Citadel, the hedge fund founded by Ken Griffin, raked in a $16 billion profit—after fees—in 2022, reports an article in MarketWatch. That’s the biggest yearly profit scored by a hedge fund manager ever, beating John Paulson’s 2007 $15 billion record. The top 20 managers of 2022 made gains of $22.4 billion net of fees, according to a report published by LCH Investments that is cited in the article, which also estimates that managers garnered a 3.4% return for their investors. But overall, hedge fund managers saw losses of $208 billion last year.
LCH Investments is a fund of funds that invests with many of the top 20 managers, allowing them to gather information privy only to insiders, the article explains. Citadel achieved their record-breaking gain through diversification, and being a “firm with multiple sources of profits and active capital allocation and risk management,” says LCH chairman, Rick Sopher. Over the last few years the hedge fund has moved up the rankings, coming in at number 2 in 2021. Aside from Citadel, other large multi-strategy hedge funds such as DE Shaw and Millennium saw the biggest gains, generating $32 billion in net gains. These firms utilize a variety of sources such as macro, trading, quant and equity dispersion strategies. But the split between managers with multi-strategy approaches and equity long/short strategies had varying results, with some funds rising above and others falling behind. Managers who didn’t anticipate the interest rate hikes and didn’t hedge enough missed out, and if “equity markets fall again, probably we’ll see the same again,” Sopher says, though he added that some managers could potentially jump on big events. “What I do sense from our managers is that the possibility of a major shock this year or in the coming years is quite high because of the state of public finances, leverage in the system,” he told MarketWatch.
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