Chicago hedge fund Citadel hailed smashes record £13bn gain

A hedge fund has been hailed as the most successful in history after raking in a record £13billion profit for investors last year.

The boom at Citadel, a Chicago-based fund that manages £44billion in assets, surpassed the previous record of £12.6billion made in 2007 by fund manager John Paulson, whose bet against sub-prime mortgages at the start of the global financial crisis was labelled the ‘greatest trade ever’.

But Citadel’s performance appeared to have eclipsed Paulson’s record after 16 years, with its flagship hedge fund gaining 38 per cent last year after making money in all five of its core areas, rather than from a single trade.

The fund is run by Ken Griffin, a hedge fund manager from Florida who founded Citadel in 1990 and is estimated to have a net worth of over £26billion.

Estimates by LCH Investments, run by private bank Edmond de Rothschild, found that the world’s 20 biggest hedge funds generated £18.2billion in profit after fees in 2022.

But the picture was much darker for the rest of the sector, with LCH estimating that while the top 20 funds saw returns of 3.4 per cent, the rest suffered losses of 8.2 per cent.

Overall, the industry lost £169billion last year as global markets were hit by rising interest rates, inflation and the war in Ukraine.

But the performance showed the growing dominance of large multi-strategy hedge funds, which rather than investing primarily in stocks spread their portfolios across other assets such as government bonds and currency trading.

Having a larger and more diverse portfolio also allows these funds to attract higher fees.