Bigger Was Better in 2022: Global Hedge-Fund Industry Sees Split

A handful of giant firms are gaining dominance over the hottest corners of the hedge fund industry. This year showed why.

While nearly all hedge fund indexes are negative, a closer look at the data shows that multi-strategy and macro funds with the biggest concentration of investors’ cash posted gains, shielding clients from a ferocious selloff in global markets as central banks began raising rates and rolling back years of quantitative easing.

Giants from Citadel to Millennium Management produced double-digit gains as their army of traders once again earned steady returns. Those betting on macro economic trends, such as $5 billion Haidar Capital and $15.5 billion Rokos Capital Management, are poised for record annual gains.

“2022 is a tale of bifurcation on all aspects,” said Nicolas Roth, head of alternative assets at Geneva-based private bank Reyl & Cie. “From performance, asset raising to hiring, big hedge funds roared back, while small guys are struggling.”

Both critics and fans have plenty of material this year for arguments in support of or against the $4 trillion industry.

For detractors, another lousy year for stock pickers was best captured by Tiger Global Management hedge fund’s 54% slump after its bets on stocks and private assets imploded. The $75 billion of net outflows from the industry is another indication that many investors now view hedge fund fees as no longer worth paying.

Yet supporters could point to rising demand for the most coveted funds. To gain access, many are now accepting fees that can rise to many times traditional hedge fund charges and are willing to lock away their investments for longer. Others are being turned away as the funds close their doors to new money.