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Hedge Funds Lag Behind the S&P 500. Ken Griffin’s Citadel Is the Exception.


Hedge funds that seek gains by meshing different strategies have outshown most others in recent years. In 2023, some of these multistrategy funds continued to do well, but it was hard to beat the sizzling returns of benchmarks like the

S&P 500.

Ken Griffin’s Citadel may be the best-known of the multi-strat shops, with his Miami-based firm sailing through the choppy markets that followed Covid. In 2023, the firm’s flagship Wellington fund again did well: It gained 15.3%, after fees, according to several sources.

Citadel’s main rival is Millennium Management, a New York-based firm run by investor Izzy Englander, that now manages $61 billion. Millennium was up 10% in 2023, say sources.

Point72, the multi-strat fund run by the New York Mets owner Steven Cohen, was up 10.6%, according to sources.

Multistrategy managers employ many portfolio managers and investment strategies under one roof. They shift capital and curb risk among the various portfolios and strategies, which may range from the classical hedge fund approach of going long and short on individual stocks; to playing the fixed-income yield curve; to trading commodities futures; to wonky quantitative finance models.

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The multistrategy idea has been around for years. But it has far outperformed traditional long-short hedge funds, of late. In 2021 and 2022, Citadel’s Wellington was up 26% and 38%, respectively, while the S&P 500 was up 28% and down 18% in those two years. The gains swelled Citadel to around $60 billion, so it decided to return some capital to investors, to maintain its agility.

But for the average multistrategy fund in 2023, performance seems to have regressed back toward the average result for active managers. According to the hedge fund research firm PivotalPath, multi-strat funds gained just 4.9% on average, last year.

Not only did the average multistrategy return trail far behind the tech stock-powered 24% gain of the S&P 500 in 2023—the 4.9% multistrat average trailed the typical hedge fund and even the 5% return that one could recently get risk-free from a Treasury bill.

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So 2024 should be an important time to keep tabs on the popular multistrategy strategy.

Write to Bill Alpert at william.alpert@barrons.com

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