Citadel, the biggest hedge fund company in Chicago, delivered returns of about 13 percent to investors in its flagship funds last year—not bad by hedge fund standards, though still short of the S&P 500 Index's explosive 19 percent gain for 2017.
The firm's key funds, Kensington and Wellington, which invest in everything from stocks to bonds to derivatives, had 13 percent gains, according to a source familiar with the results. That bested the 8.5 percent average for hedge funds last year, based on calculations by Chicago consultant Hedge Fund Research.
Hedge funds won't typically release their results, but HFR collects a significant share of returns worldwide to produce a composite figure. A Citadel spokesman declined to comment.
Hedge funds don't aim to beat stock market gains. Rather, they charge a hefty fee—sometimes as much as 2 percent of assets plus a 20 percent share of profits—to generate consistent returns, which may not match strong markets, but won't dive to their depths, either.
That proposition has faced more skepticism in recent years, given strong stock market returns. As a result, $70 billion flowed out of hedge funds in 2016, on a net basis, though last year the industry resumed its growth with a relatively small $3 billion gain.
Citadel is led by CEO Ken Griffin, the richest man in Illinois, with about $8.7 billion, according to Forbes magazine. The firm has lived up to that industry aim for consistency in recent years, delivering 5 percent returns in 2016 that were about the same as rivals, though falling short of the 9.5 percent gain for the S&P 500.
Citadel's hedge fund operation has $27 billion under management for high-net-worth individuals and institutional investors, the most ever since Griffin founded the operation in 1990. The company has had its ups and downs during those nearly three decades, nearly collapsing in 2008 after negative 55 percent returns induced by the financial crisis.
But lately, Citadel has been steadily bulking up with big-name new hires and additions across its investment, trading and technology divisions. Griffin has also been expanding the company's sister trading operation he leads, Citadel Securities, which is located in the same Loop office building. Together, the two entities have about 2,000 employees in offices around the world, including London, New York, Dallas, Hong Kong and Toronto.
Last month, Citadel hired the former top Midwest official for the Securities & Exchange Commission, David Glockner, as its chief compliance officer. And last summer, Citadel Securities lured Joseph Mecane from his post leading British bank Barclays' electronic equities trading to head its execution services.