Ken Griffin’s Citadel turned in a $16 billion profit for investors last year, the biggest dollar profit by a hedge fund in history and a run that establishes his company as the most successful of all time.
Citadel, which manages $54 billion in assets, posted a 38.1% return on its top hedge fund and strong gains on other products last year, equating to a record $16 billion profit for investors. after commissions, according to research by LCH Investments, led by Edmond de Rothschild.
The gain, which was driven by bets on a variety of asset classes including bonds and stocks, tops the roughly $15.6 billion earned by John Paulson in 2007 through his bet against subprime mortgages.
Last year’s huge sell-off in government bonds provided a very attractive deal for many macro managers, helping them his biggest earnings since the start of the global financial crisis.
Citadel, which Griffin created in 1990, made a total gross trading profit of about $28 billion last year, meaning it charged its investors, one-fifth of whom are its own employees, roughly $12 billion. in expenses and performance fees.
The huge fee highlights how many investors put up with so-called pass-through charges — variable fees that cover a variety of items including merchant pay, technology and rent — if net returns remain high.
The $16 billion gain for investors means Griffin’s Citadel replaces Ray Dalio’s Bridgewater, which for seven years had been the most successful hedge fund of all time, at the top of LCH Investments’ list of the best money managers Citadel declined to comment.
The record gains come in a turbulent year for financial markets and the hedge funds that trade them, as stocks and bonds plunged.
Multi-manager funds like Citadel and Millennium, which manage money across a wide range of strategies, and macro funds like Brevan Howard and Rokos, which bet on falling bond yields, thrived. But many stock funds were badly hurt by the sell-off in tech stocks, as interest rates rose sharply to combat runaway inflation.
Most striking was the 56 percent loss suffered by Chase Coleman’s global tiger, the most famous of the so-called “Tiger cub” funds generated by legendary investor Julian Robertson’s Tiger Management.
Coleman’s hedge fund was one of the biggest bull market winners in tech stocks and two years ago entered the list of all-time best managers at 14th with an annual profit of $10.4 billion. .
But it was one of the highest profile casualties when the markets reversed, with losses of $18 billion in his funds last year and falling out of the top 20. According to LCH, this ranks as the largest annual loss in hedge fund history. The LCH investigation does not include Tiger’s private equity business. Tiger Global declined to comment.
Meanwhile, fellow Tiger Cub Lone Pine lost $10.9 billion last year, dropping his ranking from sixth to eleventh on the all-time list. And Sir Christopher Hohn’s TCI fell from ninth to 14th as he lost $8.1bn, wiping out much of the $9.5bn he generated for investors in 2021.
There has been “a tremendous divergence” in results, LCH President Rick Sopher said. “The divergences primarily reflected whether the strategy was looking to take advantage of trading opportunities around significant volatility, or was stuck holding high-growth stocks whose valuations compressed sharply.”
Overall, the top 20 all-time managers on the LCH list made $22.4 billion in profit last year, while hedge funds overall lost $208 billion to investors.
Israel Englander’s Millennium, which gained about 12 percent last year, earned $8 billion for investors, and Steven Cohen’s Point72 earned $2.4 billion thanks to a 10.3 percent return. Both are multi-manager funds that employ tens or even hundreds of teams of traders. They specialize in controlling risk by rapidly reducing losing bets, but increasing the size of winning trades.
Citadel, which suffered badly in the 2008 financial crisis but then returned well above the S&P 500 and its peers, last year was able to take risks when many other investors sought cover. It posted records in four of its five business units last year, with its fixed income strategy achieving 32.6 percent, ahead of many specialist macro funds.
“Ken Griffin learned a lot about hedging in the 2008 financial crisis and has an extremely disciplined approach to risk,” said David Williams, founder of outsourced stock trading firm Williams Trading.
Point72 did not respond to requests for comment. TCI, Millennium, Lone Pine and Bridgewater declined to comment.
