The profits made by the Connecticut-based Pure Alpha – already the world’s biggest hedge fund, with $72bn under management using its trading strategy – beat its own record for the largest one-year dollar gain last year.
However, the ranking by LCH Investments, part of the Edmund de Rothschild group, also showed last year the biggest-ever loss by a hedge fund. John Paulson’s New York-based Paulson & Co lost investors $9.6bn last year, more than was lost in the collapse of Long Term Capital Management in 1998. But Mr Paulson is still ranked third for the best overall returns for investors, at $22.6bn.
LCH, which has been investing in hedge funds since 1969, assesses hedge funds by how much they have made over their lifetimes for investors in dollars. It argues that percentage returns distort performance as fund managers frequently find it hard to maintain big returns as they take in more money. This is important as investors tend to buy funds that have done very well but then those funds often produce mediocre returns on the larger amounts of money.