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Last year, big-name managers such as Citadel and Millennium outperformed their rivals in the world’s most-watched hedge fund strategies, demonstrating how the arms race for talent and technology is hitting smaller companies in the sector. ing.
Ken Griffin’s Citadel gained 15.3% in its flagship Wellington fund in 2023, according to people familiar with the numbers. The company told customers in December it planned to return $7 billion in profits to investors and said it would start 2024 with $58 billion in assets.
New York-based Izzy Englander’s Millennium, which has $61.4 billion under management, rose 10% last year, while Steve Cohen’s $31.4 billion Point72 Asset Management rose 10.6%, investors said. Rose.
The three companies are among the oldest and best-resourced in the fast-growing multi-owner sector. All three groups declined to comment.
The gains came as asset managers had to contend with the U.S. regional banking crisis and a sharp decline in bond markets for much of last year as global interest rates rose. In comparison, the S&P 500 index rose 24.2% in 2023.
Citadel and Millennium’s gains are higher than in 2022, when Citadel’s main fund rose 38.1% and the company posted record profits of $16 billion, establishing itself as the most successful hedge fund manager of all time. It was low. Millennium rose 12%, while the S&P 500 fell 19.4%.
Hedge funds with multiple managers typically allocate capital to dozens or hundreds of trading teams operating a variety of strategies and are overseen by a centralized risk management system designed to prevent large losses. They seek profits regardless of overall market performance and have become popular with investors in recent years because of their high risk-adjusted returns.
Rather than the traditional “2 and 20” fee, where managers charge a 2 percent management fee and 20 percent profit, the multi-manager platform features a pass-through expense model.
Instead of paying an annual management fee, managers pass on all costs, including office rent, technology and data, salaries, bonuses, and customer entertainment, to end investors. In theory, these costs should be offset by the resulting performance gains.
But the performance of some small businesses last year shows how some companies are struggling to achieve results as spending on technology and talent squeezes profits.
Investors said Schoenfeld Strategic Advisors’ main fund rose 3% last year, while Dmitry Baryasny’s hedge fund Baryasny Asset Management’s Atlas Enhanced Fund rose 2.7%. The company has reached the end of the year, people familiar with both companies said. Mr. Varyasny is worth $21 billion, while Mr. Schoenfeld is worth $10 billion.
The pair have been among the main beneficiaries of billions of dollars in inflows in recent years, when investors have been eager to get into multi-manager hedge funds and Citadel, Millennium and others have been unable to deploy new capital. Ta. Buoyed by the pass-through model, Bariasny and Schoenfeld have aggressively hired and increased their cost base.
But funds are facing greater pressure to perform as rising interest rates raise the risk-free returns available to investors. Within sectors with multiple managers, investors expect some players with disappointing results may be forced to lay off traders, cut costs or form alliances.
The Financial Times reported in October that Mr. Schoenfeld was in talks to partner with Millennium, which could see Mr. Englander’s hedge fund spend billions of dollars in partnership with a smaller rival. It was reported that there is.
But the plan fell through when investors announced they would give Schoenfeld an additional $3 billion to strengthen his position. In November, the company announced it would cut 15% of its workforce to cut costs.
Eisler Capital, the largest multi-fund fund with $4 billion in assets, rose 9.8% last year, according to people familiar with the matter. ExodusPoint, another new entrant in the multi-manager space, rose 7.3%, according to people familiar with the numbers.
Bloomberg first reported Citadel and Millennium’s performance.
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