shaw capital management career: 2nd UPDATE: Bridgewater Largest US Hedge Fund Manager--Magazine

By Amy Or 
   Of DOW JONES NEWSWIRES 
 

Ray Dalio's Bridgewater Associates LP has once again been named the largest U.S. hedge fund manager, according to trade publication AR magazine, with assets having grown last year by $15.3 billion.
Westport, Conn.-based Bridgewater, which was also named the nation's largest hedge fund manager for 2009, managed $58.9 billion or about 5% of the $1.3 trillion assets held by American hedge funds as of Jan. 1.
"The strong performance of Bridgewater's Pure Alpha Fund II, which gained 44.8% during 2010, powered much of this growth," AR said. Hedge funds gained 10.4% on average last year, according to Hedge Fund Research, trailing the 15.1% total return of the Standard & Poor's 500 Index.
Pure Alpha Fund II is a global macro fund that trades on a wide variety of themes and markets, including currencies, debt, equities and commodities.
Dalio, whose firm has more than 900 employees, made a series of bearish bets on the U.S. economy last year, including trades anticipating continued low interest rates, and bullish investments in the Japanese yen and gold.
J.P. Morgan Asset Management, which ranked second among 225 hedge fund managers with over $1 billion assets or more, had $45.5 billion at the beginning of the year. Paulson & Co. managed $36 billion.
Total assets managed by American hedge funds rose 10% last year, accounting for 60% of world hedge fund assets, and the number of funds with over $1 billion in assets also rose by around 6% as of Jan. 1, 2010, helped by a median 9.15% gain last year.
While assets under management have rebounded strongly, they were still short of the $1.68 trillion peak reached in July 2008.
"Industry assets haven't yet reached their peak, but hedge funds continue to recover from the 2008 crisis," said Amanda Cantrell, a managing editor of AR. "The industry is also consolidating, with an entrenched leadership of firms managing more than $5 billion."
An exception, however, was D.E. Shaw & Co.
The firm, which was once the giant in the industry and charged the highest fee, dropped to 20th place from 5th last year. It lost 40% of its hedge funds assets in 2010, ending with $14.23 billion, AR said. Firm-wide assets, including those not in hedge funds, dropped 24% to $19 billion as of Jan. 1.
"Most of that loss came from redemptions," AR said. "The firm allowed investors to fully redeem from its D.E. Shaw Composite fund last year after suspending redemptions in that fund in 2008 and allowing only partial redemptions until last summer, when it lifted the gate for that fund." AR said D.E. Shaw Composite returned just 1.7% in 2010 after gaining 19.9% in 2009.
D.E. Shaw is trailing behind managers like Soros Fund Management, Och-Ziff Capital Management Group LLC (OZM), BlackRock Inc. (BLK) and Baupost Group.
The firm slashed 150 jobs or 10% of its work force, including some senior executives as well as back-office employees, a person familiar with the situation said in September.
On Wednesday, a person familiar with the situation said D.E. Shaw planned to cut its management fee to 2.5% from 3% of assets, and its incentive fee, charged on profits its investments earn, to 25% from 30%.
Other firms that lost large amount of assets, according to AR, included Max Holmes's Plainfield Asset Management, whose assets fell by 62.1% to $1.25 billion because of the liquidation of several large privately held positions; Bill Hwang's Tiger Asia, which lost 48.7% of its assets, possibly related to investigations by both Hong Kong and U.S. securities regulators on allegations of insider dealing and market manipulation; and Shumway Capital Partners, where investors pulled assets after Chief Investment Officer Chris Shumway announced he was stepping down. Shumway announced last month it would return all external capital to investors by the end of March.
Diamondback Capital Management, run by Richard Schimel and Larry Sapanski, and one of a handful hedge funds raided by Federal Bureau of Investigation agents in November as part of an insider-trading probe, was recorded by AR as having a 28.9% jump in assets last year. However, investors applied to redeem a total $1.32 billion by the end of the quarter, out of the firm's $5.8 billion in assets.

-By Amy Or, Dow Jones Newswires; 212-416-3142; amy.or@dowjones.com

(END) Dow Jones Newswires
March 02, 2011 17:19 ET (22:19 GMT)
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