Iran Conflict Triggers Losses for Citadel, Millennium and Point72
Big-name hedge funds hit by big dollar-figure losses amid market upheaval
Hedge funds were off to a roaring start this year, overcoming market fears about artificial intelligence, tariffs and private credit to post two straight months of solid gains.
Then came the U.S.-Israeli strikes on Iran.
Some of the world’s savviest investors suffered big dollar-figure losses last week after the conflict in the Middle East sent global markets on a wild ride, with oil prices surging and bonds selling off.
Citadel, Millennium Management and Point72 were among those hit by the market fallout, according to people familiar with the matter, as were Balyasny Asset Management and ExodusPoint Capital Management.
Millennium and Point72 each lost $1.5 billion last week, the people said, while Citadel lost about $1 billion in its fixed-income and macro business.
While there wasn’t a particular trade that stoked the losses, some funds were hit by macroeconomic bond-market bets that went awry. That includes the popular steepener trade, in which investors bet on a widening gap between short- and long-dated bond yields.
Balyasny lost about $1 billion, including $700 million in its fixed-income business alone, the people said. ExodusPoint lost a couple hundred million dollars on bond-market bets.
Billion-dollar losses for the world’s most famous hedge funds are relatively modest on a percentage basis, given how many assets they oversee. Many of the firms remain up for the year.
Citadel, which oversees $66 billion, finished last week down about 2% in its flagship Wellington fund, but was still up for the year. Millennium and Point72—which oversee nearly $87 billion and almost $46 billion, respectively—are also still in positive territory year to date, people familiar with the firms’ performance said.
Balyasny suffered a 3.5% loss last week, putting it down 3.1% for the year as of Friday, according to people familiar with the firm’s performance.
Some of the performance figures were earlier reported by Bloomberg News.
The losses underscore the extent to which the conflict in Iran has upended perceived wisdom in the bond markets. Going into this year, investors had expected inflation to continue to moderate, and for central banks to keep cutting interest rates. Bond yields around the world trended lower.
The rapid surge in oil prices has turned those expectations on their head, prompting traders to suddenly bet on inflation rising. Bond yields have correspondingly jumped. Traders are now betting that some central banks might no longer cut rates at all—or may even raise rates.
In recent weeks, investors had grown accustomed to the idea that the U.S. might strike Iran. They had watched for weeks as military hardware poured into the Middle East. But the speed and severity of Iran’s response to the strikes—and the sudden choking off of global oil markets—caught some traders off guard.
Many of the hedge funds that suffered losses last week are so-called multimanager funds—a type of investor that is different from the swing-for-the-fence firms of yesteryear. Rather than going big on a few risky bets, they instead divvy up money, in some cases, across hundreds of specialized investment teams.
The strategy for these funds is to go for base hits, not home runs. They run a so-called market-neutral approach that aims to benefit from rising and falling markets. And their businesses are typically diversified across stocks, bonds, currencies, commodities and beyond. That means when a few trades suffer, they ideally have other winners to help offset any losses.
Losses for the first week of March don’t necessarily mean that these firms will finish the month lower. While last week’s market upheaval may have led to losses as some funds recalibrated their positions, ongoing volatility could offer opportunities to profit.
Last year, some hedge funds were caught off guard by President Trump’s Liberation Day tariffs. Yet many such firms finished higher last year.
Before the conflict in the Middle East started, hedge funds were up more than 3% through February, according to a broad hedge-fund index from research firm PivotalPath.