Multi-strategy hedge funds are encountering significant challenges, the most severe since the early days of the pandemic, as they are forced to rapidly unwind crowded trades amidst a heavy market sell-off. Sources indicate that two of the world's largest multi-strategy hedge funds, Citadel and Millennium Management, experienced declines in February and continued to face losses in the first week of March.
The stock market has been hit hard by ongoing trade tensions initiated by former U.S. President Donald Trump and persistent inflation concerns, forcing some multi-strategy hedge fund teams managing billions of dollars to liquidate or reduce positions. According to investors, Ken Griffin's Citadel suffered losses alongside other top players like Point72 Asset Management and Balyasny Asset Management. Citadel fell 1.7% in February, marking its largest monthly drop since May 2021, and continued to decline by another 1.7% in March.
Despite the losses, Griffin encouraged his team to seize the opportunity, urging them to adopt a more aggressive approach in a recent email to co-chief investment officer Pablo Salame and other executives. Millennium saw a 1.3% drop in February and a further 1.4% decline in the first six days of March. Two of its trading teams focused on index rebalancing have incurred losses of approximately $900 million this year.
Balyasny, which had gained 3.5% by last month, has since given back some of those gains, according to sources who requested anonymity. DE Shaw & Co's second-largest fund, Oculus, which primarily engages in macro investments, surged 36% last year but has dropped 4.4% as of March 7. Its flagship fund, Composite, has remained relatively flat this month. Additionally, Marshall Wace's flagship hedge fund, Eureka, has lost 3% this month.
