Citadel, the hedge fund run by billionaire Ken Griffin, reported a record $16 billion in profit last year — knocking off Ray Dalio’s Bridgewater as the most successful firm seven years running.
The Miami-based investing giant, which manages $54 billion in assets, reported a 38.1% return on its main hedge fund, according to the Financial Times, which cited research by LCH Investments, a subsidiary of European-based investment house Edmond de Rothschild.
LCH Investments reported that Citadel’s total gross trading profit last year amounted to $28 billion. Investors were charged around $12 billion in expenses and performance fees, according to FT.
Since its founding in 1990, Citadel has reported net gains of $66 billion — besting Dalio’s Bridgewater, which generated net gains of more than $58 billion.
The $16 billion profit that Citadel netted for its investors surpasses the $15.6 billion bet made by John Paulson against subprime mortgages back in 2007.
Citadel’s windfall wasn’t powered by any single outsized bet, but rather by successful trades across the equities and fixed income markets, according to Bloomberg. Citadel also generated revenue by moving beyond options trading and expanding into equities, foreign exchange, credit indexes, commodities, exchange-traded funds, and interest-rate swaps.
Citadel told investors its flagship Wellington fund returned roughly 32% through the end of November, a sharp contrast to much of Wall Street and the economy at large. By then, the average hedge fund lost 4% and the benchmark S&P 500 stock index plunged 16% as the Federal Reserve wrestles with high inflation and a potential recession.
Citadel Securities, which has been dubbed “the Amazon of financial markets,” is responsible for one out of every five stock trades made in the United States.
It has become one of Wall Street’s biggest “market makers” — or companies that quote the buy and sell price of securities and then profit from the difference in the bid-ask spread.
Citadel Securities, the market-making arm of Griffin’s empire, reported a record $7.5 billion of revenue last year, according to Bloomberg News. The unit is partly credited for the rise of retail brokerages such as Robinhood.
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Griffin, whose net worth has been valued by Bloomberg at $29.4 billion, built his fortune on quantitative analysis, or quant trading, which relies on computer algorithms and statistical analysis to gauge where the market is going.
Griffin generated headlines last year when he announced that Citadel would relocate its headquarters from Chicago to his native South Florida. Griffin, an enthusiastic supporter of Florida Gov. Ron DeSantis, cited surging crime rates in the Windy City as one of the main driving forces for the move.
Griffin, who in 2019 purchased the most expensive home in the US for $238 million — a penthouse in the high-rise at 220 Central Park South in Manhattan — warned last week that business leaders would flee New York City if violent crime rates continued to climb.
Griffin’s warning came weeks after his firm unveiled plans to develop a brand-new “1.7 million square foot trophy office tower” in Midtownthat would become Citadel’s key hub in the city.
Citadel’s planned skyscraper will replace adjacent buildings at 350 Park Avenue, 40 East 52nd Streetand 39 East 51st Street and eventually house all of its New York City-based employees.
The company has approximately 1,500 workers in New York and approximately 4,000 workers globally.
Additional Reporting by Thomas Barrabi
