Citadel topped the list of the top 20 hedge fund managers in a report released on Monday by LCH Investments, surpassing John Paulson’s 2007 $15 billion gain, which has been regarded as “the biggest transaction ever,” according to Rick Sopher, LCH chairman.
According to the investors, Ken Griffin’s U.S. hedge firm Citadel generated $16 billion in profit after fees last year, the biggest yearly profit ever recorded by a hedge fund manager.
Citadel topped the list of the top 20 hedge fund managers in a report released on Monday by LCH Investments, surpassing John Paulson’s 2007 $15 billion gain, which has been regarded as “the biggest transaction ever,” according to Rick Sopher, LCH chairman.
Overall, the top 20 managers earned $22.4 billion net of fees for their clients in 2022 and $691.6 billion net of fees since inception. LCH believes that the top 20 funds earned 3.4% last year, while the remainder lost 8.2%. Hedge fund managers lost $208 billion last year, bringing net profits since inception to $1.42 trillion, with the top 20 managers accounting for 48.7%.
Citadel’s record gain, according to Sopher, was due to the company being a “diversified organization with many sources of earnings and aggressive capital allocation and risk management.”
“Their ascent in the rankings in the last several years has been phenomenal,” he noted, noting that Citadel was placed second among the top 20 schools in 2021.
“In 2022, huge multi-strategy hedge funds like Citadel, DE Shaw, and Millennium achieved the most gains,” Sopher added. “These managers achieved $32.0 billion in net profits by combining outstanding results from many sources, including macro, trading, quant, and stock dispersion methods.”
According to Sopher, the disparity between managers operating multi strategy and macro funds, as well as equity long/short strategies, caused some funds to perform well and others to underperform last year.
“Many [stock long/short] managers were unable to earn sufficient profits to compensate on the short side because they failed to predict or sufficiently hedge against the effects of increasing interest rates,” he added.
“If there is a lot of dispersion and equities markets tumble again, we’ll probably see the same thing,” he said.
According to Sopher, certain managers may be able to capitalize on major occurrences rapidly. “What our managers tell me is that the probability of a large shock this year or in the next years is fairly high due to the situation of public finances and system leverage.”