In this article, we discuss the 10 best performing hedge funds of 2021.
Despite a relatively more volatile and generally tough investing environment for equity-based investment firms, especially in the context of the rise of retail investors and their short squeezes, hedge funds that focused on stocks returned, on average, close to 12.3% to investors in 2021, up nearly 2.3% when compared against peers in the industry. Data from LCH Investments, as reported by news agency Reuters, shows that the 20 best-performing hedge funds earned over $65 billion for clients in 2021. In 2020, all hedge funds combined earned $176 billion for clients.
However, even though the top performing funds managed nearly one-fifth of the $3.6 trillion in total assets under management for the industry, their combined gains still lagged behind the performance of the broader stock market. In 2020 and 2019, the 20 best-performing funds had made $63.5 billion and $59.3 billion for clients. Some of the funds that deserve a mention among the top performers include TCI Fund Management and Bridgewater Associates, which made gains of $9.5 billion and $5.7 billion respectively.
Some of the top holdings of the best performing hedge funds in 2021 included eBay Inc. (NASDAQ:EBAY), Netflix, Inc. (NASDAQ:NFLX), and The Walt Disney Company (NYSE:DIS), among others. Rick Sopher, the chief of LCH Investments, said that the returns for 2021 for hedge funds were “the highest ever”, topping the record gains of 2020 despite the threats of interest rate hikes and the resurgence of virus cases. Sopher noted that “low net exposure and a difficult environment for short selling” limited the returns for hedge funds.
Our Methodology
The hedge funds that registered the largest year-to-date (YTD) gains, based on data available with news platform Bloomberg by November 2021 were selected for the list. The exact YTD gains are mentioned alongside the top holdings and performance of each fund in 2021.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each top holding.
Best Performing Hedge Funds of 2021
10. Millennium Management
YTD Gain as of November 2021: 12.1%
Millennium Management is an investment manager based in New York. It is led by Israel Englander, an investor and philanthropist with a personal net worth of over $10 billion. At the end of the third quarter of 2021, the fund managed more than $166 billion in assets. According to data from LCH Investments, Millennium Management posted a gain of around $6.4 billion in 2021. In 2020, Millennium Management had been on the top-end of the best performing hedge funds as well, posting a gain of $10.4 billion.
Israel Englander of Millennium Management
Millennium Management holds a large stake in Amazon.com, Inc. (NASDAQ:AMZN), a diversified tech firm with core interests in ecommerce. Among the hedge funds being tracked by Insider Monkey as of Q3 2021, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN), with 3.9 million shares worth more than $12.8 billion.
Just like eBay Inc., Netflix, Inc., and The Walt Disney Company, Amazon.com, Inc. is one of the stocks that elite investors are buying.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. was one of them. Here is what the fund said:
“Amazon.com, Inc.:We sold our last remaining stake in Amazon.com, Inc. this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon.com, Inc. has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon.com, Inc., we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon.com, Inc. is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
9. Schonfeld Strategic Advisors
YTD Gain as of November 2021: 12.6%
Schonfeld Strategic Advisors is a hedge fund led by Ryan Tolkin. The fund operates from New York. At the end of September 2021, it managed over $9 billion in assets. Tolkin is one of the relatively younger managers on Wall Street, aged just 35 years-old. He has transformed Schonfeld from a family office into one of the most successful hedge funds in the US, averaging annual returns of more than 14% in the five years since it opened to outside capital. Tolkin formerly worked at Goldman Sachs.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
Schonfeld Strategic Advisors holds a large stake in Bio-Rad Laboratories, Inc. (NYSE:BIO), the company that markets life science research services. At the end of the third quarter of 2021, 38 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in Bio-Rad Laboratories, Inc., compared to 41 funds in the previous quarter, holding stakes in the company worth $1.2 billion.
8. D1 Capital Partners
YTD Gain as of November 2021: 17%
D1 Capital Partners is an investment firm based in New York. It is chaired by Daniel Sundheim who founded it in 2018. Sundheim has a personal net worth of more than $2.5 billion and his hedge fund manages more than $17.8 billion in assets, as per the 13F filings from Q3 2021. The fund made headlines last year after losing nearly 20% of its capital, roughly $4 billion, during the GameStop short squeeze. Within three months, however, it had recouped nearly 90% of this loss.
One of the top holdings of D1 Capital Partners is Microsoft Corporation (NASDAQ:MSFT), the Washington-based tech giant. Among the hedge funds being tracked by Insider Monkey in Q3 2021, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ:MSFT), with over 25 million shares worth more than $7 billion.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation was one of them. Here is what the fund said:
“We have written extensively about Microsoft Corporation in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. Microsoft Corporation continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and Microsoft Corporation stock continues to reflect the fundamentals.”
