The best and worst of Wall Street 2011: Hedge FundsDecember 12, 2011: 5:00 AM ET
FORTUNE -- It's been a brutal year for hedge funds, and some former stars are stepping down. The super-secretive Bruce Kovner is retiring after 28 years atop $10 billion Caxton Associates; billionaires George Soros and Carl Icahn are returning outsiders' money; and the once-exalted Goldman Sachs (GS) Global Alpha fund was shuttered this fall. "It's a changing of the guard," says Emma Sugarman, global head of capital introductions at BNP Paribas. No wonder investors are fleeing many funds: Through October, the broad Hennessee Hedge Fund Index was down 2.95% for the year, while the Standard & Poor's 500 index (SPX) gained 1.3%. (You'd pull your money too.) Still, a few portfolio managers were able to shine. --Scott Cendrowski
Friedberg Global Macro
Albert Friedberg hardly conjures up the modern-day hedge fund manager -- he's 65 and works from small offices in Toronto, not Greenwich, Conn., or Midtown Manhattan. But he's been trading commodities dating back to the early 1970s, and since opening his Global Macro Fund in 2001, he has posted 19% average annual returns. This year Friedberg wagered that hot stock markets in Brazil and India would fall, European banks would crash harder than industrial stocks, and inflation-protected U.S. Treasuries would continue their rise (a trade he's continuing to ride). His current investment thesis is a scary proposition: Europe is headed for a massive credit implosion, after which the world falls into a global depression. If Europe can't get its act together, he puts those odds at more than 50%.
Coleman's partners are affectionately known as "assassins" for their stealthy tech investments. Early stakes in Facebook and LinkedIn (LNKD) won praise for the press-shy 36-year-old, and in 2011, Tiger Global benefited from huge positions in Apple (AAPL) and Russian tech company Yandex (YNDX).
Hot money poured into JAT Capital this year, tripling its assets to some $3 billion. Thaler, a former bank analyst who founded JAT in 2007, posted huge returns with short positions in Chinese Internet companies and by going long on travel stocks like Priceline.com (PCLN) and Wynn Resorts (WYNN).
A few years after earning billions shorting subprime-backed securities, Paulson's largest fund is in the dumps. His bet on a U.S. recovery was off, dooming stakes in Citigroup (C), Bank of America (BAC), and SunTrust Banks (STI). Still, Paulson remains upbeat, telling investors that stocks remain cheap and that the economy will improve by the end of 2012.
Odey European Inc Euro
One of London's biggest hedge funds had one of its worst years on record. Led by Crispin Odey, who was once married to Rupert Murdoch's oldest daughter, the fund was burned by European banks anticipating a recovery that never came.
CQS Directional Opportunities
This summer's selloff in European bank stocks and bonds hammered the flagship fund at billionaire Michael Hintze's London firm.
Note: All returns through 9/30/11. Sources: Hennessee Group, Bloomberg
The best and worst of Wall Street 2011
- Venture capital and private equity
- Hedge funds
- Mutual funds
This article is from the December 26, 2011 issue of Fortune.