Key Takeaways
- • Citadel founder Ken Griffin's implied hedge fund hurdle rate is about 8.2%, derived from his stated target of the risk-free rate plus 4%, with the three-month Treasury bill as the risk-free benchmark, according to eFinancialCareers' analysis of Bloomberg figures.
- • Citadel's Wellington, DE Shaw and Point72 were above the hurdle on year-to-date returns net of fees through September, while Millennium, Schonfeld, ExodusPoint, Verition, Brevan Howard, Balyasny, Walleye, Rokos, Marshall Wace, Arini and Taula were below it.
- • Arini was down 33% through September, and multistrategy funds commonly use four to five year lock-ups, which limits near-term investor redemptions.
- • Persistent underperformance is expected to become a longer-term problem for multistrategy funds, which face pressure to improve returns in the final months of 2026 and into 2027.
Summary
EFinancialCareers reports that Ken Griffin, speaking to Goldman Sachs, said hedge funds need an equilibrium return of 4% plus the risk-free cost of capital before investor money flows in. Using the three-month Treasury bill rate as the risk-free benchmark, the implied hurdle is roughly 8.2%. Based on Bloomberg data, the publication charted which funds had year-to-date returns net of fees above that level through September, and which had not.
On that measure, Citadel's Wellington fund, DE Shaw and Point72 are favoured. Other multistrategy funds, including Millennium, Schonfeld, ExodusPoint, Verition, Brevan Howard, Balyasny and Walleye, fall below the threshold. Single-strategy funds Rokos (macro), Marshall Wace (equities), Arini (credit) and Taula (macro) are also below it.
The article links this underperformance to recent market stress, including October's macro fund losses tied to French bonds, pain in credit funds as risk premiums rose, and a late-period episode that Barry Ritholtz described as a "huge, leveraged growth unwind" by major multistrategy funds caught in a crowded, systematic, long-leveraged growth equity trade. The publication warns annualised returns may deteriorate further.
In the short term, the impact on investors is limited because capital is locked up. Millennium raised $3.7bn for a share class with a five-year lock-up in 2019 and is moving other investors onto those terms. Arini, down 33% through September, has investor capital locked for an average of two years, according to Rupak Ghose. Over the longer term, persistent weak performance is expected to become problematic. Bloomberg's Nishant Kumar has attributed the losses to crowded trades, while Ritholtz described forced liquidations as 108 separate pods were closed and unwound after risk limits were breached. The article notes that funds are likely to tighten risk limits after such episodes.
On that measure, Citadel's Wellington fund, DE Shaw and Point72 are favoured. Other multistrategy funds, including Millennium, Schonfeld, ExodusPoint, Verition, Brevan Howard, Balyasny and Walleye, fall below the threshold. Single-strategy funds Rokos (macro), Marshall Wace (equities), Arini (credit) and Taula (macro) are also below it.
The article links this underperformance to recent market stress, including October's macro fund losses tied to French bonds, pain in credit funds as risk premiums rose, and a late-period episode that Barry Ritholtz described as a "huge, leveraged growth unwind" by major multistrategy funds caught in a crowded, systematic, long-leveraged growth equity trade. The publication warns annualised returns may deteriorate further.
In the short term, the impact on investors is limited because capital is locked up. Millennium raised $3.7bn for a share class with a five-year lock-up in 2019 and is moving other investors onto those terms. Arini, down 33% through September, has investor capital locked for an average of two years, according to Rupak Ghose. Over the longer term, persistent weak performance is expected to become problematic. Bloomberg's Nishant Kumar has attributed the losses to crowded trades, while Ritholtz described forced liquidations as 108 separate pods were closed and unwound after risk limits were breached. The article notes that funds are likely to tighten risk limits after such episodes.
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