Investors Say Performance Rules in Grading U.S. Hedge Funds

York Takes Top Grade in AR Magazine's Investor Survey of U.S. Hedge Funds; Major Shift in Lineup of Top-Scoring Firms Since Last Survey

Hedge fund investors have not forgotten the carnage of 2008, and the managers who learned its lessons -- as well as those who produced stellar returns -- garnered the top marks in the latest "Hedge Fund Report Card" survey in the September issue of AR Magazine.

York Capital Management, the New York hedge fund founded by Jamie Dinan that manages $11.35 billion in assets, topped the survey, with investors praising Dinan for his integrity and the firm's investment performance. York edged Bridgewater Associates out of the lead and jumped nine notches from its tenth-place ranking in last year's survey.
The Hedge Fund Report Card is a survey of hedge fund investors--including pension funds, foundations and endowments--who collectively oversee more than $250 billion in assets. For the survey, these investors scored the top 50 firms in the AR Billion Dollar Club on six factors: alignment of interests, alpha generation, independent oversight, infrastructure, transparency and liquidity terms.

Investors have changed the way they look at many of the industry's largest hedge fund firms, as evidenced by the major shift in the lineup of the top-scoring firms since last year's survey.

They have also changed their priorities about what factors they deem to be most important. Investors say their main concern now is performance, jumping into second place of the six factors that investors took into consideration when scoring the funds.
Bridgewater, headed by Ray Dalio and managing $50.9 billion, finished a close second place in this year's survey. Investors cited the firm's client service, creativity and innovation in giving the firm high marks. Rounding out the top 10 are Bain Capital/Brookside Capital Partners, Adage Capital Management, Canyon Capital Advisors and Baupost Group (tied for fifth place), King Street Capital Management, Taconic Capital Advisors and Angelo, Gordon & Co. (tied for eighth place) and Fortress Investment Group.

Fortress gained the most over the past year, climbing to 10th place from 30th last year. Another firm that jumped significantly this year is Angelo Gordon, which tied for eighth place with Taconic, up from its 24th-place ranking last year. Not surprisingly, strong performance is the reason most of these funds gained in the rankings, according to investors.

On the flip side, several prominent and highly regarded firms plummeted in this year's rankings. Tudor Investment Corp., Paulson & Co. and Highbridge Capital Management -- in second, third, and fourth place, respectively, last year -- fell significantly.