2023 Hedge Fund Report – A Year in Review - Citco (2024)

FAQs

2023 Hedge Fund Report – A Year in Review - Citco? ›

Citco said equity hedge fund strategies had a weighted average return of 21.91% for 2023, followed by fixed income arbitrage at 12.63% and multi-strategy at 12.56%. Overall, the weighted average return for funds was 14.66% was welcome news following the -7.02% return logged in a challenging 2022.

The median performing hedge fund returned 7.2% for the year. The median performing hedge fund sub-strategies were credit – direct lending (ranked 18th^th out of 36 sub-strategies returning 8.0%) and arb-CB (19^th: 8.0%).

A hedge fund administrator handles functions like accounting, reporting, operations, technology, compliance, and investor services. This allows the fund manager to focus entirely on investing and client relations.

Decision-making: Hedge funds and other investment money managing firms are typically fast-paced work environments. People in these roles need to make quick and efficient decisions, as they have to respond to stock market changes, which can occur often.

Most hedge and private equity funds target a net IRR of 15% for their investors (after fees). This provides their investors with a meaningful premium over historical average stock market returns of 8%.

Citadel and Millennium typically top lists charting the most profitable hedge funds. In 2023, Griffin's Citadel ranked second with a total profit of $8.1 billion and Millennium ranked fourth with $5.7 billion, according to a report by LCH Investments in January.

Billionaire Christopher Hohn's TCI led the annual ranking by 2023 returns, which were $12.9 billion after fees, while Citadel, Millennium Management and D. E. Shaw, all multi-strategy firms, were the top three hedge funds by lifetime gains.

Hedge fund managers typically earn above-average compensation, often from a two-and-twenty fee structure. Hedge fund managers typically specialize in a particular investment strategy that they then use to power their fund portfolio's mandate for profits.

In terms of everyday responsibilities, the main duties of a fund manager include building financial models, meeting with clients, and analysing investments. At a higher level, they oversee the hedge fund's daily operations. This might include risk management, marketing, sales, and cash flow forecasting.

Who is the richest hedge fund manager? ›

Who Is the Richest Hedge Fund Manager? Ken Griffin of Citadel is both the richest hedge fund manager and the highest paid. In 2022, he earned $41. billion, and by the beginning of 2023 his net worth was estimated at $35 billion.

Hedge Fund Analyst Hours and Lifestyle

At smaller, single-manager funds, the average might be 10-12 hours per day, for a total of 50-60 hours per week (weekend work is rare). As you move to larger, multi-manager funds, the hours and stress get worse, so the average may be more like 60-70 hours per week.

It's extremely difficult to break into hedge funds, and once you're in, the job is stressful and requires long hours and sacrifices.

The 2 and 20 is a hedge fund compensation structure consisting of a management fee and a performance fee. 2% represents a management fee which is applied to the total assets under management. A 20% performance fee is charged on the profits that the hedge fund generates, beyond a specified minimum threshold.

Hedge funds set high barriers to entry, which screen out most investors. Hedge funds tend to have specific characteristics and features. They require wealth to participate. Hedge funds typically require an investor to have a liquid net worth of at least $1 million, or annual income of more than $200,000.

Citadel, a Miami-based multistrategy hedge-fund firm, led the list with a $74 billion net gain for its investors since inception in 1990 through 2023.

Billionaire money managers Chris Hohn and Ken Griffin led hedge funds to deliver one of the best years for clients in 2023. The industry produced combined gains worth $218 billion after fees, according to estimates by LCH Investments, a fund of hedge funds.

Year-to-date, the index was up 6.84% (7.11%), as the 2023 return was up 24.23% (26.29%), making up for 2022's 19.44% decline; the one-year return was 28.36% (30.45%). The index was up 50.50% (60.64%) from its pre-COVID-19 Feb. 19, 2020, closing high.

As a result, 2023 was the third-most-profitable year for the 25 highest earners, slightly behind the total in 2021. The best year was 2020, when the top 25 made a total of $31.71 billion. This year, 11 of the 25 made at least $1 billion.

Reality Check: S&P 500 Outperforms Hedge Funds 🚀

Data shows that hedge funds consistently underperformed the S&P 500 every year since 2011. The average annual return for hedge funds was about 4.956%, while the S&P 500 averaged 14.4%.