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Since 2004, William Harnisch has functioned as Peconic Partners’ chief investment strategist, drawing upon his prior experience with Chase Manhattan Bank and Forstmann-Leff Associates. Having received the Chartered Financial Analyst (CFA) charterholder designation in 1977, William Harnisch is a member of the CFA Institute, which offers members and prospective members several scholarship opportunities, including the Program Access Scholarship.

Awarded on or before December 1 each year, the Program Access Scholarship provides recipients with the enrollment fee for the CFA Program, where applicable, in addition to providing a discount for the CFA exam registration, lowering the fee to $250.

To attain eligibility for the scholarship, applicants must be eligible for the CFA Program. This requires applicants to possess an international travel passport, for identification purposes. Further, the applicant should hold or be in the final year of study for a relevant bachelor’s degree or possess four years of relevant full-time work experience. Alternatively, applicants may combine work experience with their studies to reach the four-year total.

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Ruth Ann Harnisch

A "recovering journalist," Ruth Ann started out as a teen deejay in her native Buffalo, NY. Her media career spanned three decades and includes Emmy-nominated television reporting, becoming the first woman to anchor Nashville, TN's CBS-TV affiliate, hosting a daily talk-radio program on WLAC-AM, and 17 years as a columnist for the Nashville Banner.

After retiring from journalism, Ruth Ann chaired the board of More Than Money, a national nonprofit assisting top wealth-holders in "putting their money where their values are". The organization's coaching program piqued her interest in the emerging field and, before long, she had joined the International Coach Federation and the International Association of Coaching. Ruth Ann went on to serve on IAC's Board of Governors, the board of the Thomas J. Leonard Foundation, and to co-found both The Foundation of Coaching and The Institute of Coaching at McLean Hospital, an affiliate of Harvard Medical School. Her deep belief in the power of professional coaching also drove her to become an IAC Master Certified professional coach herself.

Ruth Ann's other philanthropic endeavors include serving on Sigma Delta Chi Foundation's Board of Trustees and joining a myriad organizations including: the International Women's Forum, Rachel's Network, the National Association of Television Arts and Sciences, the Radio and Television News Directors Association, American Women in Radio and Television, the Buffalo Broadcasters Association, Women Donors Network and Women Moving Millions. She is a lifetime member of the Broadcasters Foundation and an enthusiastic patron of TED.

Recently described as the "the punk rock fairy godmother of feminism," Ruth Ann splits her time between her pro bono practice and her work with the Harnisch Foundation. While you may have a tough time grabbing ahold of her Awesome Cape, which flies along the coast between the Hamptons and the Bahamas, the shimmer of her philanthropy can be seen far and wide. She is married to William F. Harnisch, president and CEO of Peconic Partners, an investment management firm with offices in New York City and Long Island, and co-founder of the Harnisch Foundation.

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A "recovering journalist," Ruth Ann started out as a teen deejay in her native Buffalo, NY. Her media career spanned three decades and includes Emmy-nominated television reporting, becoming the first woman to anchor Nashville, TN's CBS-TV affiliate, hosting a daily talk-radio program on WLAC-AM, and 17 years as a columnist for the Nashville Banner.

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Table: Top 100 Hedge Funds

WHY INVEST IN A HEDGE FUND? To beat the market, obviously.

On that score, the winners of our annual Top 100 Hedge Fund ranking came through with flying colors, posting an average annual return of 20.83% over the past three years, compared to a 2.24% return for all hedge funds and a 15.94% loss for the stock market overall.

Because many of our Top 100 invest in bonds and engage in short-selling stocks, they don't always benefit as much in an up market. Last year the average fund on our list was up 25.14%, a tad less than the 26.5% gain for the Standard and Poor's 500 Index.

