Ken Griffin’s Citadel churned out a file $16 billion in revenue for shoppers final 12 months, outperforming the remainder of the business and eclipsing considered one of historical past’s most profitable monetary performs.
The highest 20 hedge fund companies collectively generated $22.4 billion in revenue after charges, based on estimates by LCH Investments, a fund of hedge funds. Citadel’s acquire was the most important annual return for a hedge fund supervisor, surpassing the $15 billion that John Paulson generated in 2007 on his wager towards subprime mortgages. This was described because the “best commerce ever” in a subsequent guide of the identical identify by Gregory Zuckerman.
Citadel’s efficiency wasn’t about one commerce. Its flagship hedge fund gained 38% final 12 months by buying and selling all the pieces from equities to commodities, Bloomberg reported earlier this month. The agency made cash in every of its 5 core methods, which additionally embrace mounted earnings and macro, quant and credit score. Citadel returned about $8.5 billion in revenue to buyers on the finish of final 12 months.
Nevertheless it’s a distinct story exterior the business giants, with hedge funds total shedding $208 billion final 12 months as many managers discovered themselves on the fallacious facet of worldwide market turmoil. LCH estimated a return of three.4% on the high 20 managers — whereas the remainder of funds it studied suffered losses of 8.2%.
Whereas falling inventory markets hit the efficiency of many equity-focused funds, loads of the largest macro funds benefited from bets on rising charges and unstable currencies. And main hedge funds which have dozens of buying and selling groups throughout belongings confirmed the upside of such diversification.
“The most important features had been as soon as once more made by the massive multistrategy hedge funds like Citadel, DE Shaw and Millennium,” LCH Chairman Rick Sopher stated in a press release. “The sturdy features they’ve generated in recent times replicate their growing dominance in methods which don’t rely on rising asset costs, and their substantial measurement.”
LCH’s annual rating is only one method to take a look at the efficiency of hedge funds, the place managers are usually measured by their total features since inception. The rating, which was first printed in 2010, could exclude newer or smaller hedge funds that outperformed on a share foundation.
The findings additionally replicate the rising clout of multistrategy hedge fund companies, that are on the cusp of taking on equity-focused funds to turn out to be the dominant technique within the business. Their rising belongings and better charges are serving to them win an costly battle to rent and retain high merchants.
LCH estimated that the business has produced features in extra of $1.4 trillion for shoppers since inception. The highest 20 managers, which oversaw nearly 19% of the business belongings, produced $692 billion of that revenue, or 49% of the entire.