Citadel Posts Record Revenues for Hedge-Fund, Securities Operations
Hedge-fund business is said to have taken in $28 billion in revenue for 2022
Citadel’s winning streak continued in 2022, with Kenneth Griffin’s hedge-fund and electronic-trading businesses both posting record revenues even as markets swooned, people familiar with the matter said.
Citadel, the hedge-fund operation with $54.5 billion under management as of Jan. 1, had about $28 billion in revenue, the people said. That far outstripped its prior record of $16.2 billion the year before. The separate Citadel Securities, one of the world’s biggest electronic-trading firms, had $7.5 billion in revenue, up from the prior record of $7 billion in 2021.
After a near-death experience in 2008, Citadel went on in recent years to outpace many rivals, and each of its hedge funds posted double-digit gains after fees in 2022. Operating under tight risk controls that leave Citadel with little directional exposure to markets, the firm’s 1,000-plus traders make bets across asset classes in markets around the world. The firm doesn’t provide detailed information to clients about significant trades, though earlier in the year it told them it had benefited from successful commodities bets.
Citadel Securities is a global market-making operation that handles more than 20% of the shares that change hands in U.S. stock markets each day. The business, which also trades futures, options, Treasurys and currencies, benefits from increased volumes and volatility, allowing it to prosper even when markets fall. In 2022, it added new institutional clients and improved its technology and analytics, one of the people said.
The pandemic-era boom in activity by individual investors has benefited Citadel Securities’ so-called retail-wholesaler unit, which executes orders for brokerages such as Charles Schwab Corp. and Robinhood Markets Inc. Last year’s uptick in revenue for Citadel Securities took place even though overall retail stock-trading volumes declined in 2022 relative to 2021, underscoring the strength of Citadel Securities’ other businesses.
The revenue bonanza will add to the already considerable fortune of Mr. Griffin, 54 years old, who in addition to regularly breaking records in the real estate and art markets, has emerged as a major GOP donor. Forbes estimates Mr. Griffin’s wealth at around $31 billion.
Many hedge funds had rougher years. Goldman Sachs Group Inc. told its prime-brokerage clients in a recent note that hedge funds betting on and against stocks lost an average 12.9% for the year, on an asset-weighted basis, while the S&P 500 lost about 18% including dividends. Citadel’s flagship multistrategy fund, Wellington, returned 38.1% by contrast. The Wall Street Journal previously reported that commodities made up more than 60% of the second-quarter gross investment gains for Wellington.
Citadel returned about $8.5 billion in profits to its investors Dec. 31, up from the $7 billion it earlier expected. (Funds that have notched huge gains regularly return some money in efforts to limit their size and stay nimble.)
Rivals Millennium Management and Point72 Asset Management gained 12.4% and 11.8% for the year, respectively. D.E. Shaw Group’s flagship multistrategy fund, Composite, returned about 24.7%.
All of Citadel’s five strategies—fixed income and macro, commodities, equities, quant and credit—were profitable for the year, people familiar with the matter said. That was evident in the returns of its three other hedge funds, which notched gains of more than 20%. One of the funds, Citadel Equities, was up 21.4% for the year.