(Reuters) In 2022, when fears of rising interest rates and geopolitical uncertainty weighed on markets, investment firms that focused on trading strategies and bet on macroeconomic trends reaped gains.
Those with strategies linked to market moves stumbled.
Last year will mostly be remembered as a tough one, with the broader S&P 500 (.SPX) index losing 20% and blue chip hedge fund managers like Tiger Global and Third Point nursing losses.
Tiger Global was on the brink of collapsing all last year as it struggled to stay afloat.
Overall, hedge funds lost $208 billion in 2022 for clients, marking the biggest single-year decline since 2008, when they lost $565 billion, LCH data showed.
Hedge funds, which were jointly managing $3.3 trillion on Dec. 31, 2022, according to eVestment data, often promise to outperform, especially when markets are stumbling.
And according to WSJ, short sellers were down $81 billion by the end of January this new year after stocks rallied.
Goldman says bigger short squeezes are coming since the ‘meme stock’ frenzy.
Still, the direction of the market in 2023 is uncertain as recession talks loom.
Few Hedge Funds Survived 2022
The 20 best performing hedge fund managers earned $22.4 billion for investors in 2022, marking their slimmest gains since 2016 as many firms, including Tiger Global Management, struggled with slumping financial markets, LCH Investments data show.
Citadel’s gain of $16 billion last year was the largest annual gain ever made by a hedge fund manager, LCH said.
The top 20 managers, led by Ken Griffin’s Citadel, Bridgewater Associates and D.E. Shaw Group, made less than half of the $65.4 billion the group returned in 2021 when rising stock prices led to a record return.
In comparison, they made $63.5 billion in 2020 and $59.3 billion in 2019.
“Redditors, thank you so much for helping create the best pipeline we’ve ever had”, said Ken Griffin on Business Insider.
Ken Griffin, on how the GameStop frenzy helped raise Citadel’s profile with potential hires.
The GameStop affair, in an odd twist, actually helped boost Citadel’s clout with potential recruits, Griffin said.
“For a lot of people this was a wake-up call that this firm Citadel is actually one of the most important players in the world’s financial markets,” he told Business Insider.
“Redditors, thank you so much for helping create the best pipeline we’ve ever had.”
Citadel Securities had to receive a $1.2 billion lifeline from partners Sequoia and Paradigm in the beginning of 2022.
In March, the hedge fund froze customers from being able to withdraw their money.
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