"The New King of Hedge Funds": The Era of Growth for Multi-Strategy Hedge Funds Has Ended!
Ken Griffin, the founder of Citadel, one of the world's largest hedge funds, stated that the era of growth for multi-strategy hedge funds has come to an end, with capital inflows essentially stagnating. Although these funds attracted capital due to their ability to provide stable returns amid market volatility, a shortage of talent and restrictions on leveraged investments have limited their growth. According to Goldman Sachs data, the assets managed by multi-strategy hedge funds slightly declined to $366 billion this year, marking the first decrease since 2016. Griffin also predicted that under new government leadership, the entrepreneurial spirit in the United States will be reignited, and companies will be more willing to take risks
Ken Griffin, the founder of Citadel, one of the world's largest hedge funds and known as the "new king of hedge funds," stated that the era of explosive growth for multi-strategy hedge funds has come to an end.
The Citadel founder said: "That chapter is over, and now the inflow of funds into multi-strategy funds has basically stagnated."
In recent years, these funds attracted significant capital by providing relatively stable returns during market volatility, thanks to the various investment methods employed by their trading teams. They have the ability to charge higher fees, aggressively recruit top traders, and use borrowed funds to increase their positions, making them one of the most influential forces in the $4.5 trillion hedge fund industry.
Since 2008, Citadel's capital has increased more than fivefold to $65 billion; its competitor Millennium Management has also expanded at the same rate to over $70 billion, while D.E. Shaw & Co. has accumulated over $60 billion. Many top funds are facing difficulties due to a talent shortage and the constraints on leveraged investment bets, limiting their ability to continue growing, and thus are no longer actively raising funds.
According to data from Goldman Sachs, the assets managed by multi-strategy hedge funds have slightly declined this year to $366 billion, marking the first decline since 2016. In 2017, the size of such funds was only $134 billion.
Citadel regularly returns profits to control its size, having returned $25 billion to clients since 2017.
Griffin—this 56-year-old hedge fund titan—discussed a range of topics on Monday, from potential tariff policies under Trump to investments and immigration.
When asked about the "Trump trade" for the next four years, Griffin paused for a long time before predicting that companies previously under regulatory pressure would perform better.
Griffin stated: "The biggest change is not a specific company, but the entrepreneurial spirit in the U.S. is being reignited."
He predicted that under the new government leadership, businesses would be more willing to take risks, build more factories, invest more in R&D, and allocate more funds to long-term investments from customer acquisition to new technologies.
Speaking about the risks emerging in the hedge fund industry, particularly "basis trading," Griffin noted that the current market size has shrunk significantly.
This trading method is favored by a few of the largest hedge funds in the world and aims to profit from the small price differences between U.S. Treasury spot and futures. The Financial Stability Board is considering a deeper study of these bets.
Griffin said: "Basis trading is no longer being mentioned, the spread between futures and futures bonds has narrowed, especially in the U.S. Treasury market, and the amount of allocated funds has decreased."