Citadel and Millennium outpace smaller hedge fund rivals

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Big-name managers such as Citadel and Millennium outpaced rivals in the world’s hottest hedge fund strategy last year, illustrating how an arms race for talent and technology is taking a toll on smaller players in the sector.

Ken Griffin’s Citadel gained 15.3 per cent in its flagship Wellington fund in 2023, according to people familiar with the numbers. It told clients in December that it planned to return $7bn in profits to investors and said it would start 2024 with $58bn in assets.

Izzy Englander’s New York-based Millennium, which runs $61.4bn, gained 10 per cent last year, while Steve Cohen’s Point72 Asset Management, which has $31.4bn in assets, was up 10.6 per cent, investors said.

The three firms are among the oldest and best-resourced players in the fast-growing multi-manager sector. All three groups declined to comment.

The gains came as money managers had to contend with a regional banking crisis in the US and a large sell-off in the bond market for much of last year as global interest rates moved higher. The S&P 500 index rose 24.2 per cent in 2023 in comparison.

Citadel’s and Millennium’s gains were lower than in 2022, when Citadel’s main fund gained 38.1 per cent and the firm made a record $16bn in profits, establishing it as the most successful hedge fund manager of all time. Millennium was up 12 per cent while the S&P 500 fell 19.4 per cent.

Multi-manager hedge funds typically allocate capital across tens or hundreds of trading teams that operate a variety of different strategies, and are overseen by a centralised risk management system designed to help prevent big losses. They seek to make money regardless of overall market performance and have been popular with investors in recent years due to their strong risk-adjusted returns.

Rather than the traditional “2 and 20” fees — where managers charge a 2 per cent management…