Who are the best hedge fund managers?

• Tried to acquire Dell, fought with Michael Dell
• Acquired a large number of Apple shares and fought with Apple to buyback stock
• Battled Bill Ackman on Herbalife
• Bought 10% of Netflix and made $800 million in profit within a year
• Suggested to eBay to spin off paypal

I am biased towards what you would call as "global macro" fund managers. Global macro is the mandate that allows you trade almost every single asset class in the entire planet. If humans lived on Mars, these folks would be willing to even trade Martian assets. And it is an interesting bit of trivia that modern day hedge funds started out as macro shops.

First is the Soros camp. Many have come out of this camp: the man himself, George Soros, his protege Scott Bessent, and Stanley Druckenmiller.

While Koushik Venkatasubramanian talked about the first two, let me talk about Druckenmiller.

While Soros is called as the man who broke the Bank of England, it was actually Druckenmiller who was responsible for that trade. I wrote another answer about it. Quoting from it,

It just so happens he's in the office. He's usually in Eastern Europe at this time doing his thing. So I go in at  4:00 and I said, "George, I'm going to sell $5.5 billion worth of British pounds tonight and buy Deutsche marks. Here's why I'm doing and that means we'll have 100% of the fund in this one trade." And as I'm talking, he starts wincing like what's wrong with this kid, and I think he's about to blow my thesis away and he say's, "That is the most ridiculous use of money management I ever heard. What you described is an incredible one-way bet. We should have
200% of our net worth in it, not 100%. Do you know how often something like this comes around? Like one or 20 years. What is wrong with you?" So we started shorting the pound that night. 

Siddharth Pathak's answer to How did George Soros manage risk when he performed a short sale of US $10 billion worth of pounds during the 1992 Black Wednesday UK currency crisis?

He was the CIO for Quantum, and was responsible for generating all those insane returns. He left Quantum in 2000 to focus full time on his fund, Duquesne. He closed down the fund in 2010, citing his emotional toll of not being able to keep up with his own targets. This was despite the fact that in its 30 years of existence, the fund returned 20% annually. If you invested $1 in 1981, you would be sitting on $198 by 2010.

Second, I would have to mention the name of another legend, Julian Robertson. His Tiger fund, and Soros' Quantum fund were quite really the pioneers who got the whole hedge fund strategy started.

He eventually liquidated his fund in 2000 and returned all the money to his investors, tired of a strange "new economy" bubble from tech stocks. He now seeds wannabe hedge fund managers, and some of them are amongst the top performers.

Horseman Capital. This is a relatively small macro shop operating out of London, but has had outstanding returns. It returned 31% in 2008, and interestingly enough it has been net short since 2012, and in this time period it returned 16%, 19%, 12% and 20%. The research they put out on their website, is very insightful, and I highly recommend you to read it - Horseman Capital Management

Paul Tudor Jones. His flagship fund has returned over 19% annually and it started in the 80s. He returned 50% in 1987 by calling the 20% drop in equities down to the damn day it happened. Incidentally, there was a documentary filmed before 1987 where it tracked what he did, and what were some of his reasoning for why he thought the market was headed for a big drop. If you get your hands on it, do make it a point to watch it, because it is an amazingly detailed look into the life of one of the most successful traders in our times. He turned down an MBA admit from Harvard for an apprenticeship with a futures trader down South.

Other lesser known managers would be Jim Leitner, Jim Rogers, Keynes (yes, he was a quite a successful trader), and Hugh Hendry, Crispin Odey and many others who choose to stay out of limelight.

In terms of actual investment performance and value-added, Jim Simons, founder of Renaissance Technologies and Paul Singer, founder of Elliott Management.

In terms of building organizations that investors trust and stick with, Dalio (Bridgewater) and Ken Griffin (Citadel).

Answer is simple. The Best Fund Managers are those who are consistently producing pre-defined Absolute Returns, say, 15–20% p.a., year on year basis, WITHOUT any major volatility in the returns. Irrespective of the type of market environment, they should be able to produce similar returns. If there is wide variation in the returns produced, say, 5% in one year, 20% in another year, & 45% in another year, then, we can assume that there can be loss of 25-45% in total assets as well, or higher.

Higher Returns a Fund Manager is trying to produce in a year, higher will be the Volatility in returns in each month, within a year, or, year on year.

The answer to this question is akin to answering who are the best actors or the best doctors … there is no one single yardstick to judge everyone by. Yes, absolute returns could be one such measure, but then there is longevity of the fund, there is risk adjusted return, there is return judged in context of the AUM ; but that said, one of my favorites and not only because of his financial success but because of his clarity of thought and general philosophy of life is Ray Dalio of Bridgewater Associates. Do read his book “Principles” and you will know why. More about him at Ray Dalio - Wikipedia