Ken Griffin's Citadel Offer Clients To Cash Out Profits After A 15% Year, But Most Decline

In what was at best a mediocre year (by its own standards) for Ken Griffin's flagship hedge fund, Wellington, which generated a 2024 return of 15.1% and underperformed the S&P (which does not charge 2 and 20) by roughly 10%, Citadel invited clients to cash out their profits, but the vast majority opted to keep their money in the multistrategy hedge fund, Bloomberg reported.

The voluntary profit distribution offered in recent weeks had few takers, and out of the billions of dollars in profits Citadel made last year, only about $300 million is exiting the firm, the Bloomberg source said. In other words, the rich are so rich, they don't even bother harvesting gains, let alone principal.

While it may not have been a stellar return, Citadel’s main Wellington hedge fund made money last year across all five strategies, equities, fixed income and macro, commodities, credit and convertibles and global quantitative strategies.

The latest proposal differed from recent years, when Citadel required investors to redeem profits rather than making it optional. The firm, which manages $66 billion of assets, previously gave clients the choice of whether to redeem profits but hasn’t done so in recent years.

Ironically, in a world where many investors would promptly send over their redemption letters to any other hedge fund that generate a measly 15% past year, Ken Griffin can seemingly go no wrong. Meanwhile, the ability to keep profits with high-performing hedge funds is a boon for investors, who are increasingly running out of options to allocate money to the most desired investment firms. The vast majority aren’t taking new money, and some are even returning capital; meanwhile new up and coming hedge fund managers are barely able to scrape a couple million dollars together as most of the capital flows is now going toward such multi-strat funds as Citadel, Balyasny, Millennium and DE Shaw.

And speaking of, DE Shaw is preparing to hand back billions of dollars to external clients after two of its biggest hedge funds produced double-digit returns last year.

In the past, Citadel has regularly returned profits - a total of $25 billion since 2017 - and the firm hasn’t been actively raising money for years. Its billionaire founder, Ken Griffin, recently told Bloomberg that the growth of multistrategy hedge funds was boosted by billions of capital returns to investors.

Multistrat funds, which rely on multiple teams of traders to make money - who often times trade against each other leaving the risk-management back office tearing out their hair over how to properly manage risk exposure - have gobbled up cash in recent years by delivering mostly steady gains even during periods of market volatility, driven by a broad variety of investing approaches in their trading teams. Their ability to charge higher fees, spend big to recruit the best traders and fuel their positions with borrowed money has made them the most influential force in the $4.5 trillion hedge fund industry.