But a lot of hedge funds suffered a far worse fate. Since the financial crisis erupted in late 2008, an estimated 2,000 of them have gone out of business, taking their number down to about 9,000. Hedge-fund assets hit a trough of $1.33 trillion by the end of the first quarter of 2009, down from a mid-2008 peak of $1.93 trillion. The ferment in the group can be seen in our rankings, where about half of the members are new.

A case can be made that fewer, stronger funds will deliver better long-term results for investors. Last Thursday's congressional approval of a measure to force bigger funds to register with the Securities and Exchange Commission should further distinguish between weak and strong outfits.

There are clear signs that hedge-fund investors are getting pickier and more quality-conscious. This year, assets under management have risen to about $1.67 trillion, with the vast majority of the new money going to bigger shops.

This selection process has been particularly grueling for so-called funds of hedge funds. Not only has their performance been sub-par: They've returned an annualized 8.2% over the past 20 years, versus 12.24% for single-manager hedge funds, according to fund-tracker Hedge Fund Research. Even worse, their due-diligence skills in selecting managers for clients have also proved lacking in a number of well-publicized scandals, like Bernie Madoff's Ponzi scheme. As a result, their ranks have been thinned by about 20%, to 2,117 in the past two years; their assets have fallen by 29% to $570 billion.

The high failure rate underscores how critical it is for hedge funds to get the markets right. "You had to be long in 2009 and beat your benchmark or lose your job," laughs the head of one big London-based hedge fund.

A significant number of funds, however, were delivering stellar returns for investors even before 2008's bear market and 2009's resurgent bull. The Barron's Top 100 Hedge Fund ranking attempts to highlight funds that have posted strong returns over three years, rather than one-year wonders. We eliminate funds that invest in a single sector, country or region. Our minimum fund size is $300 million to make sure it offers investors stability. Barron's worked with two hedge-fund database companies, BarclayHedge (www.barclayhedge.com) and Morningstar/CISDM (http://alternativeinvestments.morningstar.com) to sort through thousands of funds and firms. A free-lance journalist, Eric Uhlfelder, then checked with each of the firms to confirm numbers and added to this information with his reporting.

Our winner this year is John Paulson, whose Paulson Credit Opportunities Fund finished No. 1 in our tally with a mind-boggling three-year compound annual return of 122.92%. Paulson, whose New York firm now runs more than $32 billion, also had two other funds in the Top 100, Paulson Advantage (an event-arbitrage vehicle up 41.31% a year over three years and our No. 1 last year) and merger-arbitrage specialist Paulson International (up 20.23%). The hedge-fund manager has been in the headlines for much of the past two years, first lauded for accurately forecasting the disaster in subprime-mortgage lending and, more recently, castigated for reportedly helping Goldman Sachs select the securities for a collateralized debt obligation that subsequently tanked and cost other investors dearly.

Ranking No. 2 is Balestra Capital Partners, a global macro fund whose three-year compound annual return comes to 65.63%. After two stellar years in mostly down markets, the fund, run by James Melcher, didn't quite catch 2009's turnaround, gaining just 4.22%. Still, Melcher's three-year performance is impressive.

In third is mathematics Ph.D. and portfolio manager James Simons, who retired at the start of this year. His Medallion Fund, a computer-driven quantitative trading vehicle that's part of Renaissance Technologies, posted an average annual average increase of 62.80% for the three-year period.

Just how well these and dozens of other hedge firms -- including Element Capital, Odey Asset Management, Harbinger Capital Partners and Shumway Capital -- have performed in the past three years is highlighted by some marquee names that didn't make the list. Among them are stars like Louis Bacon's Moore Global Investments, Steven Cohen's SAC Capital Advisors and Ken Griffin's Citadel Investment Group. The minimum three-year annual return to make the list was 11.55%.

It should be noted that we assume that David Tepper's Appaloosa Management, whose distressed-investment strategies reportedly gained by more than 100% last year after a loss of roughly 27% in 2008, would have finished near the top of Barron's Top 100. However, its funds were among those for which we couldn't gather reliable three-year figures, either through databases or our own reporting.

