The rapid expansion of multi-strategy hedge funds is at an end, according to Ken Griffin, founder of Citadel, who, in an interview with Bloomberg News after speaking at the Oxford union this week, said: “That chapter has come and gone."
“The AUM flows into multi-strategy funds are basically a push today," added Griffin.
Multi-strategy funds, which employ diverse investment approaches across multiple teams, have been a dominant force in the $4.5tn hedge fund industry, thanks to their ability to deliver steady returns, charge premium fees, and attract top talent. These funds also leverage significant borrowing to amplify their trades.
Over the past decade, firms like Citadel, Millennium Management, and DE Shaw saw dramatic growth, with Citadel’s assets under management (AUM) surging to $65bn, Millennium to $70bn, and DE Shaw reaching $60bn. However, Griffin noted that many leading players are no longer actively raising capital due to constraints such as a limited pool of elite trading talent and challenges in managing leveraged positions.
Multi-strategy fund assets have declined slightly to $366bn this year, marking their first drop since 2016, according to Goldman Sachs. This follows years of significant growth from $134bn in 2017.
Griffin attributed the multi-strategy boom in part to their consistent returns of capital to limited partners (LPs). “Let’s face it: that was driven by the fact that we, in particular, were returning billions of dollars of capital a year back to LPs. They were looking to put that money to work,” he said.
Since 2017, Citadel has returned $25bn to its clients, effectively managing its size and ensuring sustained performance.
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