If imitation is the sincerest form of flattery, these top hedge fund managers selected by our panel of Motley Fool contributors are probably blushing. Each has reached the pinnacle of success in an industry renowned for its ruthless pop-and-drop nature. As a result, countless investors track their every market move.
Ask any professional mutual fund or hedge fund manager to tick off a list of the most influential investors of our generation and every last one of them is likely to mention George Soros.
Soros is among the elite for good reason. While many managers have proven to have flash-in-the-pan success, Soros has remained a fixture among the best-of-the-best investors for more than four decades thanks to his steady stewardship of Soros Fund Management. Jim Rogers and Stanley Druckenmiller are just two of the investment gurus who worked alongside Soros over the years, and Soros' market-moving investments, including his break-the-bank short trade of the British pound in 1992, makes him my favorite hedge fund manager to watch.
Soros' investing style is based on the concept of reflexivity -- a belief that views influence the course of events, and the course of events influences participants' views. Soros isn't shy about betting big on trends to exploit investment opportunities -- when he feels there's money to be made, he'll embrace risk and invest in everything from currencies to biotechnology stocks. Since long-term investing has proven a better wealth creator than short-term trading for most investors, Soros' approach won't work for everyone. But watching his activity can still provide investors with intriguing and potentially profit-friendly ideas.
Carl Icahn is one of the best-known and successful hedge fund managers in history for a good reason: he gets results.
Many hedge fund managers made their reputations by investing in undervalued small-cap stocks that others were not following. Icahn, though, takes a different path, buying stock in large and megacap companies that anyone can invest in but that most investors overlook as they are known to be dead money. But his strategy does not stop there.
Icahn targets undervalued companies that have subpar performance and then pushes for change that will benefit both the company and shareholders over the long run. No one likes to be told they are doing a bad job, so Icahn is frequently vilified by targeted companies' management. Thus, his strategy takes great willpower and a thick skin that most other managers don't have to get companies to take action. This has paid off with his funds returning 273% the past 10 years, compared to the S&P 500's 73% return.
Icahn is also one of my favorite hedge fund managers because you can invest alongside him. Icahn's campaigns are always public, so it is easy to see which companies he is targeting, then join in. In recent years Icahn has had big wins with Netlflix and Apple. While his position in Netflix is declining, Apple remains a major holding at roughly 15% of Icahn's portfolio. Recent additions to his portfolio include eBay, Hertz, and Navistar, each of which is worth taking a look for the opportunity to profit alongside Icahn.
Jim Simons isn't nearly as much of a household name as George Soros or Carl Icahn, but he put together an impressive track record at Renaissance Technologies. Many investors give the esteemed mathematician credit for being a pioneer in quantitative investing, with Simons' Medallion Fund and other hedge funds seeking new ways to interpret voluminous amounts of data and taking advantage of the market inefficiencies they discover.
Admittedly, Simons' funds are about as non-Foolish as you can get in one aspect: fees. Most hedge funds charge an annual fee of 2% of assets plus 20% of any gains, which is bad enough compared to the lower-cost alternatives of exchange-traded funds and mutual funds. But Simons reportedly charges a much higher 5% annually off the top, plus a 44% performance fee. Nevertheless, with reported long-term average annual returns of about 35%, Simons has demonstrated his ability to crush the market over the long run. Even after his retirement about five years ago, Simons continues to make a difference, advocating for math education and giving back through his charitable foundation. Pursuing topics ranging from the Big Bang to autism, Simons is a classic Renaissance man who remains worthy of investors' attention.