Ken Griffin's Citadel is returning $7 billion to clients as his firm outperforms hedge fund peers

• Citadel will hand out $7 billion in profits to its investors, the Wall Street Journal reported.
• The hedge fund outperformed its peers this year, returning almost 15% in its flagship fund.
• Hedge funds overall averaged returns of 4.35% in the last year amid a slew of challenges.

Citadel plans to distribute $7 billion in profits among its clients, after securing sizable returns despite a volatile year, The Wall Street Journal reported on Tuesday.

The firm, led by billionaire Ken Griffin, has outperformed other hedge funds in 2023. This year through November, its flagshipWellington Fund, a multi-strategy fund that invest in stocks, bonds, and other asset classes, has returned almost 15%, while hedge funds averaged gains of 4.35% gains, according to HFR research cited by the WSJ.

Navigating 2023 was no easy task for hedge funds. Markets were whipsawed by banking turmoil, a massive bond market retreat and sharp rebound, the AI-driven boom in tech stocks, and a huge November rally.

Conditions have become so unpredictable, famed short seller Jim Chanos closed down his hedge funds in November.

"The marketplace for what I do has changed," he explained.

But Citadel's solid performance may result from its atypical approach to the market, allowing independent teams to pursue investments, rather than relying on one leading manager, WSJ said.

Citadel regularly returns profits to clients as their cash piles grow too big to invest. Since 2018, the hedge fund has returned around $25 billion. Entering 2024, Citadel is expected to have $58 billion in assets under management.

The hedge fund declined to comment to Business Insider.

Update: December 12, 2023: A previous version of this story compared the performance of the multi-strategy Wellington fund to the all-stock S&P 500. This comparison has been removed.