The "multi-strategy hedge funds" two giants Citadel and Millennium returned slightly over 10% in 2025, which is lower than their smaller-scale peers

The two major multi-strategy hedge fund giants Millennium and Citadel delivered slightly over 10% returns for investors in 2025, but their performance lagged behind several smaller peers in the field. On January 2, according to the Financial Times, Millennium, led by Izzy Englander, and Citadel, under Ken Griffin, rebounded after a brief loss in the first half of the year, recording annual gains of 10.5% and 10.2% respectively. Both firms briefly fell into negative return territory earlier in the year due to market turbulence triggered by Trump's tariff policies. In contrast, the smaller multi-strategy hedge fund ExodusPoint achieved an annual gain of 18%, while Schonfeld's flagship fund rose by 12.5%, significantly outperforming the two giants. Analysis indicates that this performance divergence highlights changes in the competitive landscape of the multi-strategy hedge fund sector. Although the industry has dominated hedge funds in recent years, the performance gap between firms of different sizes is widening. Notably, in the broader hedge fund sector, macro strategy funds experienced their best performance since 2008 in 2025. Bridgewater's Pure Alpha hedge fund rose by 33% as of December 29, marking the highest annual return in the firm's 50-year history. The Two Giants Steadily Rebound in the Second Half The recovery of Millennium and Citadel was primarily due to sustained stable returns in the second half of the year. According to the Financial Times, insiders revealed that the two firms achieved a performance turnaround through strict risk management and diversified trading strategies after experiencing market turmoil in the early months of 2025. The improvement in market conditions supported this recovery. Trump abandoned many of his most aggressive tariff measures mid-year, driving stock indices to strong gains by the end of the year. The S&P 500 and the UK FTSE 100 indices rose by 16.5% and 21.5% respectively in 2025. Analysts believe that the reduction in market volatility and the subsequent upward trend created a more favorable trading environment for multi-strategy funds. In the multi-strategy hedge fund sector, smaller firms clearly held an advantage in 2025. ExodusPoint led with an 18% return, approximately 8 percentage points higher than the two giants. Schonfeld's flagship fund's 12.5% gain also surpassed that of Millennium and Citadel. This performance disparity has sparked discussions about the relationship between size and returns. Multi-strategy hedge funds achieve diversification by operating hundreds of trading teams across various asset classes, including stocks, bonds, and commodities, but scaling up may affect strategy flexibility and execution efficiency. Advantages and Costs of the Multi-Strategy Model Multi-strategy hedge funds have risen to the top of the industry over the past decade, with their business model built on strict central risk control and high leverage operations. These firms typically quickly require traders to exit losing positions, achieving sustained stable returns through disciplined risk management However, this model comes with a higher cost structure. Multi-strategy funds charge investors fees that are higher than traditional hedge funds, directly passing on expenses such as bonuses and client entertainment. Nevertheless, this model has generally delivered stable performance over the past decade, meeting the demand for steady returns from large institutional investors such as pension funds. These institutions do not benchmark against stock indices like the S&P 500, but instead aim to achieve profits regardless of market fluctuations. For example, several multi-strategy funds still recorded positive returns during the significant stock market decline in 2022