Ken Griffin’s Citadel made a $16bn revenue for buyers final 12 months, the most important greenback acquire by a hedge fund in historical past and a haul that establishes his agency as probably the most profitable of all time.
Citadel, which manages $54bn in belongings, made a 38.1 per cent return in its predominant hedge fund and robust beneficial properties in different merchandise final 12 months, equating to a file $16bn revenue for buyers after charges, in keeping with analysis by LCH Investments, run by Edmond de Rothschild.
The revenue, which was pushed by bets throughout a spread of asset courses together with bonds and equities, surpasses the roughly $15.6bn made by John Paulson in 2007 via his guess towards subprime.
Final 12 months’s large sell-off in authorities bonds supplied a extremely engaging commerce for a lot of macro managers, serving to them to their greatest beneficial properties for the reason that onset of the worldwide monetary disaster.
Citadel, which Griffin arrange in 1990, made a complete gross buying and selling revenue of about $28bn final 12 months, which means that it charged its buyers — one-fifth of whom are its personal staff — roughly $12bn in bills and efficiency charges.
The large payment highlights what number of buyers tolerate hefty so-called move via bills — variable fees masking a spread of things together with dealer pay, expertise and hire — if web returns are nonetheless excessive.
The $16bn of beneficial properties for buyers means Griffin’s Citadel replaces Ray Dalio’s Bridgewater, which for seven years had been the all-time most profitable hedge fund, on the prime of LCH Investments’ checklist of the highest cash managers. Citadel declined to remark.
The file earnings are available a turbulent 12 months for monetary markets, and the hedge funds that commerce them, as shares and bonds each tumbled.
Multi-manager funds similar to Citadel and Millennium, which run cash throughout a variety of methods, and macro funds similar to Brevan Howard and Rokos that guess on falling bond yields, thrived. However many fairness funds have been badly broken by the sell-off in expertise shares as rates of interest have been raised sharply to fight hovering inflation.
Most hanging was the 56 per cent loss suffered by Chase Coleman’s Tiger International, probably the most well-known of the so-called “Tiger cub” funds spawned from legendary investor Julian Robertson’s Tiger Administration.
Coleman’s hedge fund was one of many greatest winners from the bull market in expertise shares and two years in the past entered the checklist of the highest managers of all time in 14th place, with an annual acquire of $10.4bn.
However it was certainly one of the highest-profile casualties when markets reversed, making $18bn of losses throughout its funds final 12 months and dropping out of the highest 20. In accordance with LCH, this ranks as the most important annual loss in hedge fund historical past. LCH’s analysis doesn’t embrace Tiger’s personal fairness enterprise. Tiger International declined to remark.
In the meantime fellow Tiger cub Lone Pine misplaced $10.9bn final 12 months, pushing its rating down from sixth to eleventh within the all-time checklist. And Sir Christopher Hohn’s TCI slipped from ninth to 14th because it misplaced $8.1bn, wiping out a lot of the $9.5bn it made for buyers in 2021.
There had been “an amazing divergence” of outcomes, mentioned LCH chair Rick Sopher. “The divergences primarily mirrored whether or not the technique sought to learn from buying and selling alternatives across the important volatility, or have been caught holding excessive progress equities whose valuations compressed sharply.”
Total the highest 20 managers of all time in LCH’s checklist made $22.4bn in beneficial properties final 12 months, whereas hedge funds total misplaced $208bn for buyers.
Israel Englander’s Millennium, which gained about 12 per cent final 12 months, made $8bn for buyers, and Steven Cohen’s Point72 made $2.4bn because of a ten.3 per cent return. Each are multi-manager funds that make use of tens and even lots of of groups of merchants. They specialize in controlling threat by rapidly chopping again dropping bets, however growing the scale of successful trades.
Citadel, which suffered badly within the 2008 monetary disaster however has gone on to publish returns properly forward of the S&P 500 and its friends, was final 12 months in a position to placed on threat when many different buyers have been operating for canopy. It achieved information in 4 of its 5 enterprise items final 12 months, with its mounted revenue technique making 32.6 per cent, forward of many specialist macro funds.
“Ken Griffin discovered a lot about hedging within the 2008 monetary disaster and has an especially disciplined strategy to threat,” mentioned David Williams, founding father of outsourced fairness buying and selling agency Williams Buying and selling.
Point72 didn’t reply to requests for remark. TCI, Millennium, Lone Pine and Bridgewater declined to remark.