Key Takeaways
- • Using Ken Griffin's stated hurdle of the risk-free rate plus 4%, which implies roughly 8.2% based on three-month Treasury bill rates, eFinancialCareers (based on Bloomberg data) finds that many hedge funds were below the threshold on year-to-date net returns through September.
- • Citadel's Wellington fund, DE Shaw and Point72 cleared the implied hurdle, while Millennium, Schonfeld, ExodusPoint, Verition, Brevan Howard, Balyasny and Walleye did not.
- • Single-strategy funds Rokos (macro), Marshall Wace (equities), Arini (credit) and Taula (macro) also fell below the threshold.
- • Multistrategy lock-ups of four to five years mean near-term redemption pressure is limited, but persistent underperformance poses a longer-term risk to fund flows.
- • The article links the weak returns to October's macro fund losses tied to French bonds, credit-fund pain from rising risk premiums, and a sharp growth-equity unwind by multistrategy funds.
Summary
Ken Griffin, founder and CEO of Citadel, told Goldman Sachs that hedge funds need an equilibrium return of 4% plus the risk-free cost of capital to attract investor money. eFinancialCareers applies that framework using the rate on three-month Treasury bills, which yields an implied hurdle of about 8.2%. Using Bloomberg figures, the publication charted which funds had year-to-date returns net of fees above that level through September.
According to the analysis, Citadel's Wellington fund, DE Shaw and Point72 are above the hurdle. Several other multistrategy funds, including Millennium, Schonfeld, ExodusPoint, Verition, Brevan Howard, Balyasny and Walleye, are below it. Single-strategy funds Rokos (macro), Marshall Wace (equities), Arini (credit) and Taula (macro) are also under the threshold. The article notes that annualized returns may deteriorate further following October's macro fund losses linked to French bonds, pressure in credit funds as risk premiums rose, and a multistrategy growth-equity unwind that Barry Ritholtz described as a "huge, leveraged growth unwind."
In the near term, the impact on investors is expected to be limited. Multistrategy firms commonly impose four- to five-year lock-ups. 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, which was down 33% through September, has capital locked in for an average of two years, according to Rupak Ghose. Arini founder Hamza Lemssouguer previously said the fund had the structural duration of capital needed to see investments through to their catalysts.
Over the longer term, sustained underperformance is likely to affect fundraising. The article also addresses why multistrategy funds, which are designed to make uncorrelated bets, posted losses this year. Bloomberg journalist Nishant Kumar attributed this to crowded trades. Ritholtz cited forced liquidations after 108 separate pods were closed and unwound when individual risk limits were breached. The article argues that performance pressure through to September will push funds to improve results in the final months of 2026 and into 2027.
According to the analysis, Citadel's Wellington fund, DE Shaw and Point72 are above the hurdle. Several other multistrategy funds, including Millennium, Schonfeld, ExodusPoint, Verition, Brevan Howard, Balyasny and Walleye, are below it. Single-strategy funds Rokos (macro), Marshall Wace (equities), Arini (credit) and Taula (macro) are also under the threshold. The article notes that annualized returns may deteriorate further following October's macro fund losses linked to French bonds, pressure in credit funds as risk premiums rose, and a multistrategy growth-equity unwind that Barry Ritholtz described as a "huge, leveraged growth unwind."
In the near term, the impact on investors is expected to be limited. Multistrategy firms commonly impose four- to five-year lock-ups. 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, which was down 33% through September, has capital locked in for an average of two years, according to Rupak Ghose. Arini founder Hamza Lemssouguer previously said the fund had the structural duration of capital needed to see investments through to their catalysts.
Over the longer term, sustained underperformance is likely to affect fundraising. The article also addresses why multistrategy funds, which are designed to make uncorrelated bets, posted losses this year. Bloomberg journalist Nishant Kumar attributed this to crowded trades. Ritholtz cited forced liquidations after 108 separate pods were closed and unwound when individual risk limits were breached. The article argues that performance pressure through to September will push funds to improve results in the final months of 2026 and into 2027.
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