Given how demanding the markets are and how high the failure rate is among hedge funds, do they make sense for individual investors? One factor that argues for participating selectively is the top funds' performance during 2008's global market collapse. The average hedge fund that year, as measured by the Barclay Hedge Fund Index, lost 21.63%, versus the S&P 500's 37% decline; more than 70 of Barron's Top 100 Hedge Funds for 2008 posted positive returns.

"Hedge funds as a group offer significant protection from long-only strategies," says Edward Cronin, president of independent advisor Manchester Capital Management He looks for funds that are large, well-established, run by a sizable professional staff, have a trusted custodial agent and consistently mark their assets to market.

He recommends clients with $5 million to $10 million in investable income include about 15% to 20% of their portfolio holdings in hedge funds.

Sherri Stephens, a financial advisor at Stephens Wealth Management Group, an affiliate of Raymond James Financial Services, suggests investors with over $5 million in investable assets place 15% of their portfolios into hedge funds.

She limits the allocation because of the risks of illiquidity and lock-ups -- the ability of some funds to delay redemptions. But she likes the upside.

"Any time you have uncertainty and dysfunctional markets" like now, a hedge fund is agile and has huge advantages to pick up oversold opportunities, she says, adding that she personally still likes the funds-of-funds model because of its diversity.

One of Stephens' rules: She selects only managers who have their own money in the fund and who don't get a payout unless investors make money. "They have a strong incentive to do well," she says.

Virtually all the hedge-fund managers agree on at least one thing: 2010 isn't going to look like the highs of 2009 or the lows of 2008. As Phil Falcone, founder of highly successful Harbinger Capital Partners, notes: "I anticipate that hedge-fund returns for 2010 will be more muted than in 2009, as investors grapple with a delicate recovery."

Read on to get the views of five other leading hedge-fund managers -- ranging from traditional long/short funds to commodities traders to fixed-income managers -- on how money was made in 2008 and 2009 and how it will be made in the remainder of 2010. One common theme: They're very cautious about this year.

John Burbank

Combining a broad global view with nimble company-specific analysis has enabled John Burbank's $1.3 billion Passport Fund II to identify and profit from trends before they're widely recognized.

As a result, the diversified San Francisco hedge fund has gained more than 24% a year since its inception in 2000. And though he trailed the broad market last year by about seven percentage points, rising 19.4%, his three-year annualized returns of 23.2% put him in 20th place on our ranking. Shorting the subprime mortgage market in 2007, which gave him a 220% annual return, provided Burbank with a big cushion to soften 2008's roughly 50% fall.

This past year Passport profited by correctly wagering on an expanding yield spread between two-year Treasury rates, which are mostly driven by Federal Reserve policy, and 10-year rates, which tend to be more closely related to market events. The spread did widen as the shorter rates remained near 1% and the longer ones rose by nearly 1[frac12] percentage points.

Burbank also bought key beneficiaries of China's expansion, particularly as emerging markets hit bottom in early 2009. Whether the mainland grows at 6% or 10%, China's construction boom will continue, he says. That will drive demand for steel and specifically for the metal's key ingredients: iron ore and coking coal. He has accumulated nearly a 20% long exposure to those commodities through three producers: Labrador Iron Mines (ticker: LIM.Canada), Brazil's Vale (VALE) and Australia's Riversdale (RIV.Australia).

By buying five-year Japanese government- bond puts, Burbank is betting that the days of ultra-cheap Japanese government financing are coming to an end given the country's tremendous debt load, the fall in its domestic savings and general investor skepticism about sovereign debt.

Although he thinks the U.S. will continue to recover through 2010, Burbank worries about the withdrawal of government support both here and abroad. That's why he'll stick to his flexible strategy.

