Ken Griffin’s Citadel makes US$16 billion profit in 2022 to top John Paulson’s ‘greatest trade ever’

The top 20 hedge fund firms collectively generated US$22.4 billion in profit after fees in 2022, according to estimates by LCH Investments

Hedge funds overall lost US$208 billion last year as many managers found themselves on the wrong side of the global market turmoil

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Ken Griffin’s Citadel was the most profitable hedge fund last year. Photo: Reuters

Published: 11:26am, 23 Jan 2023

Ken Griffin’s Citadel churned out a record US$16 billion in profit for clients last year, outperforming the rest of the industry and one of history’s most successful financial plays.

The top 20 hedge fund firms collectively generated US$22.4 billion in profit after fees, according to estimates by LCH Investments, a fund of hedge funds.

Citadel’s gain was the largest annual return for a hedge fund manager, surpassing the US$15 billion that John Paulson generated in 2007 on his bet against subprime mortgages. This was described as the “greatest trade ever” in a subsequent book of the same name by Gregory Zuckerman.

But it’s a different story outside the industry giants, with hedge funds overall losing US$208 billion last year as many managers found themselves on the wrong side of global market turmoil. LCH estimated a return of 3.4 per cent at the top 20 managers – while the rest of funds it studied suffered losses of 8.2 per cent.

Multistrategy hedge fund firms are on the cusp of taking over equity-focused funds to become the dominant strategy in the industry, according to LCH Investments. Photo: AFP

“The largest gains were once again made by the large multistrategy hedge funds like Citadel, DE Shaw and Millennium,” LCH chairman Rick Sopher said in a statement. “The strong gains they have generated in recent years reflect their increasing dominance in strategies which do not depend on rising asset prices, and their substantial size.”