the game-changing factor in how consumers choose financial services brands.
Visualizing the Importance of Trust to the Banking Industry
In the digital age, money is becoming less tangible.
Not only is carrying physical cash more of a rarity, but we are now able to even make contactless payments for many of the products and services we use on the fly.
Our financial transactions are starting to be analyzed and optimized by artificial intelligence. Meanwhile, investments and bills are paid online, and even checks can now be deposited through our phones. Who has the time to visit a physical bank these days, anyways?
Trust in the Digital Age
The migration of financial services to the cloud is increasing access to banking solutions, while breaking down barriers of entry to the industry. It’s also creating opportunities for new service offerings that can leverage technology, data, and scale.
However, as today’s infographic from Raconteur shows, this digital migration has a crucial side effect: trust in financial services has emerged as a dominant driver of consumer activity.
This likely boils down to a couple major factors:
Financial services are becoming less grounded in physical experiences (using cash, visiting a branch, personal relationships, etc.)
- Personal Data
Consumers are rightfully concerned about how personal data gets treated in the digital age
Further, the above factors are compounded by memories of the 2008 Financial Crisis. These events not only damaged institutional reputations, but they elevated trust to become a key concern and selling point for consumers.
Trust, by the Numbers
In general, trust in banks has been slowly on the rise since hitting a low point in 2011 and 2012.
At the same time, consumers are consistently ranking trust as a more important factor in their decision of where to bank. To the modern consumer, trust even outweighs price.
Top Five Factors for Choosing a Bank:
- Ease and convenience of service (47%)
- Trust with the brand (45%)
- Price/rate (43%)
- Service resolution quality and timeliness (43%)
- Wide network coverage of ATMs (40%)
It’s important to recognize here that all five of the above factors rank quite closely in percentage terms. That said, while they are all crucial elements to a service offering, trust may be the most abstract one to try and tackle for companies in the space.
With this in mind, how can financial services leverage tech to increase the amount of trust that consumers have in them?
Tech Factors That Would Increase Consumer Trust:
- Reliable fraud protection (36%)
- Technology solves my problems (13%)
- Useful mobile application (9%)
Better fraud protection capability stands out as one major trust-builder, while designing technology that is useful and effective is another key area to consider.
Visualizing the Future of Banking Talent
Banking talent is undergoing a fundamental shift. This infographic explores how banks are adapting to rapid automation and digitization in the industry.
Visualizing the Future of Banking Talent
View the full-size version of the infographic by clicking here
Many organizations say that their greatest asset is their people. In fact, Richard Branson has famously stated that employees come first at Virgin, ranking ahead of customers and shareholders. So, how do businesses effectively manage this talent to drive success?
This question is top of mind for many bank CEOs. As processes become increasingly automated and digitized, the composition of banking talent is changing – and banks will need to become adept at hitting a moving target.
Six Ways Banks are Becoming Talent-First
Today’s infographic comes from McKinsey & Company, and it explores six ways banks are becoming talent-first organizations:
1. They understand future talent requirements.
43% of all bank working hours can be automated with current technologies.
Consequently, talent requirements are shifting from basic cognitive skills to socio-emotional and technological skills. Banks will need to analyze where they have long-term gaps and develop a plan to close them.
2. They identify critical roles and manage talent accordingly.
It is estimated that just 50 key roles drive 80% of bank business value. Banks will need to identify these roles based on data rather than traditional hierarchy. In fact, 90% of critical talent is missed when organizations only focus at the top.
Then, banks must match the best performers to these roles and actively manage their development.
3. They adopt an agile business model.
Banks will need to shift from a hierarchical structure to an agile one, where leadership enables networks of teams to achieve their missions. As opportunities come and go, teams are reallocated accordingly.
This flexible structure has many potential benefits, including fewer product defects, lower costs, shorter time-to-market, increases in customer satisfaction, and a bump in employee engagement.
4. They use data to make people decisions.
Instead of making decisions based on subjective biases or customary practices, banks will need to rely on the power of data to:
For example, company data can be used to develop a heatmap of the roles with the highest attrition rates. Leaders can then focus their retention efforts accordingly.
5. They focus on inclusion and diversity.
Gender and ethnicity diversification leads to higher financial performance, better decision making, higher employee satisfaction, and an enhanced company image.
Industry-leading banks will set measurable diversity goals, and re-evaluate all processes to expose unconscious biases. For example, one organization saw 15% more women pass resume screening when they automated the process.
6. They ensure the board is focused on talent.
Only 5% of corporate directors believe they are effective at developing talent.
To be successful, boards will need to recognize Human Resources (HR) as a strategic partner rather than as a primarily transactional function. The CEO, CFO, and CHRO (Chief Human Resources Officer) form a group of three that makes major decisions on human and financial capital allocation.
CEOs worldwide see human capital as a top challenge, and yet they rank HR as only the eighth or ninth most important function in a business. Clearly, this is a disconnect that needs to be addressed. To keep up with rapid change, banks will need to bring HR to the forefront – or risk being left behind.
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