-- Eric Uhlfelder

William Harnisch

William Harnisch has delivered a 15.47% compound annual return since launching the Peconic Grenadier Fund under the wing of well-known money manager Forstmann-Leff back in 1990. His investment picks, he explains, are contributors to broad themes that should outlast any particular economic boom or bust. One example: He bought consumer-electronics retailer Best Buy (BBY) at 2 in 1997 as a catalyst in America's shift from analog to digital TVs. Harnisch sold it in 2006 at 56.

The 64-year-old strategist's most recent theme, called Dominant Growth, focuses on companies well positioned to prosper amid modest, 2% growth over the next 18 months or so. Harnisch, who ran Forstmann-Leff for 26 years, favors stocks that have little competition, such as Nuance Communications (NUAN), which makes voice-recognition software. Peconic Grenadier bought at a weighted average price of 11.91 at various times between December 2008 and December 2009, realizing a return of 42% over all.

"We have more confidence in the ability of dominant companies to grow in their respective businesses. They should get a lower risk premium and a higher multiple," says Harnisch.

Although Peconic, with 18 staff members, is mostly a buy-and-hold investor, its $455 million Grenadier Fund came through 2008's crash with just an 8.15% loss owing to some savvy short plays in financial stocks. Included was Freddie Mac (FRE), which the fund shorted between September and November 2007 and walked off with a 35% gain.

The No. 56 fund on our list was 73% long and 43% short on May 10, giving it a net exposure of 40% (70% of its money was sitting in cash). "Most of the time we make our money on the long side," says Timothy O'Brien, a portfolio manager for Peconic Grenadier.

-- Michael Shari

Paul Touradji

Paul Touradji once ran Julian Robertson's commodities funds at Tiger Management and seems to share the hedge-fund legend's willingness to challenge the odds. The 38-year-old founder and managing partner of Touradji Capital Management says that's possible only with good research and strong risk-management discipline.

So far, that has served his five-year-old New York firm well. Over the past three years his roughly $2.5 billion Global Resources Fund has returned 16.9% annualized, making it No. 48 on our list; the S&P's GSCI, the benchmark commodities index, is down 6.9% a year in that time. Touradji's firm plays commodities and related stocks as well as futures. The volatility of his portfolio is less than half that of his benchmark.

The recent strong returns are mostly due to getting the top in commodities prices right. "In the spring of 2008, we called commodities as being in a bubble," Touradji says. "They were widely overvalued. We made at the time a contrarian call. In 2008 commodities were on a tear. It was a very intense time." And a little painful. The firm had to retreat from some short positions during the first half of 2008. Ultimately, however, the move paid off as Touradji remained short from July of 2008 through the spring of 2009, when it turned bullish, in part because Chinese demand for commodities seemed ready to turn up.

Although Touradji won't discuss specific investments, SEC filings from late 2009 show that he was holding more than one million shares of Barrick Gold (ABX), his biggest equity holding. He also had loaded up on US Steel (X), AK Steel (AKS) and Steel Dynamics (STLD), along with a few energy outfits.

Touradji expects choppy markets. "We have had anywhere from 75% to 90% invested in cash. We only have a fraction of our money in play, but we've had good returns. It's part of staying conservative" -- and challenging the consensus.

-- Debbie Carlson

Charles Clough

From his perch as Merrill Lynch's stock-market strategist, Charles Clough presciently warned that the dot-com bubble was about to burst. But his persistently bearish and contrarian views eventually led to his departure from America's best-known brokerage firm.

Shortly thereafter, he created Clough Capital Partners in Boston, just 10 days before the stock market peaked in March 2000. What started as friends-and-family money has grown to $3.3 billion, including three hedge funds with $950 million in total, $2.2 billion in mutual funds and $225 million in institutional accounts.

The original fund, Clough Capital Partners I, returned 44.25% in 2009, fell just 5.75% in 2008 and gained 18.97% in 2007. That was good enough for No. 46 on the Top 100 Hedge Funds.

