Citadel breaks records with $16bn profit

Citadel breaks records with $16bn profit

Ken Griffin’s Citadel made a $16bn profit for buyers final yr, 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 property, made a 38.1 per cent return in its foremost hedge fund and robust positive factors in different merchandise final yr, equating to a document $16bn profit for buyers after charges, in keeping with analysis by LCH Investments, run by Edmond de Rothschild.

The profit, which was pushed by bets throughout a spread of asset lessons together with bonds and equities, surpasses the roughly $15.6bn made by John Paulson in 2007 by way of his wager in opposition to subprime.

Last yr’s enormous sell-off in authorities bonds supplied a extremely enticing commerce for a lot of macro managers, serving to them to their biggest gains for the reason that onset of the worldwide monetary disaster.

Citadel, which Griffin arrange in 1990, made a complete gross buying and selling profit of about $28bn final yr, which means that it charged its buyers — one-fifth of whom are its personal workers — roughly $12bn in bills and efficiency charges.

The enormous price highlights what number of buyers tolerate hefty so-called cross by way of bills — variable costs masking a spread of things together with dealer pay, expertise and lease — if web returns are nonetheless excessive.

The $16bn of positive factors 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’ record of the highest cash managers. Citadel declined to remark.

The document earnings are available a turbulent yr 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 wager on falling bond yields, thrived. But 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 putting was the 56 per cent loss suffered by Chase Coleman’s Tiger Global, probably the most well-known of the so-called “Tiger cub” funds spawned from legendary investor Julian Robertson’s Tiger Management.

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 record of the highest managers of all time in 14th place, with an annual acquire of $10.4bn.

But it was one in every of the highest-profile casualties when markets reversed, making $18bn of losses throughout its funds final yr and dropping out of the highest 20. According to LCH, this ranks as the most important annual loss in hedge fund historical past. LCH’s analysis doesn’t embody Tiger’s non-public fairness enterprise. Tiger Global declined to remark.

Meanwhile fellow Tiger cub Lone Pine misplaced $10.9bn final yr, pushing its rating down from sixth to eleventh within the all-time record. 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 vital volatility, or have been caught holding excessive progress equities whose valuations compressed sharply.” 

Overall the highest 20 managers of all time in LCH’s record made $22.4bn in positive factors final yr, whereas hedge funds general misplaced $208bn for buyers.

Israel Englander’s Millennium, which gained about 12 per cent final yr, made $8bn for buyers, and Steven Cohen’s Point72 made $2.4bn because of a ten.3 per cent return. Both are multi-manager funds that make use of tens and even tons of of groups of merchants. They specialize in controlling threat by shortly chopping again shedding bets, however growing the dimensions of successful trades.

Citadel, which suffered badly within the 2008 monetary disaster however has gone on to put up returns effectively forward of the S&P 500 and its friends, was final yr capable of placed on threat when many different buyers have been operating for canopy. It achieved records in 4 of its 5 enterprise items final yr, with its mounted earnings 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 method to threat,” mentioned David Williams, founding father of outsourced fairness buying and selling agency Williams Trading.

Point72 didn’t reply to requests for remark. TCI, Millennium, Lone Pine and Bridgewater declined to remark.

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