The World's Largest Hedge Funds Reported Bumper Profits, According to Research

Analysis indicates that the world's foremost hedge funds achieved unprecedented profits last year, propelled by a resurgence in stock markets. The top 20 funds generated $67 billion in investor profits in 2023, surpassing the $65 billion recorded during the pandemic-driven rally in 2021, according to research from LCH Investments, a fund of hedge funds. This figure is nearly triple the $22.4 billion earned by fund managers for investors in 2022.

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The fund management industry, as a whole, saw gains of $218 billion after fees, as estimated by LCH Investments.

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Despite representing less than a fifth (19%) of the industry's assets, the top funds—identified as those with the best performance in dollar terms since their inception—contributed approximately one-third of the annual profits in the previous year. Notable performers among them included TCI by Christopher Hohn, Citadel by Ken Griffin, and Viking by Andreas Halvorsen.

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Brad Amiee, Director and Head of Research at LCH Investments, attributed the success of leading funds to the "fantastic run" in the stock market during 2023. Additionally, he highlighted the astute stock selection strategies employed by many of these funds, emphasizing the effectiveness of maintaining a long-biased approach and concentrating on a portfolio of high-quality positions, especially considering the challenges associated with shorting.

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The top-ranking fund, TCI, achieved investor profits of $12.9 billion, concluding the year with a 33% gain, surpassing the S&P 500's 24% increase. Citadel, securing the second position in 2023, generated $8.1 billion in profits, building on its record-breaking $16 billion in 2022. With $74 billion in gains since inception, Citadel stands as the most successful hedge fund in history.

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The research further revealed that the top 20 funds collectively accumulated $755.4 billion in profits since their inception, surpassing the total managed assets of $655.5 billion. Hedge funds, structured as limited partnerships of private investors with fund managers overseeing their investments, are renowned for their inclination toward higher-risk and unconventional assets compared to mutual funds.

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