Tuesday, January 31, 2023

Citadel, D.E. Shaw lead multi-strategy performance in 2022

Ken Griffin’s Citadel beat the growing field of multi-strategy hedge fund platforms with a 38% flagship gain last year.

The Miami-based firm’s Wellington product recorded the biggest gain, but its fixed income, tactical trading and equities products also advanced strongly, up 32.6%, 26.5% and 21.4% respectively, during the market chaos of 2022.

It was also a very strong year for New York-based D.E. Shaw, which posted an estimated 24.7% return in its multi-strategy Composite flagship and a 20% gain in its macro-oriented multi-strategy fund, Oculus.

Their increases were down to a combination of systematic, discretionary and hybrid investment strategies.

Spokespersons for Citadel and D.E. Shaw declined to comment.

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The outperformance of multi-strategy operators continues to be a defining industry trend. Among single-manager strategies, only managed futures and macro strategies gained well last year, with the average hedge fund losing ground.

Industry pundits expect the largest hedge fund managers, especially those with a multi-strat approach, will continue to attract most capital.

“We expect 5% of hedge fund organisations, with the strongest brands, to attract 80-90% of net flows within the industry. In order to successfully attract investors, it is not enough to have a high quality product offering with a strong track record,” said Don Steinbrugge of Agecroft Partners in a recent note.

“Managers must then differentiate themselves in order to successfully raise assets by having a strong brand.”

But many of the most in-demand multi-strat platforms are closed in their flagships, with Citadel, D.E. Shaw and others even returning gains worth billions to existing investors.

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