NEW YORK, NY--(Marketwired - Feb 18, 2014) - In a year when the broad U.S. stock market indexes gained around 30 percent, most hedge funds failed to deliver half that return -- and still collected billions of dollars in fees in the process.
The hedge fund firms at the top of the annual Hedge Fund Report Card survey from Institutional Investor's Alpha did better than that. They not only outperformed most of their peers, they earned high marks from investors for aligning their own interests with those of their clients.
Investors were asked to grade the world's 100 largest hedge funds on a variety of factors, including performance, alignment of interests, infrastructure and liquidity terms. This year's results reveal that while performance is still tops with investors -- it was rated the most important factor for the third year in a row -- it is not enough to guarantee an "A" grade. The eight firms that earned As this year earned high scores in several categories.
Silver Point Capital, the Greenwich, Connecticut-based credit and distressed debt firm founded by Goldman Sachs alumni Edward Mulé and Robert O'Shea, shot to the top of the Hedge Fund Report Card for the first time. It ranked No. 21 and earned a B in last year's survey. Silver Point ranked in the top ten this year for all eight categories on which investors were asked to judge the firms, and it took top honors for alpha generation, the most heavily weighted category. It also landed at No. 1 for alignment of interests and transparency.
Daniel Loeb's New York-based hedge fund firm Third Point landed at No. 2 on the report card and earned its first A grade. Loeb, best known for his brash brand of shareholder activism, is an eclectic investor who profited handsomely last year from shorting the Japanese yen and buying large stakes in U.S. companies including American International Group and Yahoo. Third Point earned an A in all but one of the eight categories, infrastructure.
Rounding out the top five firms in this year's survey are Boston-based Adage Capital Management, New York-based Elliott Management Corp. and Chicago-based Citadel. All three firms retain their A ratings from last year, despite the fact that Elliott's and Citadel's main funds did not perform quite as well in 2013 as they did the previous year. A total of eight firms received an A grade.
Four firms earned an F. London-based BlueCrest Capital Management was hurt by its F scores for alpha generation and transparency, while New York-based Eton Park was dinged by poor scores for alignment of interest, alpha generation, risk management and liquidity terms. Bain Capital earned Fs in six of the eight categories, as did New York-based Cerberus Capital Management.
To see the full Report Card, go to www.institutionalinvestorsalpha.com or check out the Winter 2014 issue of Institutional Investor's Alpha.
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