According to an investor, Ken Griffin’s American hedge company Citadel earned $16 billion in profit last year after fees, which is the highest 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 fund of funds LCH Investments, surpassing John Paulson’s $15 billion profit from 2007, which up until this point had been referred to as “the largest transaction ever,” according to Rick Sopher, LCH chairman.
The top 20 managers collectively earned $22.4 billion in net fees for their clients in 2022 and $691.6 billion in net fees for their investors overall since the industry’s beginning. The top 20 funds, according to LCH, made returns of 3.4% last year, while the remaining funds suffered losses of 8.2%.
Hedge fund managers as a whole lost $208 billion in 2017, bringing the total net gains since the industry’s creation to $1.42 trillion, of which 48.7% were gained by the top 20 managers.
LCH Investments, a fund of funds, was able to calculate the profits made by these market leaders based on its own investing activities.
Because of our investments in many or most of the top 20 managers, Sopher said, “We’ve been able to get close to them and obtain information that isn’t often released.”
He cited Citadel’s “diversified firm with many sources of earnings and active capital allocation and risk management” as the reason for its record gain.
Many [equity long/short] managers failed to foresee or properly hedge against the impact of rising interest rates, and they were unable to make enough money on the short side to make up for it, the author claimed.
“We’ll probably see the same again if there’s a lot of dispersion and equities markets tumble again,” he said.
According to Sopher, some managers may be able to quickly capitalise on major events.
Because of the health of the public finances and the system’s leverage, our management have told us that there is a good chance that a severe shock will occur this year or in the upcoming years.
