Griffin: Hedge funds need 4% above risk-free rate

Citadel founder Ken Griffin told a Goldman Sachs event that hedge funds must produce roughly 4 percentage points of annual returns above the risk-free rate to continue attracting investor capital over the long term. He described the industry’s equilibrium as “outperform the risk-free cost of capital by roughly 4%.”

With the 10-year US Treasury yield near 4.5%, that benchmark implies hedge funds need to target annual returns close to 9% to cover the gap between safe government yields and the expected excess return.

Performance across the multi-strategy hedge fund sector in the first half of 2026 varied. Marshall Wace’s Eureka fund rose nearly 20% through June, Citadel’s Tactical Trading fund returned about 14.3%, and Citadel’s Wellington fund gained roughly 5.7%. Jain Global returned about 3.9%, Balyasny posted a 2.6% gain, Brevan Howard’s Master Fund rose around 2.2%, and commodity-focused manager Taula recorded a loss in the same period.

Griffin pointed to higher interest rates as a factor raising investor expectations. When government bonds yield more than 4% with minimal credit risk, investors can demand higher excess returns from managers who charge fees and impose investor lock-ups.

Longer lock-up periods can reduce the influence of short-term volatility, but sustained performance below the implied hurdle could make fundraising more difficult if investors conclude they are not being adequately compensated for added risk.

The remarks come as managers and investors reassess performance targets in an environment where the risk-free rate has risen from the low levels earlier in the decade.