The former seminarian credits energy, materials and Asia holdings for his terrific performance. Although he won't disclose Asian positions, Clough says Southwestern Energy (SWN), National Oilwell Varco (NOV) and Occidental Petroleum (OXY) figure among his energy positions.

In addition, "we didn't have any distressed mortgages once the credit crisis hit," says the 67-year-old. Rather than buy a distressed-bond portfolio in 2009, the firm opted to pick up life insurers, whose holdings made them proxies. As a result, he bought Genworth Financial (GNW) in spring 2009, which gained twofold once the recovery got started and credit spreads tightened. Clough also bought Tenneco (TEN), the auto industry's largest maker of emissions systems, which rebounded 260%.

"We tend to have long-term positions in what we think are major profit cycles," says Clough. "And we trade around them, and we try to hedge and keep the long trades on the books."

These days Clough is bullish on Asia. China is a $4 trillion economy, and "the profit cycle is changing. It used to be really localized in real-estate development and exports. It's migrating to consumption. For the first time people there have Visa cards," he says.

-- Erin Arvedlund

Bob Treue

"We make money off people making non-economic decisions," says Bob Treue, who runs Barnegat Fund Management, a $476 million fixed-income arbitrage outfit in Hoboken, N.J.

Treue will pounce when he sees panic selling in bonds, government intervention that distorts pricing or a change in an asset's tax situation. His Barnegat fund, which had a sizable loss in 2008, has returned 18.9% at a compound annual rate over the past 10 years and 14.83% over three years, good for a tie for 68th in our survey.

For instance, in late 2008 and early 2009 tax-free municipal-bond swaps yielded more than taxable swaps despite their tax advantage. In a swap, a buyer receives protection against a security's default while the seller guarantees its creditworthiness if there is a problem. The fund jumped at the chance to buy the tax-exempts. "It has since corrected," says Treue, who made a nice gain.

At one point in the credit crisis Treasury Inflation Protected Securities were yielding more than unprotected cash bonds with the same maturities. "We could hold those trades for months and years" and make money, says Treue.

Britain's quantitative easing, which started in early 2009, provided another opportunity for Treue. The program required the Bank of England, the country's central bank, to purchase up to $200 billion of gilts, or British government bonds. But the government and the BOE can't trade with each other. The BOE "wasn't looking for the best price; they wanted to print money" to bail out the financial system, says Treue. So he bought cheap U.K. gilts and sold them to the BOE for a tidy profit.

"We're math nerds" who seek relative value, he says. He looks at interest rates around the world and trades accordingly: "A lot of a little everyday work can uncover a trade that says: Pay 3%, get 5%."

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Table: Top 100 Hedge Funds WHY INVEST IN A HEDGE FUND? To beat the market, obviously. On that score, the winners of our annual Top 100 Hedge Fund ranking came through with flying colors, posting an average annual return of 20.83% over the past three years, compared to a 2.24% return for all hedge funds and a 15.94% loss for the stock market overall.

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Thinking about starting a new business? Stop! Is there a genuine market for your idea? Do you really want to compete in that industry? Are you the right person to pursue it?

No matter how talented you are or how much capital you have, if you're pursuing a fundamentally flawed opportunity then you're heading for failure.

So before you launch your lean start-up, take your idea for a test drive and make sure it has a fighting chance of working.

With an accompanying app, available on iTunes and Android, that will enable readers to easily capture their road test data - notes, interviews, photos or videos - while they are on the go.

www.newbusinessroadtest.com

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ROAD TEST YOUR IDEA BEFORE YOU WRITE YOUR LEAN START-UP Thinking about starting a new business? Stop! Is there a genuine market for your idea? Do you really want to compete in that industry? Are you the right person to pursue it?

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William Harnisch, Founder of Peconic Partners

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William Harnisch is an investment professional with more than four decades of industry experience. Holding a BBA from Baruch College of the City University of New York, he began working for Chase Manhattan Bank as an analyst and eventually worked his way up to the position of vice president of special equity investment.