Former Citadel portfolio managers Niall O’Keeffe and Tio Charbaghi have delivered a strong first-quarter performance at their hedge fund, FIFTHDELTA, capitalising on market turbulence while many larger hedge funds struggled with losses, according to a report by Bloomberg.

FIFTHDELTA returned 9% in the three months through March, according to a person familiar with the matter. This marks a significant rebound for the fund following a challenging 2023. The firm adjusted its investment strategy to cap portfolio volatility, reducing its target volatility range to 7%-10% from the previous 10%-15%, the source added.

This performance stands in contrast to a 4.6% decline in the S&P 500 over the same period, as broader market volatility led to losses for some of the industry’s biggest players, including Millennium Management, Citadel, and Brevan Howard Asset Management. Equity-focused hedge funds collectively posted a 1.3% gain over January and February, according to Bloomberg data.

Launched in 2021 with $1.3bn in initial assets, FIFTHDELTA quickly became one of Europe’s most high-profile hedge fund startups. Since then, it has navigated sharp performance swings, experiencing double-digit gains and steep declines.

FIFTHDELTA's Q1 gains were driven by long and short positions, particularly in Europe and Asia. The fund profited from shorting auto manufacturers and taking positions in capital-goods stocks, according to the source.

The firm, which saw its assets shrink due to prior losses, now manages over $1 billion, bolstered by fresh inflows in Q1, including capital from multistrategy hedge fund Walleye Capital.

O’Keeffe and Charbaghi, who worked together at Ken Griffin’s Citadel for seven years, maintain a global focus on industrial and technology stocks. Their refined risk management approach appears to be paying off in the face of ongoing market volatility.

A representative for the London-based firm declined to comment.