7. Pershing Square
YTD Gain as of November 2021: 20.1%
Pershing Square is a hedge fund that operates from New York and is led by Bill Ackman, one of the richest investors in the US, with a personal net worth of over $3 billion. The fund gained more than 5.7% in December and finished the year with a gain of close to 27%, whereas the year-to-date gain as of November 21 clocked in at 20.1%. So far this year, as Ackman builds a new stake in Netflix, the hedge fund has lost more than 13.8% as the share price of the streaming giant nose-dived. However, Ackman has told investors that his fund loves the business model and industry context for Netflix and admires their management team.
Pershing Square has invested heavily in Lowe’s Companies, Inc. (NYSE:LOW), the North Carolina-based home improvement retailer. At the end of the third quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Lowe’s Companies, Inc..
In its Q2 2021 investor letter, Pershing Square Holdings, an asset management firm, highlighted a few stocks and Lowe’s Companies, Inc. was one of them. Here is what the fund said:
“Since the onset of the COVID-19 pandemic, Lowe’s Companies, Inc. has experienced a significant acceleration in demand driven by consumers nesting at home, higher home asset utilization and the reallocation of discretionary spend. In the three years since Marvin Ellison became CEO, the company has executed a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities. This transformation has allowed Lowe’s Companies, Inc. to meet consumers’ needs during this highly elevated period of demand, and positioned the company for continued success and accelerated earnings growth.
In the second quarter, Lowe’s Companies, Inc. reported U.S. same-store-sales growth of 2.2%. Growth was bolstered by strength from the critical Pro consumer, where Lowe’s reported growth of 21%, off setting moderating do-it-yourself (“DIY”) demand. While DIY demand has receded from peak-COVID-19 periods, Pro customer demand has accelerated as consumers engage Pro’s for larger renovation projects.
Notwithstanding the headline growth figure, which is impacted by comparisons to COVID-19-aff ected months from spring of 2020, demand remains extremely elevated relative to baseline 2019 levels. July same-store-sales, the most recent full month for which the company has provided disclosure, were up 31.5% on a two-year basis and management indicated August month-to-date results are substantially similar. More significantly, Lowe’s Companies, Inc. reported Pro growth of +49% on a two-year basis in Q2, evidence that Lowe’s focus on the Pro is bearing fruit. Share gains with the critical Pro customer will provide a tailwind to growth that should allow Lowe’s to outperform market-level growth going forward.
Even as the robust demand experienced during the height of COVID-19 stabilizes at a new base, the medium and longer-term macro environment remain very attractive for the home improvement sector and Lowe’s Companies, Inc. in particular. This favorable context for the sector is evidenced by consumers’ enhanced focus and appreciation of the importance of the home, higher home asset utilization, rising home prices, historically low mortgage rates, an aging housing stock, strong consumer balance sheets, and the general lack of new housing inventory.
Against this backdrop, Lowe’s Companies, Inc. is focused on taking market share and expanding margins. Pro penetration today is still only 25% of revenue as compared to Lowe’s medium-term target of 30% to 35%, providing a runway for continued above market growth. Management continues to execute against various operational initiatives (Lowe’s “Perpetual Productivity Improvement” program) designed to improve the customer experience while enhancing the company’s margins and long term earnings power. The company’s long-term outlook implies significant opportunity for continued margin expansion and earnings appreciation as it executes its business transformation.
Lowe’s currently trades at approximately 17 times forward earnings. Home Depot, its closest competitor, trades at approximately 22 times forward earnings despite Lowe’s superior prospective earnings growth. We find this valuation disparity to be anomalous in light of Lowe’s strong execution and potential for further operational optimization.”
6. Heard Capital
YTD Gain as of November 2021: 23%
Heard Capital is an investment firm based in Chicago. It is chaired by William Heard and manages over $515 million in assets as of the close of the third quarter of 2021. Heard previously worked at Stark Investments as a special situations analyst, focusing on industries such as telecom, media, tech, and financials. He launched his own fund in 2011 and has had mixed success in the industry so far, managing gains of more than 6% annually since inception. In 2020, the annual returns stood at 7%. In 2021, his High Conviction Long Only Fund, a flagship offering, posted gains of over 21%.
One of the premier holdings of Heard Capital is BlackRock, Inc. (NYSE:BLK), an investment management company. At the end of the third quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $1 billion in BlackRock, Inc. (NYSE:BLK), compared to 47 funds in the the preceding quarter, holding stakes in the company worth $1.2 billion.
In addition to eBay Inc., Netflix, Inc., and The Walt Disney Company, BlackRock, Inc. is one of the stocks that institutional investors are flocking to.
