Evening Brief – 01.26.24
The world’s 20 most successful hedge fund firms generated their biggest profits on record in 2023 on the back of a stock market surge, making a combined $67 billion for investors.
Last year’s returns beat the previous record of $65 billion set in 2021 and were almost triple the figure recorded in 2022 according to data from LCH Investments, a fund of funds.
According to LCH, which calculates which managers are most successful based on cumulative dollar profits generated for investors, net of fees, since inception, activist fund TCI Fund Management, run by billionaire Christopher Hohn, led the way in 2023 with gains of $12.9 billion after fees, as the top 20 firms recorded an average gain of 10.5%, outperforming the industry average of 6.4%.
Citadel, a multi-strategy fund, outperformed Millenium and D.E. Shaw in terms of lifetime gains. Despite having only 4.6% of the industry’s assets under management, the threesome has delivered 38.3% of the industry’s total returns during the last three years.
Citadel, led by hedge fund kingpin Ken Griffin, surpassed Ray Dalio’s Bridgewater Associates, which ranks fourth on LCH’s 2023 list. Citadel, which finished second in 2023, made $8.1 billion in profits after earning a record $16 billion in 2022. Its $74 billion gains since creation make it the most successful hedge fund in history.
Bridgewater Associates and Caxton were the only two firms among the 20 to report a loss in 2023. Bridgewater lost $2.6 billion, the worst performance among the top 20.
Bill Ackman’s Pershing Square Capital Management recaptured a spot on the list nine years after slipping off it. Pershing Square ranked 20th, ahead of Louis Bacon’s Moore Capital Management.
Brad Amiee, director and head of research at LCH Investments, stated that the top funds were boosted by the stock market’s “fantastic run” in 2023. However, he said that several also demonstrated particularly astute stock selecting tactics.
“You could argue that, since shorting is such a challenging sub-strategy, keeping things long biased and having a concentrated portfolio of high-quality positions has been the way to go,” Amiee told the Financial Times.
Overall, the fund management industry recorded gains of $218 billion after fees, according to LCH Investments estimates.
The study also discovered that the top 20 funds had earned a combined $755.4 billion in profits since their creation, far above the $655.5 billion in total managed assets.