Ken Griffin’s Citadel made $16 billion in profits for investors last year, the largest gain by a single hedge fund in history and a success that made his firm the most successful of all time.
Citadel, which manages $54 billion in assets, posted a 38.1 percent return in its main hedge fund and strong gains in other products last year, equating to a record $16 billion in profit for investors after fees, according to research by LCH Investments. led by Edmond de Rothschild.
The profits, which are driven by bets on a range of asset classes including bonds and stocks, exceed the roughly $15.6 billion John Paulson made in 2007 through his bet against subprime.
Last year’s massive sell-off in government bonds provided a very attractive trade for many macro managers, helping them post their biggest gains since the start of the global financial crisis.
Citadel, which Griffin founded in 1990, made a total gross profit of about $28 billion last year, meaning it charged its investors — one-fifth of whom are its employees — about $12 billion in expenses and fees.
The huge fee underlines how much investors are tolerating large so-called expenses – variable fees that cover a range of items including trader salaries, technology and rent – if net returns remain high.
The $16 billion profit for investors means Griffin’s Citadel replaces Ray Daly’s Bridgewater, which was the top hedge fund of all time for seven years, at the top of LCH Investments’ list of top money managers. Citadel declined to comment.
The record profits come in a turbulent year for financial markets and the hedge funds that trade them, as both stocks and bonds fell.
Multi-manager funds like Citadel and Millennium, which run money across a wide range of strategies, and macro funds like Brevan Howard and Roccos, which bet on falling bond yields, have succeeded. But many equity funds were hit hard by the sell-off in tech stocks as interest rates were raised sharply to combat rising inflation.
Most striking was the 56 percent loss suffered by Chase Coleman’s Tiger Global, the most famous of the so-called “Tiger Cub” funds spawned by legendary investor Julian Robertson’s Tiger Management.
Coleman’s hedge fund has been one of the biggest gainers in the technology stock market, and two years ago he entered the list of the best managers of all time at No. 14, with annual profits of $10.4 billion.
But it was one of the biggest casualties when the markets turned, making an $18 billion loss in its funds last year and falling out of the top 20. According to LCH, this ranks as the biggest annual loss in hedge fund history. LCH’s research does not include Tiger’s private equity. Tiger Global declined to comment.
Meanwhile, the tiger cub, Lone Pine, lost $10.9 billion last year, dropping his ranking from sixth to 11th on the all-time list. And Sir Christopher Hone’s TCI fell from ninth to 14th as it lost $8.1 billion, wiping out most of the $9.5 billion it made for investors in 2021.
There was a “huge difference” in the results, LCH President Rick Soffer said. “The differences largely reflected whether the strategy sought to benefit from trading opportunities around significant volatility, or was caught holding high-growth stocks whose valuations have compressed sharply.”
The top 20 all-time managers on LCH’s list made $22.4 billion in profits last year, while hedge funds collectively lost $208 billion for investors.
Israel Englander’s Millennium, which gained about 12 percent last year, earned $8 billion for investors, and Stephen Cohen’s Point72 earned $2.4 billion thanks to a 10.3 percent return. Both are multi-manager funds that employ dozens or even hundreds of teams of traders. They specialize in risk control by quickly reducing losing bets but increasing the size of winning trades.
Citadel, which was hit hard by the financial crisis in 2008 but posted returns well ahead of the S&P 500 and its peers, was able to take risks last year when many other investors ran for cover. Last year, it achieved a record in four of its five business units, with its fixed income strategy returning 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.