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and BlackRock, Inc. was one of them. Here is what the fund said:
“During the quarter, we initiated a position in BlackRock, Inc., the world’s largest investment manager with $9 trillion in assets under management. BlackRock offers an array of products across equities, fixed income, alternatives, and cash management to institutional and retail investors worldwide. About one-quarter of BlackRock’s assets under management is actively managed, and the rest is in passive index funds and iShares-branded ETFs. The company offers technology services including the investment and risk management platform, Aladdin, as well as other advisory services and solutions. Over the five years ending December 31, 2020, assets under management and earnings per share grew at compound annual growth rates of 13% and 12%, respectively.
We believe BlackRock, Inc. is well positioned for continued growth given its diverse product offering, global distribution, brand recognition, and capable management team. With most of its assets in index funds and ETFs, BlackRock, Inc. is a prime beneficiary of the ongoing shift to passive investing. BlackRock, Inc. also benefits from increasing demand for sustainable investment strategies and “barbell” strategies that use a combination of low-cost index funds, active and illiquid alternatives products. BlackRock fits squarely within our Tech-Enabled Financials theme given its longstanding commitment to innovation and proprietary technology platform, Aladdin, which serves as the investment and risk management system for both BlackRock, Inc. and a growing number of institutional investors around the world. We expect BlackRock’s earnings per share will continue to grow at a double digit annual rate over a market cycle through a combination of mid-single-digit growth in assets under management from net inflows, market appreciation, low to mid-teens revenue growth in technology services, modest margin expansion, and share repurchases.”
5. Citadel Investment Group
YTD Gain as of December 27, 2021: 24.3%
Citadel Investment Group is one of the most famous multi-strategy funds. It operates from Chicago and is chaired by billionaire Ken Griffin. Griffin has a personal net worth of over $26 billion. His fund, as of the end of September 2021, managed over $481 billion in assets, one of the largest portfolios in the US. According to LCH data, Griffin made over $8.2 billion for investors in 2021, behind only Chris Hohn of TCI Fund Management who earned $9.5 billion for investors. Citadel made gains of close to 4% in December 2021 alone.
Ken Griffin of Citadel Investment Group
Citadel Investment Group has invested a lot of money in Tesla, Inc. (NASDAQ:TSLA), the California-based EV maker. At the end of the third quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $10 billion in Tesla, Inc. (NASDAQ:TSLA), compared to the same number of funds as in the previous quarter, with stakes equalling $9 billion.
Here is what Baron Partners Fund has to say about Tesla, Inc. in its Q1 2021 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. Tesla, Inc. stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
4. Third Point
YTD Gain as of November 2021: 25.7%
Third Point is a New York-based hedge fund founded and led by Daniel Loeb. At the end of the third quarter of 2021, it managed more than $18 billion in assets. Loeb has pioneered an “activist” investment strategy and is famous for pressuring firms to divest off assets or consolidate operations for success. The fund beat the benchmark S&P 500 by around a third in terms of overall returns through the year. Third Point has had a rough start to 2022 with the flagship Third Point Offshore fund losing 7.6% in January.
Dan Loeb of Third Point
One of the top investments of Third Point is The Walt Disney Company (NYSE:DIS), a diversified entertainment company. At the end of the third quarter of 2021, 101 hedge funds in the database of Insider Monkey held stakes worth $9.4 billion in The Walt Disney Company, compared to 112 in the preceding quarter worth $10.8 billion.
In its Q4 2020 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and The Walt Disney Company was one of them. Here is what the fund said:
“One of the original constituents of the Nifty Fifty holds a place in our portfolio today. When we bought Disney three years ago, we wrote that “we view Disney theme parks in the US, Europe, and China as resistant to online substitution.” We did not reckon on a pandemic, which closed all of them, and sent all of us to our couches. Disney, however, wasready for us, brilliantly illustrating the importance of management foresight and change management. Or, as Louis Pasteur said, “chance favors the prepared mind.
A century after its founding in 1923, Disney is in the middle of a bold shift from its legacy media networks & entertainment model—with cable TV, theme parks, and theater films dominating its earnings—to a direct-to-consumer streaming media model. The keys to Disney’s transition: matchless storytelling, coupled with financial strength. The company reliably creates content that people all over the world are eager to consume. It also hastened spending on original content to attract subscribers to its new streaming platform. These factors have allowed Disney to weather the pandemic having expanded its direct engagement with customers. Such connections yield a rich harvest of insights used to customize offerings on a mass scale, reinforcing that engagement in a virtuous circle and thereby raising the lifetime value of each customer. Subscribers to Disney+ reached 86.8 million one year after launch, compared to the 60 – 90 million management projected to reach in 2024. To be sure, Netflix, Apple, and Amazon remain formidable competitors in new-era streaming entertainment (mind what we said about everyone standing up at once), but there’s fight left in this old dog.”
