In this article, we will take a look at 10 youngest hedge fund billionaires and their top stock picks. If you want to see more youngest hedge fund billionaires and their top stock picks, go directly to 5 Youngest Hedge Fund Billionaires and Their Top Stock Picks.
Hedge funds are funds that take money from wealthy individuals and invest that money using a variety of strategies in an effort to make a return. Given the risks and the fees involved, only high net worth individuals and institutions are allowed to invest.
The first hedge fund began when Alfred W. Jones began his first fund in 1949 when he bought stocks, hedged positions, and charged a fee that required investors pay him 20% of the profits of the fund. Given Jones’ example, many later hedge funds charged the same structure, and the 2% management fee and 20% incentive fee became standard.
With the growth of the United States economy, the total value of stocks in the United States has increased over time.
In terms of the S&P 500, the index has had an average annualized return since inception in 1928 to the end of 2021 of 11.82%. The S&P 500 index represents 500 of the largest U.S. companies including many blue chips. More recently, the S&P 500 has averaged annual returns of 13.34% in the last 10 years as of 11/30/22.
Although the total hedge fund performance isn’t 100% correlated with the S&P 500’s performance because hedge funds use a variety of different strategies, some hedge funds have nevertheless done really well over time. As a result of that growth, some hedge fund managers, including some who are relatively young, rank among the world’s richest individuals.
Many of the World’s Youngest Hedge Fund Billionaires Are American
Many of the youngest hedge fund billionaires are based in the United States given the United States economy is the world’s largest with a GDP of $23 trillion as of 2021.
The American economy has expanded substantially over time given productivity increases, population growth, and inflation. While American GDP was around $1 trillion in 1970, it rose to nearly $6 trillion in 1990 and over $10 trillion in 2000. Given the many bright people in America, the country will likely continue to lead the world in innovation in the future and its economy will likely continue to grow.
Many of the youngest hedge fund billionaires are also based in the United States because New York City is the financial capital of the world and home to Wall Street. Because New York City is the financial capital, many leading financial institutions are based there and many hedge funds also want to have headquarters there as well.
New York City describes itself, “New York City is the world’s most sophisticated and diverse financial center. Home to 45 Fortune 500 companies, NYC boasts the deepest capital pools, the finest international talent, and an administration that is committed to strengthen the city’s financial base.” The city also notes it has a large talent base of over 330,000 financial services workers as well as a favorable corporate culture.
In 2022, the broader market has also weakened given that the Federal Reserve has increased interest rates substantially to fight inflation.
More recently, some hedge funds have lagged the market in their performance and institutions have asked for a change from the traditional 2% and 20% fee structure.
Although inflation has shown signs of potentially peaking in October, many still think the U.S. central bank will continue to raise rates further. If the Federal Reserve raises rates too much, there could be a recession next year. If the economic slowdown is worse than expected, there could be more downside and some hedge funds might not do as well.
Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
John Overdeck of Two Sigma Advisors
For our list of 10 Youngest Hedge Fund Billionaires and Their Top Stock Picks, we selected the 10 youngest hedge fund billionaires from Forbes’ The Richest People In The World list for 2022.
We ranked the hedge fund managers based on age and included their net worth according to Forbes.
For those of you interested, also check out 15 Most Famous Investment Gurus of All Time.
10 Youngest Hedge Fund Billionaires and Their Top Stock Picks
10. Philippe Laffont
Net Worth: $6.5 billion
Philippe Laffont is the founder of Coatue Management, a tech focused fund that has a portfolio value of $8.61 billion at the end of Q3. At the end of the third quarter, Coatue Management’s top position was Tesla, Inc. (NASDAQ:TSLA) with a stake value of $840.6 million. Laffont is the 10th youngest hedge fund billionaire on our list with a net worth of $6.5 billion…