Hedge fund profits soared in 2023, but which ones did best?

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. Hohn’s TCI Fund Management made $12.9 billion to top LCH’s rankings, followed by Citadel, which made $8.1 billion.

The annual survey focuses on money managers with the most overall profits in absolute dollar terms since inception, and as a result the largest and oldest hedge funds typically tend to do best. The top 20 firms, which oversee less than a fifth of the industry’s assets, generated $67 billion or roughly a third of the gains last year.

As measured by a more traditional way of assessing returns, the top grouping gained 10.5% in 2023, outperforming the average hedge fund which returned 6.4%. Over the past three years, the top 20 have generated 83% of the absolute gains made by all hedge fund managers, the report found. 

“In most cases this reflects an ability to limit the downside in adverse conditions and to make money when conditions are favourable, as they were toward the end of 2023,” Rick Sopher, chairman of LCH, said in a statement. “These managers have been generating above average performance over several decades reflecting the persistence of their superior returns.” 

The report also shows the dominance of large multistrategy hedge funds that have been gobbling up assets, talent and leverage in recent years, causing unease among regulators, investors and traders.

Citadel, Izzy Englander’s Millennium Management, and D.E. Shaw & Co. lead the rankings for most money made since launch. Over the past three years alone, the trio generated $71.2 billion of gains representing 38.3% of the total profits of all hedge funds. They managed 4.6% of industry assets at the end of last year, LCH estimates. 

“Firms of this type typically run with leverage levels far higher than the average hedge fund, which has helped boost their performance,” Sopher said. “Their strong net returns have been achieved after passing on substantial operating costs, which continue to be tolerated by their investors. The sustainability and acceptability to investors and regulators of the risks involved in these models is rightly coming under scrutiny.”

Top 20 Managers Ranked by Profits in 2023

Source: LCH Investments; Gains are in billions of dollars 

Note: * Denotes gains frozen when all outside capital returned