3. SRS Investment Management
YTD Gain as of November 2021: 46%
SRS Investment Management is an employee-owned hedge fund led by Karthik Sarma. It operates from New York. One of the primary reasons for the success of the fund in 2021 was the incredible performance of Avis Budget Group, a mobility solutions provider in which SRS owns a large stake. The jump in the share price of Avis alone was responsible for around $5 billion in gains in a single day for SRS in November 2021. The fund has a portfolio value of over $7 billion, with investments concentrated in the services and tech sectors.
One of the biggest holdings of SRS Investment Management is Netflix, Inc. (NASDAQ:NFLX), the company that owns and runs a streaming platform. Among the hedge funds being tracked by Insider Monkey in Q3 2021, Chicago-based firm Citadel Investment Group is a leading shareholder in Netflix, Inc., with 4.3 million shares worth more than $2.6 billion.
In its Q1 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Netflix, Inc. was one of them. Here is what the fund said:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
2. Impala Asset Management
YTD Gain as of December 23, 2021: 55.5%
Impala Asset Management is an investment firm headquartered in Connecticut. It is chaired by Robert Bishop and also has offices in Florida and New York. Bishop has had an illustrious career in finance and was previously the chief investment officer at Soros Fund Management, one of the most successful hedge funds of all time. Between 2015 and 2017, Impala delivered an average annual return of around 29% to investors. The fund focuses on investments in basic materials and services, offering a healthy mix of value and growth to investors.
A top holding of Impala Asset Management is Devon Energy Corporation (NYSE:DVN), an independent oil and gas firm. Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in Devon Energy Corporation (NYSE:DVN) as of Q3 2021, with 13.9 million shares worth more than $493 million.
In its Q4 2020 investor letter, GoodHaven Capital Management, an asset management firm, highlighted a few stocks and Devon Energy Corporation was one of them. Here is what the fund said:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
1. Rima Senvest Management
YTD Gain as of November 2021: 75%
Rima Senvest Management is a hedge fund led by Richard Mashaal and is based in New York. The fund managed to be one of the top performing money managers of the year due to a shrewd bet it made on GameStop at the beginning of the year, as well as smart investments in Canadian energy companies through the rest of 2021. Mashaal also profited by shorting Chinese firm Gaotu Techedu Inc. At the end of the third quarter of 2021, the fund had a portfolio value of around $3.5 billion.
One of the top holdings of Rima Senvest Management is eBay Inc. (NASDAQ:EBAY), the firm that owns and runs an internet platform that connects buyers with sellers. Among the hedge funds being tracked by Insider Monkey, United Kingdom-based investment firm Ako Capital is a leading shareholder in eBay Inc., with 7.3 million shares worth more than $512 million.
In its Q4 2020 investor letter, Steel City Capital, an asset management firm, highlighted a few stocks and eBay Inc. was one of them. Here is what the fund said:
“eBay (Long): EBAY continues to be a core holding in the Partnership’s long book despite not having any “sexy” attributes or unknown catalysts. I like EBAY because it checks the boxes of being both capital light and priced as a value stock (low multiple of free cash flow), factors which are attractive in a potentially inflationary environment.
In 3Q’20 the company printed $2.6 billion of revenue vs. guidance of $2.4 billion (a $200 million beat) while full year revenue guidance was taken up by $400 million, implying 4Q’20 would be higher by $200 million as well. Free cash flow from continuing ops was guided to $2.3 billion for the full year, slightly above the $2.0 billion the business regularly generated before getting a Covid/stimulus related boost.
EBAY will have about $4.6 billion of cash on hand at year end5 and should receive another $2.0 billion in after-tax proceeds this quarter related to the sale of its Classifieds portfolio6 . Additionally, the company will receive 540 million shares from Adevinta which are currently valued at ~$8.3 billion, and also holds a warrant to purchase a 5.0% stake in payment processor Adyen which was last valued at ~$775 million. Additional asset sales are also not out of the question7 . Backing everything out at today’s market cap of $38.2 billion gives a clean market cap for the core marketplace of $22.6 billion. At a minimum, I expect $2.0 billion of free cash flow in FY’21, with the potential for a higher figure to the extent the incoming administration is successful in cutting additional stimulus checks. By FY’22, free cash flow should ramp to $2.3 billion after incorporating a full year’s contribution from the managed payments initiative. This values EBAY at 9.6x free cash flow, or 11.7x excluding stock-based comp.”
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This article is originally published at Insider Monkey.