When you look at the financial news headlines every morning, you're likely to see a story telling you what some hedge fund manager is buying or selling, or what comments they've made about the market.
While this can definitely be useful information, maybe some fund managers should be more closely watched than others. We asked three of our analysts who they prefer to follow, and here is what they had to say.
Jordan Wathen: When Warren Buffett shut down his early partnerships to take control of Berkshire Hathaway, he referred his investors to one group: Sequoia Fund. At the time, it was led by his friends Richard Cunniff and Bill Ruane, who went on to have a fantastic record of performance, handily beating the S&P 500 index ever since it's founding in 1970.
The fund is newly under the leadership of David Poppe and Robert Goldfarb and is nestled in between a variety of funds and hedge funds managed by the firm Ruane, Cunniff & Goldfarb, but it's still worth watching closely.
Each year, Sequoia Fund produces an excellent annual shareholders packet, documenting the investment thesis behind their biggest investments. Fans of Warren Buffett will see the iconic value investor shine through in their every comment. Transcripts of their Investor Day meetings are published online, complete with hours of back-and-forth exchanges between investors and the fund managers. And no question is off limits -- topics often include "touchy" subjects, like the badmouthing of ineffective management teams at America's biggest public companies.
If Warren Buffett were running a smaller mutual fund rather than his behemoth Berkshire Hathaway, it'd likely look a lot like Sequoia Fund. And for that reason, I think David Poppe and Robert Goldfarb, both excellent investors and thinkers, should be on the radar of any investor.
George Budwell: When it comes to making money, there are few hedge fund managers that do it quite like Pershing Square's Bill Ackman. Over the past 10 years, his fund has generated a cumulative return of nearly 1,200%! And so far this year, Ackman has been absolutely crushing most other hedge funds due to his activist role in the takeover bid for Allergan by Valeant Pharmaceuticals. Most impressively, his fund pocketed a reported $2.6 billion in profits from its position in Allergan, even though Valeant ultimately lost out to Actavis plc in its quest to land the coveted Botox maker.
The good news for lay investors is that piggybacking on his fund's picks is relatively easy. Unlike most other funds that only disclose their holdings in required filings, Ackman often publicly announces his positions in the media. For example, the average retail investor could have bought Allergan back in April -- after Ackman publicly revealed Pershing Square's massive position, for a healthy 27.7% return in a little over six months. Returns like that are why I think Ackman is one of the best money managers to look toward for investing ideas.
Patrick Morris: One hedge fund manager that is worth keeping an eye on is Ray Dalio, the head of Bridgewater Associates, which just so happens to be the biggest fund in the world. It manages more than $150 billion worth of investments across the globe and has time and again been recognized among the best.
But his success isn't the only reason that Dalio is worth keeping an eye on. In a Buffett-like manner, he has been happy to share some of his investing insights over the years; his 123-page document simply entitled Principles outlines some of the fundamentals which govern his strategies.
In addition, Dalio also crafted a website, Economic Principles, that former Federal Reserve Chairman Paul Volcker said "casts strong light on how the economy actually works" in just a half-hour long video.
While I don't agree with everything in his Principles paper, I'm thankful for his willingness to be open about his perspective, because it's always helpful to learn how others craft their investment decisions as we make our own.
