Up High, Down Low

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What’s going on?

Data out this week showed that hedge fund Citadel broke profit records last year.

What does this mean?

The selling point of any hedge fund is its ability to make money in even the most trying market conditions, so last year’s financial earthquakes left them working overtime to dodge the falling masonry and turn a profit. And boy, did Citadel succeed: the fund manager made a series of savvy bets across all kinds of assets that carried its main hedge fund to an envy-inducing 38% return last year. Factoring in strong performances by other areas of the business, that amounted to a tidy $16 billion profit – the biggest dollar gain racked up by any hedge fund ever. That meant Citadel pipped Ray Dalio’s Bridgewater to the post, taking gold as the most successful hedge fund manager of all time.

Why should I care?

The bigger picture: Caged tiger.

If you’re staring miserably at your own portfolio after reading that, you’re not alone: while the top 20 managers of all time raked in total gains of over $22 billion last year, hedge funds overall lost $208 billion – dragged down by especially hard-hit growth stocks. The single biggest loser was American investment firm Tiger Global, joining the Investing Hall of Shame with the biggest annual loss in hedge fund history: an eye-watering $18 billion.

For you personally: ETF, phone home.

To access hedge funds, you need to be some kind of VIP – either a big-dog institution or high-net-worth fat cat. But if you’re neither canine nor fat, fear not: there are some ETFs that let regular Joes sample the kind of trading strategies that hedge funds use. You’ll need to keep your wits about you if you invest in them, though. They can be risky, and a misstep could send your portfolio the way of Tiger Global’s faster than you can say “upsy-daisy”.

Originally Posted January 23, 2023 – Up High, Down Low

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