How Ken Griffin’s Citadel beat the rest of the hedge fund industry and soared to a $16 billion return in 2022

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Ken Griffin’s Citadel churned out a record $16 billion in profit for clients last year, outperforming the rest of the industry and one of history’s most successful financial plays.

The top 20 hedge fund firms collectively generated $22.4 billion in profit after fees, according to estimates by LCH Investments, a fund of hedge funds. Citadel’s gain was the largest annual return for a hedge fund manager, surpassing the $15 billion that John Paulson generated in 2007 on his bet against subprime mortgages. This was described as the “greatest trade ever” in a subsequent book of the same name by Gregory Zuckerman.

But it’s a different story outside the industry giants, with hedge funds overall losing $208 billion last year as many managers found themselves on the wrong side of global market turmoil. LCH estimated a return of 3.4% at the top 20 managers — while the rest of funds it studied suffered losses of 8.2%.

“The largest gains were once again made by the large multistrategy hedge funds like Citadel, DE Shaw and Millennium,” LCH Chairman Rick Sopher said in a statement. “The strong gains they have generated in recent years reflect their increasing dominance in strategies which do not depend on rising asset prices, and their substantial size.”

LCH’s annual ranking is just one way to look at the performance of hedge funds, where managers are typically measured by their overall gains since inception. The ranking, which was first published in 2010, may exclude newer or smaller hedge funds that outperformed on a percentage basis. 

The findings also reflect the growing clout of multistrategy hedge fund firms, which are on the cusp of taking over equity-focused funds to become the dominant strategy in the industry. Their growing assets and higher fees are helping them win an expensive battle to hire and retain top traders.

LCH estimated that the industry has produced gains in excess of $1.4 trillion for clients since inception. The top 20 managers, which oversaw almost 19% of the industry assets, produced $692 billion of that profit, or 49% of the total. 

Firm Assets Net Gains Since Launch 2022 Return Launch Year
Citadel $62.3B $65.9B $16B 1990
Bridgewater 80.6 58.4 6.2 1975
DE Shaw 43.2 51.9 8.2 1988
Millennium 60 50.4 8 1989
Soros Fund Management* n/a 43.9 n/a 1973
Elliott 55 42.1 2.8 1977
Viking 25.1 35 -3 1999
Baupost 25 33.2 -1.5 1983
Farallon 39 33.1 0.5 1987
Appaloosa 14 32.3 1.6 1993
Lone Pine 15.4 31.3 -10.9 1996
SAC/Point 72 28 30.1 2.4 1992
Och Ziff/Sculptor 32 29.9 -1.8 1994
TCI 35 28.4 -8.1 2004
Brevan Howard 29 28.1 5.1 2003
Egerton 15.6 21.6 -4.1 1995
Caxton 12.9 19.8 2.1 1983
Davidson Kempner 36.2 19.2 -0.4 1983
King Street 13.7 18.7 -0.7 1995
Moore* n/a 18.6 n/a 1990
Total 622 691.6 22.6  

Source: LCH Investments 

Gains are in billions of dollars. *denotes gains frozen when all outside capital returned

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