As multistrategy hedge funds continued their hot streak last year, D.E. Shaw rose to the top of the 2024 rankings of the best performers by LCH Investments. D.E. Shaw made $11.1 billion for investors in 2024, the most of any of the top 20 managers in the ranking.
Citadel, which made an estimated $9 billion for investors in 2024, according to LCH Investments Chairman Rick Sopher, ranked number one in net gains since inception, with some $83 billion delivered to investors since 1990 for a 19.5 percent annualized return. This is the third year in a row that Citadel has held onto that spot.
But on an annual basis, Citadel came in third last year, with Millennium also outdoing Citadel in the LCH ranking by earning investors an estimated $9.4 billion. Millennium is now the biggest of the top 20 firms, with $74 billion in assets under management, according to LCH. It gained 15 percent last year, slightly below the 15.1 percent of Citadel’s multistrategy Wellington fund, according to people familiar with both funds.
Citadel, which has been regularly returning capital to investors, ended 2024 with $64.9 billion, according to LCH. Several other Citadel funds were high performers. Citadel Tactical Trading gained 22.3 percent last year, Citadel Equities rose 18 percent, and Citadel Global Fixed Income fund was up 9.7 percent, according to an individual familiar with the numbers.
In terms of net gains over time, D.E. Shaw now comes in second, with $67.2 billion, while Millennium is third, with $65.5 billion, LCH said. Last year’s strong performance by D.E. Shaw came from its largest multistrategy hedge fund, Composite, which rose 18 percent, while Oculus, the firm’s macro-oriented multistrategy fund, jumped 36.1 percent.
Composite and Oculus remain closed to new capital, and the firm returned half of the gains of those funds to outside investors at the end of the year, according to an individual familiar with the firm.
“The greatest gains in dollar terms were generated once again by the large firms which allocate on a multi-manager basis mainly to internal teams, Citadel, D.E. Shaw, and Millennium,” said Sopher, who noted that performance was generally strong in hedge funds across the board in 2024.
But the biggest firms continue to make the bulk of the gains. Last year the top 20 firms generated asset weighted returns of 13.1 percent, according to LCH estimates, far outdoing the average hedge fund as the HFRI Asset Weighted Composite Index returned 8.3 percent. The top firms managed 20.2 percent of the total hedge fund assets at the end of 2024 and have made 44.3 percent of the gains for investors since inception.
Last year they made $93.7 billion net of fees for their investors and have made $854.5 billion net of fees for their investors since inception, according to Sopher’s estimates
The massive net gain, however, “masks the significant level of fees (both management and performance fees) that are charged to investors,” he added. Since inception, he estimated that the fees of the top 20 hedge fund managers come to 34.3 percent of the gross gains.
In the industry overall the fee take has increased from around 30 percent of gross gains to around 50 percent of gross gains, he said.
“The increase in the fee take as a proportion of gross gains is explained largely by the fall in the gross percentage returns made by hedge funds, combined with the upward creep in the average percentage fee rates charged by hedge funds, especially for management fees,” explained Sopher.
That is largely due to the impact of the fixed management fees, which have come to represent a higher proportion of gains. “Whereas fixed management fees used to represent less than 10 percent of gross gains in the first decades of hedge funds, they represented an estimated 29.5 percent of gross gains in the past two decades,” Sopher said.