Employee compensation remained a significant cost drag at Citadel last year, even as returns moderated, highlighting the structural pressures facing large multi-strategy hedge funds competing aggressively for talent, according to a report by Bloomberg.

The report cites bond offering documents as showing that operating costs charged to Citadel’s three flagship multi-strategy funds — which together account for the bulk of the firm’s roughly $66bn in assets — rose 4% in 2025 to nearly $4.5bn. While full-year compensation figures were not disclosed, extrapolating from expense ratios for the first nine months suggests staff pay totalled about $3.8bn, broadly unchanged from the prior year.

Compensation is typically the largest expense for multi-strategy platforms, where pay levels tend to remain elevated even when overall fund performance softens due to uneven results across trading teams.

Citadel’s three flagship funds generated net investment gains of $11.1bn for the year, down 14% year-on-year. Combined with higher operating costs, this led to a 22% drop in net income to approximately $5.3bn.

Performance at the firm’s flagship Wellington fund illustrated the dynamic. The fund returned 10.3% in 2025 – its weakest result since 2018 and well below its long-term annualised average of 19%. Wellington managed around $15.6bn as of the start of 2026.

Citadel said the firm continues to prioritise investment in people, technology and infrastructure to protect long-term performance. A spokesperson added that principals and employees are the largest investors in the funds, participating on the same economic terms as external clients.

Like most multi-strategy managers, Citadel passes operating costs through to investors in addition to charging management and performance fees, making the model one of the most expensive in the hedge fund industry. Historically, investors have been willing to absorb the cost burden in exchange for consistent, market-beating returns.

Last year’s softer performance was driven by weaker results in commodities, quantitative strategies and credit, while equities, fixed income and macro trading delivered gains. Credit losses were minimal, according to the firm.

Separately, a Citadel financing vehicle raised $1.25bn last week via a two-part US bond sale, underlining the firm’s continued access to capital markets despite the more challenging performance backdrop.