- The hedge funds to watch in 2020 are a mix of big names, newcomers looking to make a splash, and a long-time industry player giving it another shot.
- Big-name macro managers like Brevan Howard will be in the spotlight thanks to the tricky geopolitical puzzle posed by 2020 and the closure of long-time macro player Louis Bacon's Moore Capital.
- Newcomers include former Viking chief investment officer Ben Jacobs and his planned fund Anomaly Capital, as well as former Cantor Fitzgerald boss Shawn Matthews' Hondius Capital.
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Investors are fleeing the hedge fund industry, pulling out billions more every quarter than they are putting in.
But there are still managers who are thriving, as well as big names that are re-entering the space or picking it up again after a tough stretch. Despite the tough launch environment, new funds are popping up with promising pedigrees and big backers.
Still, the realities of the industry have hit both big and small funds. Industry experts — like billionaire Stanley Druckenmiller — expect the manager count to continue to shrink. Returns have largely underwhelmed investors thanks in part to the increasingly efficient public markets, which have forced more funds to dive into the murkier private space, where returns can jump sky-high and then be cut down in record time.
The managers to watch in 2020 are all battling the same headwinds — they are just attacking it from their own perspectives.
Cinctive Capital
One of the biggest launches of 2019, Cinctive Capital is trying to break into the ultra-competitive multi-strategy space where funds like Millennium, Citadel, and Point72 battle for talent and assets.
The founders of Cinctive of course know this, with ties to many of the biggest names in the industry. Rich Schimel and Larry Sapanski worked for billionaire Steve Cohen at Point72's predecessor SAC before founding their own fund, Diamondback, in 2005.
Diamondback grew to nearly $6 billion in assets but was targeted by federal authorities as a part of the insider trading crackdown that forced Cohen to leave the industry for two years. One Diamondback portfolio manager was convicted of insider trading, but the charge was overturned on appeal. The bad press, though, forced Diamondback to close.
Schimel then worked for Ken Griffin at Citadel, leading the now-closed Aptigon unit, while Sapanski set up his own fund, which he converted into a family office. Now, with seed money from one of the country's biggest pensions and more than a dozen PMs, Cinctive is looking to break through in 2020 during its first full year of trading.
Brevan Howard
Alan Howard's renewed commitment to investing has investors excited about the potential for long-running macro fund Brevan Howard in 2020.
With the U.S. presidential election and the continued fall-out from a possible Brexit, macro fund managers with the golden touch will be in high demand as investors look to navigate their portfolios through political uncertainty.
Howard, the billionaire co-founder of Brevan Howard, gave up his CEO gig to focus his energy entirely on the investment side of things after the fund lost more than $20 billion in assets since 2013.
Since 2013, the firm's master fund has not returned more than 12.4% in a year, and lost money in 2014, 2015, and 2017.
Marcato Capital
While Bill Ackman had a record-breaking 2019, one of his proteges is limping into 2020.
Mick McGuire, who founded the San Francisco-based Marcato Capital in 2010, has lost a huge chunk of his assets; the firm managed more than $3 billion in 2015 after the successful activist campaigns against Sotheby's and Buffalo Wild Wings.
This summer, The Wall Street Journal reported that Marcato's assets had fallen to roughly $250 million as investors were turned off by a disastrous 2018, when the fund lost 42%. The reason for the crash was a failed bet Terex Corporation, according to the report.
While activists like Third Point's Dan Loeb had a solid year, the field is still prone to big swings between sky-high returns and bottoming out. McGuire's former boss, the billionaire Ackman, is a great example, as his fund produced its best year on record after losing money the last three years.
Hondius Capital
Hondius Capital, started by former Cantor Fitzgerald broker-dealer head Shawn Matthews, is also on the radar for investors looking for new blood.
Matthews' macro fund made money in a turbulent August for the hedge fund industry, sources say, which has generated more interested in the Stamford-based manager.
It's Matthews' first fund, after he ran the broker-dealer for the boutique bank for ten years, and he received seeding from his former employer to start it. While Matthews originally planned to raise $500 million, a regulatory filing from July of this year put the firm's assets at less than $150 million.
Anomaly Capital
O. Andreas Halvorsen has lost two chief investment officers in the last three years, and the most recent departure is going to be one of the most important managers to watch in 2020.
Ben Jacobs, who took over as co-CIO when Daniel Sundheim left Viking Global Investors in 2017, is launching his own fund, which sources have told Business Insider will be named Anomaly Capital, in the second half of next year.
Sundheim's launch of his D1 Capital in 2018 was one of the biggest in hedge fund history, with $4 billion in assets before trading. The appetite from investors for Jacobs' new offering might be a signal into the broader health of the industry — traditionally, people have clamored to get into well-pedigreed funds like this.
Perceptive Advisors
Perceptive Advisors founder and billionaire Joseph Edelman is one of the most well-known healthcare investors in the world, so eyes will be on his fund as the U.S. presidential election revolves around the future of health insurance.
But his firm also had a newsworthy 2019; after the firm's $1.3 billion Life Sciences fund lost money in 2018, it has returned more than 30% this year through the end of November, despite losing 9% in August. At the end of the year, firm also announced a new venture fund, seeded with $210 million.
The venture fund will focus on start-ups in the biotech space, and is another example of hedge funds leaking into the private space.
Point72 Asset Management
In Steve Cohen's first full year of trading outside capital again after his ban from managing outside capital, Point72 performance was solid, besting several of his fellow multi-strategy giants.
But it was news outside of monthly returns that heralded Cohen's full return to the industry. He got entangled in the war for talent in the industry, with a story in The Wall Street Journal noting that he refused to shake the hand of an employee leaving to join rival Ken Griffin's Citadel. He was revealed as the buyer of a $91 million Jeff Koons' sculpture, a three-foot-tall stainless-steel rabbit.
And Cohen is in the process of buying the New York Mets, his childhood team. After the news about the Mets purchase became public, Cohen told investors that while owning the Mets has been long-time dream of his, it will not distract him from the fund.
Appaloosa founder David Tepper turned his fund into a family office soon after buying the Carolina Panthers, as he wanted to dedicate more energy to the team, but several big-name finance folks continue to run their businesses while owning a sports team, like Avenue Capital and Milwaukee Bucks' co-owner Marc Lasry.
Mudrick Capital
Jason Mudrick eponymous firm was flying high at the beginning of 2019.
The firm's big bet on vape-maker NJOY Holdings pushed returns to the top of the industry, but a rash of vaping deaths and subsequent regulatory scrutiny has depressed the valuations of all the major vaping companies, including Juul, which has faced the most backlash.
Mudrick, who invests in distressed securities, bought a majority stake in NJOY in 2017 when the bankrupt company was valued at $40 million, a move that looked like a stroke of genius when the company's valuation jumped to $2 billion in May. While it's unlikely the company falls back to its pre-Mudrick valuation, it no longer looks like the home run it once was.