Ken Griffin’s Citadel has emerged as the hedge fund kingpin for the second year in a row, according to the annual ranking of the top 20 money managers by LCH Investments Chairman Rick Sopher. Citadel earned $8.1 billion for investors in 2023 and $74 billion since inception in 1990.
Citadel’s rise to the top of the rankings of lifetime earnings has been gradual — it came in third in 2021 and fourth in 2020. In jumping to the top, Citadel has replaced Ray Dalio’s Bridgewater Associates, which is now fourth, with total gains since its inception in 1975 coming in at $55.9 billion. In both 2020 and 2021, Bridgewater ranked first in the rankings. Last year it was second.
Bridgewater lost $2.6 billion last year, the worst showing among the top 20. The fall comes as “The Fund,” — a scathing portrait of the firm and Dalio — was published last fall. Dalio retired in 2022.
After last year’s gains, Citadel was reportedly planning to return about $7 billion to investors. At the end of 2023, it had $56.8 billion, according to LCH, a fund of funds. As Institutional investor previously reported, in 2023 Citadel’s flagship Wellington fund gained more than 15 percent, higher than most other multistrategy funds, which are also known as “pod” shops because of the many discreet teams that drive the fund’s performance.
Two other multistrategy shops, D.E. Shaw and Millennium Management, tied for second place, with both firms earning investors a total of $56.1 billion. D.E. Shaw launched in 1988 while Millennium got its start in 1989. Last year Millennium bested D.E. Shaw, earning 5.7 billion compared to DE Shaw’s $4.2 billion. Millennium gained a net 10 percent in 2023, while DE Shaw’s flagship Composite Fund had a net gain of 9.6 percent, II previously reported.
Sopher noted that the top three firms generated 38.3 percent of the total gains of hedge funds over the past three years, but only accounted for 4.6 percent of total assets under management at the end of 2023.
Because the LCH ranking is based on overall earnings for investors since inception, it tends to favor older firms. But looking at last year alone, the biggest gains were made by Christopher Hohn’s TCI, an activist hedge fund that is among the youngest to make the list. It opened its doors in 2004.
TCI had net gains of $12.9 billion in 2023. However, TCI ranks only seventh in terms of overall gains, up from 14th place in 2022, earning a total $41.3 billion.
The ranking also shows how a small minority of hedge funds dominate the industry.
“Over the past three years, the top 20 managers have generated 83 percent of the gains made by all hedge fund managers,” said Sopher. “In most cases this reflects an ability to limit the downside in adverse conditions and to make money when conditions are favorable, as they were toward the end of 2023.”
He calculated that the top 20 managers made $67 billion for investors last year, generating returns of 10.5 percent while the average hedge fund gained only 6.4 percent.
In 2023 hedge funds overall made $218 billion, a comeback from 2022, when Sopher calculated that the group lost $208.4 billion in its worst year since the financial crisis. That year, both Third Point and Tiger Global fell off the top 20 list and have yet to return.
One hedge fund that massively outperformed its peers in 2023 made it back onto the list after a long absence — Bill Ackman’s Pershing Square. Its net gains of more than 26 percent last year put the fund back in the top 20 — at number 20.
“This is a remarkable comeback, as Pershing Square had dropped off the list in 2015,” said Sopher, who said the fund had generated $12.3 billion of net returns for investors over the past five years and $18.2 billion in total. Last year Pershing Square’s net gains were $3.5 billion.
Pershing Square replaced Moore Capital, the only fund that came off the list in 2023.