(Bloomberg) — Citadel founder Ken Griffin was only half right last month when he said the multistrategy hedge fund boom had “come and gone.”
Most Read from Bloomberg
Yes, the amount of money these multimanager funds oversee has dipped from last year — partly because some, including Citadel, have returned billions of dollars of profits to clients.
But the firms, also known as pod shops, are still in their heyday — and several rank among the world’s largest hedge funds. Demand for the biggest among them is strong, performance improved this year and the war for talent to trade their billions continues to rage.
Griffin said he expects some consolidation among the smaller multimanagers, most of which have sprung up over the past 15 years.
There are now 53 such firms, which oversaw a combined $366 billion at the end of June, down from $369 billion a year earlier, Goldman Sachs Group Inc. said in a September report. Net outflows totaled about $31 billion over that span, according to Goldman’s calculations, the first time since at least 2017 that more money went out than in.
Even so, it wasn’t all because clients were looking to exit. About one-third of the outflows was attributed to the hedge funds sending cash back unilaterally, worried that managing too much money would weigh on performance. Some of the bigger players expect to do so again in 2025.
Citadel regularly returns profits — a total of $25 billion since 2017. It managed $66 billion as of Dec. 1.
In September, for the first time in its history, Steve Cohen’s Point72 Asset Management said that it would also hand back profits after assets ballooned to more than $35 billion.
Investors flocked to multimanager funds in recent years because of their steady returns, even in volatile markets. Citadel’s assets have doubled over the past five years, roughly the same rate of growth as Izzy Englander’s Millennium Management, which oversaw $72 billion at the start of December. A few new managers have made strong debuts, including Bobby Jain and Diego Megia, who both raised more than $5 billion for their funds this year.
New Pod Shops
While multimanagers only account for about 8% of the $4.5 trillion invested in hedge funds, most of the money in the strategy is concentrated in a few large firms. Millennium, Citadel, Point72, Balyasny Asset Management and Hudson Bay Capital Management all oversee more than $20 billion each, ranking them among the world’s biggest hedge funds.
Unlike Citadel and Point72, Millennium continues to actively market its fund. This year, when it set out to raise $10 billion, investors clamored to get in, pledging more than double that amount.
