It’s Kenny G’s world

The final data aren’t out yet, but 2022 will almost certainly prove to have been another crappy year for the hedge fund industry as a whole, and a profoundly awful one for a few big players.

But not for everyone!

(Reuters) — Kenneth Griffin’s Citadel marked record revenues in its hedge fund and electronic-trading businesses for 2022 despite turmoil in global capital markets, a source familiar with the matter said on Thursday.

The hedge fund operation made about $28bn in revenue, while Citadel Securities, one of the world’s biggest electronic-trading firms, brought in $7.5bn.

Record revenues from the hedge fund unit comes in a year of stellar performance for Citadel’s funds. Its flagship fund Wellington posted gains of 38.1 per cent last year, while the fixed income fund went up 32.58 per cent, for instance, according to the source.

We’ve written before about how multi-strategy hedge funds like Citadel are ascendant these days. Macro funds ruled the roost in 2022, but many big “multistrats” also enjoyed good-to-great years despite the breadth of the financial market puke.

For example, FTAV has heard that DE Shaw’s flagship fund made 24.7 per cent last year (its macro fund Oculus apparently made 20 per cent), while Bloomberg late last year pinned Millennium’s returns at 10 per cent and Brevan Howard’s at 18 per cent. But Citadel stands out from the pack, given its 38 per cent gain on a massive amount of capital.

By our estimation, that means that Citadel will now finally have leapfrogged Ray Dalio’s Bridgewater as the highest grossing hedge fund of all time. Not bad for a former computer nerd from Boca.

The annual ranking of net gains since inception compiled by LCH Investments won’t be out for a few weeks, but given the $28bn of gains reported by Reuters and the WSJ that would put Citadel at $78bn (LCH won’t include CitSec’s profits).

Meanwhile, Bridgewater was heading towards a fantastic year until it stumbled badly in the last few months. That has trimmed the 2022 return of its Pure Alpha fund from about 22 per cent at the end of September to just 6 per cent by early December, according to Bloomberg.

Bridgewater offers different flavours of its strategy and we don’t know how much of its estimated $150bn of assets under management are in Pure Alpha, the more leveraged Pure Alpha II, its risk parity funds etc. So it’s hard to estimate even roughly its nominal dollar gains for 2022 even when we see the final-year returns.

But LCH estimated Bridgewater’s net gains since inception at $52.2bn last year, and despite its much bigger AUM it looks very likely that Griffin will finally topple Dalio at the top of the table. For reference, here is what it looked like this time last year:

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Our impression is that after not caring about this ranking for a long time, Griffin started really caring about it a lot. So we suspect that he’ll be pretty chuffed about climbing to the top.

But brace yourselves for the outpouring of fury that will inevitably hit certain parts of the internet when the headlines hit.

Further reading:

— Ken Griffin, financial prodigy turned industry giant
— Multi-strategy hedge funds are the new, superior fund-of-funds
— How Ken Griffin rebuilt Citadel’s ramparts
— What is the Ken Griffin/Mayo backstory?