Billionaire Ken Griffin’s Citadel generated record profits for clients of $16 billion last year, outpacing the rest of the industry and one of the most successful financial businesses in history.
This comes as the 20 largest hedge fund companies collectively generated $22.4 billion in profits after deducting fees, according to estimates by LCH Investments, a fund of hedge funds.
The Citadel’s earnings were the largest annual return for a hedge fund manager, surpassing the $15 billion John Paulson made in 2007 from his bets against subprime mortgages. This was described as “the greatest bet ever in the history of trading,” according to “Bloomberg,” and “Al Arabiya.net” reviewed it.
The difference in the story this time around is that hedge funds overall lost $208 billion last year as many managers found themselves on the wrong side of the global market turmoil. LCH estimated the average return of the top 20 hedge fund managers at 3.4% – while the rest of the funds surveyed posted losses of 8.2%.
“The biggest gains have been made again by large multi-strategy hedge funds such as Citadel, DE Shaw and Millennium, and their strong gains in recent years reflect their increasing dominance,” LCH Chairman Rick Soffer said in a statement. In strategies that do not depend on the rise in asset prices and their large size.--
LCH’s annual ranking is just one way to look at hedge funds’ performance, as managers are typically measured by their total earnings since inception.-
The results also reflect the growing influence of multi-strategy hedge fund firms, which are poised to take over equity-focused funds to become the dominant strategy in the industry. Their growing assets and higher fees help win an expensive battle to recruit and retain top traders.
LCH has estimated that the industry has generated more than $1.4 trillion in gains for clients since its inception. The top 20 managers, who oversee nearly 19% of the industry’s assets, generated $692 billion of that profit, or 49% of the total.
Ranking of the top 20 hedge funds, source: LCH Investments