Who Says Hedge Funds Aren't Adding Value?

According to my old friend, Rick Sopher, chairman of LCH Investments in London, the top ten hedge funds have earned $153 billion for their investors since inception.

Rick, who runs his business from an elegant flat on posh Eaton Square, compiled the list after a comprehensive survey of the still operating 7,000 hedge funds worldwide. It is dominated by marquee names like Bruce Kovner's Caxton and Louise Bacon's Moore Capital. Of the 100 largest funds, 95% have returned much of their investors' original capital, and are using the remaining profits to trade on.

Of course, the numbers show a huge survivor bias. They don't include the hundreds of billions of dollars lost by now shuttered 'wanabee' managers during the financial crash, largely with highly leveraged fixed income, spread oriented, 'low risk' strategies. Many of these are still in liquidation, peddling illiquid assets for pennies on the dollar through online auctions and elsewhere.

The numbers highlight the increasing barbell nature of the hedge fund industry. The biggest funds continue to attract the big bucks, and a steady wave of defections from Wall Street, are funding hundreds of new startups. But many mid-tier firms are getting nothing and are struggling to stay in business.