How Does Citadel HF Make $28bn Revenue with $55bn AUM? Multi Manager Economics
Saw the WSJ article mentioning record returns and revenues for Ken Griffin. Good for him!
What I don't understand is how the unit economics of these behemoth multi managers actually work. I only understand bits and pieces from anecdotally reading about it (they run 6-8x+ leverage, they pay pods 20% of P&L, they charge exorbitant fees, the passthrough normal costs on top of fees etc.) But I don't really understand how $100 of LP capital flows through the Citadel ecosystem that ends up generating $28bn in revenue. Would love if someone can explain it / incorporate all the various elements (form / cost / quantity of leverage, pod returns vs. master fund returns, passthrough fees & overall fee structures, do you charge fees on net $55bn AUM or gross levered AUM, Wellington returned 38.1% net then what is the gross return, if average leverage is 8x then is it fair to say average pod returned 38.1/8 = 4.75% for the year or do you do that math on gross return / 8 etc.).
Please explain like I'm 7 years old who just learned how to do percentage math.
