Hedge Funds Reset After Selloff: Citadel Mirrors Broader Recovery In Multi-Strategy Space

LONDON — A turbulent start to March rattled global equity markets and left hedge funds scrambling to unwind risk at their fastest pace in years. But in a swift reversal, many multi-strategy funds, including Citadel’s flagship Wellington, have managed to recoup much of their initial losses, underscoring the adaptability of large, diversified hedge fund platforms in high-volatility regimes.

Citadel’s Wellington fund, which had been down around 2% year-to-date following a broad equity selloff, has since trimmed losses to under 1%, according to a source familiar with the matter. The rebound, largely fuelled by a recovery in U.S. equities, mirrors a broader sector-wide recalibration as funds repositioned quickly in response to policy and market noise.

March: Fast and Furious Unwind

The first half of March brought a sharp rise in volatility, driven by a cocktail of investor anxieties: shifting expectations around interest rates, mixed economic data, and increasing geopolitical uncertainty, all under the unpredictability of President Donald Trump’s second-term policy posture.

The result was a broad market pullback that hit hedge funds particularly hard. According to data from JPMorgan, multi-strategy hedge funds saw average losses of 3.2% through 10 March—the steepest collective drawdown in over a year. The unwinding was both fast and widespread, as managers de-risked to protect capital amid growing uncertainty.

Citadel Plays Offence

Citadel’s Wellington fund was among those caught in the initial downdraft. But unlike many peers who opted to remain defensive, Citadel shifted gears.

According to the same source, Ken Griffin, Citadel’s founder and CEO, instructed senior management to “play offence.” This translated into a significant increase in capital allocations—around 25%—to the firm’s U.S. equity portfolio managers.

The goal was to capitalise on dislocations created by the selloff and reposition for a bounce. The move paid off: as equities rebounded in mid-March, Wellington clawed back a sizeable portion of its losses. By 13 March, the fund was down less than 1% on the year.

Sector-Wide Recovery

Citadel wasn’t alone in staging a comeback. JPMorgan data showed that average losses across multi-strategy hedge funds narrowed to 0.7% by mid-March, reflecting a broader, albeit partial, recovery across the sector.

The rapid rebound points to a defining characteristic of the multi-strategy model: flexibility. These platforms, often structured with siloed teams and centralised capital allocation, can pivot quickly between strategies and markets, re-risking aggressively when opportunities emerge.

In this case, U.S. equities led the recovery, buoyed by stabilising rate expectations and opportunistic buying following the early-March shakeout.

Lessons in Agility

Citadel’s turnaround offers a case study in crisis response. Rather than retreating further amid volatility, Griffin’s directive to take risk selectively allowed Wellington to recapture ground and outperform many competitors.

The episode also highlights a broader industry truth: in an environment where market shocks can arrive quickly and without warning, nimbleness may matter more than long-term conviction. Platforms with centralised oversight and deep capital pools are uniquely positioned to act decisively.

It’s a structural advantage—especially during periods when macroeconomic narratives shift faster than fund mandates can.

Looking Ahead: Opportunity in Uncertainty

While the March recovery offered some relief, fund managers remain wary. With policy uncertainty persisting under the Trump administration, and the Federal Reserve keeping markets guessing, volatility is unlikely to fade anytime soon.

For investors, this creates a paradox. Volatility undermines predictability—but also generates pricing dislocations that skilled managers can exploit. Multi-strategy funds, with their dynamic structure, may be among the few vehicles capable of navigating this environment effectively.

But timing and execution remain critical. March proved that a quick drawdown can be matched by an equally sharp rebound—but only for those willing and able to move fast.

Conclusion

Citadel’s Wellington fund isn’t yet back in positive territory for the year—but its swift recovery speaks volumes. In a market increasingly defined by erratic swings and political crosswinds, the ability to pivot—aggressively and with conviction—may prove to be the most valuable asset in any hedge fund’s arsenal.

Because in 2025, defence might protect capital—but offence still makes the money.

Author: Ricardo Goulart