Ken Griffin, founder of Citadel, one of the largest hedge funds in the world, and known as the 'new king of hedge funds,' stated that the explosive growth era for multi-strategy hedge funds has ended.
The Citadel founder said, 'That chapter is over; today, the inflow of funds into multi-strategy funds has basically stagnated.'
In recent years, these funds have attracted significant capital by providing relatively stable returns during market volatility, thanks to the various investment methods employed by their trading teams. They are able to charge higher fees, aggressively recruit top traders, and use borrowed funds to increase their positions, making them the most influential forces in the $4.5 trillion hedge fund industry.
Since 2008, Citadel's capital has increased more than fivefold, reaching $65 billion; its competitor Millennium Management has also expanded at the same pace to over $70 billion, while D.E. Shaw & Co. has accumulated over $60 billion. Many top funds face difficulties in continuing to grow due to talent shortages and restrictions on leveraged investments, so they are no longer actively raising funds.
According to data from Goldman Sachs, the assets managed by multi-strategy hedge funds have slightly declined to $366 billion this year, marking the first decrease 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 Trump's potential tariff policies 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 will perform better.
Griffin stated, 'The biggest change is not a specific company but that the entrepreneurial spirit in the U.S. is being reignited.'
He predicts that under the new government, companies will be more willing to take risks, build more factories, invest more in research and development, and allocate more funds to long-term investments from customer acquisition to new technologies.
When discussing the risks emerging in the hedge fund industry, particularly 'basis trading,' Griffin said that the current market size has shrunk significantly.
This trading method is favored by a few of the largest hedge funds in the world, aimed at profiting 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 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.'
Article reposted from: Jin Shi Data