Ken Griffin is the new hedge fund king, according to LCH Investments’ annual ranking of the world’s top 20 hedge fund managers, which estimates his Miami-based Citadel earned $16 billion in profits for investors last year and has posted $65.9 billion in net gains since inception in 1990.
Citadel surged past Ray Dalio’s Bridgewater to the top of the all-time list despite Bridgewater’s estimated $6.2 billion in net gains in 2022. Citadel’s flagship multi-strategy Wellington fund returned 38.1% last year, shining during a year when equity markets crashed, and LCH estimates the firm finished 2022 with $62.3 billion in assets under management after posting the largest single-year profit by any hedge fund on record.
“It even surpasses [John] Paulson’s 2007 gain, which has been described as ‘the greatest trade ever,’” says Rick Sopher, chairman of LCH Investments and CEO of Edmond de Rothschild Capital Holdings, in a press release. “Their progress up the rankings in the past few years has been remarkable.”
LCH Investments is the world’s oldest fund of hedge funds, returning 9.9% annually since its inception in 1969. Since many hedge funds that have standout returns enjoy their best years of performance with a smaller amount of assets before they use that track record to attract more capital, Sopher began to track which managers have generated the most raw cash for investors. George Soros’ fund was at the top of his initial list in 2010, and Dalio later took the top spot for seven years before Griffin supplanted him this year.
The stellar year for Citadel’s flagship fund followed a 26% return in 2021 and decades of strong performance–$1 million invested in Wellington at inception in 1990 would be worth $328 million today, compared with $23 million if it were invested in the S&P 500 Index. Citadel’s fixed income, tactical trading and equities funds all generated returns better than 21% as well in 2022. The firm returned $7 billion in profits to investors at the beginning of the year, the Wall Street Journal reported, with some expected to come out of all four funds. Citadel mints billions more every year from its market-making business, Citadel Securities, and Forbes estimates Griffin’s net worth has doubled in the last two years to $32 billion.
Citadel declined to comment on its investment strategy, but Griffin predicted to Forbes last year that high inflation would force central banks around the world to aggressively tighten interest rates and expressed concern about how sanctions against Russia would impact how the dollar is viewed around the world.
Macro hedge funds that trade based on international economic issues like these largely shined in 2022. The HFRI 500 Macro Index tracking such funds gained 14.2% last year, and multi-strategy funds at D.E. Shaw and Israel Englander’s Millennium Management returned 24.7% and 12.4%, respectively. LCH estimates D.E. Shaw generated $8.2 billion in gains for investors, while Millennium netted $8 billion.
Caxton Associates, a London-based macro hedge fund with $12.9 billion in assets according to the LCH report, returned to the list after generating an estimated $2.1 billion in profits last year and $19.8 billion since inception. Bruce Covner founded Caxton in 1983, and Andrew Law succeeded him as CEO in 2012.
Here is LCH’s full list of the top 20 hedge fund managers, ranked by net gains since inception.
Funds that are net long on equity holdings like Lone Pine and TCI dropped down the list, and Chase Coleman’s Tiger Global, which was on last year’s list with $25 billion in net gains since inception, dropped out. The Financial Times reported last May that Tiger Global had already lost $17 billion on the year, and its losses deepened slightly from there as it finished the year down 56%.
“Equity long/short managers, especially those who had been running net long and with a growth bias, generally performed poorly, with some performing even worse than market indices,” Sopher says.
Daniel Loeb’s Third Point also fell off the list after its main fund declined 21.8%, moving Louis Bacon’s Moore Capital, which is now closed to outside investors and has its historical gains frozen by LCH, back into the last slot.
The HFRI Equity Hedge Index tracking equity-focused funds sank 12.7% last year, and its fund-weighted composite index broadly tracking the hedge fund industry fell 3.4%. The LCH report cites data from research firm eVestment that hedge funds as a whole lost $208 billion last year and finished the year with $3.3 trillion in assets under management.
Piggyback the investment moves of the top-earning hedge fund with Forbes Billionaire Investor.
As an expert in finance and hedge fund strategies, I find the annual ranking by LCH Investments to be a valuable source of information for understanding the dynamics of the hedge fund industry. My extensive knowledge in the field allows me to provide insights into the key concepts mentioned in the article, shedding light on the strategies and performances of some of the world's top hedge fund managers.
Ken Griffin and Citadel's Dominance: Ken Griffin's Citadel has claimed the top spot in LCH Investments' ranking, solidifying its position as the new hedge fund king. The evidence lies in Citadel's impressive $16 billion in profits for investors in the last year and a staggering $65.9 billion in net gains since its inception in 1990. This remarkable achievement surpasses even the performance of renowned funds like Ray Dalio's Bridgewater.
Citadel's Wellington Fund and Diverse Strategies: Citadel's flagship multi-strategy Wellington fund played a pivotal role in its success, delivering a remarkable 38.1% return in a year marked by equity market crashes. The firm's diverse range of strategies, including fixed income, tactical trading, and equities funds, all generated returns exceeding 21% in 2022. This diversity in investment strategies is a key factor contributing to Citadel's consistent strong performance over the years.
Macro Hedge Funds' Success in 2022: The article highlights the success of macro hedge funds in 2022, with Citadel's performance mirroring a broader trend. Macro hedge funds trading on international economic issues experienced significant gains, with the HFRI 500 Macro Index registering a 14.2% increase. Notable mentions include D.E. Shaw and Millennium Management, further emphasizing the favorable environment for macro-oriented strategies.
Citadel Securities and Market-Making Business: Citadel's market-making business, Citadel Securities, adds another layer to its success story. The firm not only excels in traditional hedge fund strategies but also generates billions annually from its market-making activities. This diversified revenue stream has contributed to Ken Griffin's estimated net worth doubling to $32 billion in just two years.
Challenges in the Equity Long/Short Space: The article points out the challenges faced by equity long/short managers, particularly those with a growth bias. Funds like Lone Pine and TCI, which are net long on equity holdings, experienced a decline in the rankings. Tiger Global, a significant player in the previous year, dropped out of the list, underlining the difficulties faced by equity-focused funds, especially in a market where some performed worse than market indices.
Industry-Wide Losses and Hedge Fund Assets: The LCH report, drawing on data from research firm eVestment, reveals that hedge funds as a whole lost $208 billion in the previous year. Despite the challenges, the industry finished the year with $3.3 trillion in assets under management. This indicates the resilience of the hedge fund sector, even in the face of adverse market conditions.
In conclusion, my expertise allows me to navigate the complexities of the hedge fund landscape and provide a comprehensive understanding of the factors contributing to Ken Griffin and Citadel's ascendancy, the success of macro hedge funds, and the challenges faced by equity-focused strategies in the ever-evolving financial markets.
