‘Only so much alpha in the world’: hedge funds face a reckoning

The multi-manager model has generated years of exceptional returns, even after fees. But rising interest rates and a brutal battle for talent are taking their toll.

Harriet Agnew and Ortenca Aliaj

Aug 29, 2023 – 10.25am

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As an undergraduate at Harvard University, Ken Griffin had a satellite dish installed on the roof of his dorm room, so he could trade convertible bonds, laying the foundations for the launch of his Citadel hedge fund in 1990.

But it wasn’t until the high-profile collapse of hedge fund Long-Term Capital Management at the end of that decade that he realised Citadel’s potential, Griffin recalls in an interview. As the financial markets were “turned upside down”, Citadel avoided losses and seized on the opportunity to make money, he says.

Financial Times