In the world of hedge funds, Balyasny Europe Asset Management, headquartered in London, experienced a remarkable surge in profitability during the fiscal year ending on December 31, 2022. The company's financial performance outshone previous years, with profits catapulting by an astounding 400%, totaling £22.7 million. This substantial leap in profitability, compared to the £4.5 million reported in 2021, is a testament to the hedge fund's impressive financial prowess, as detailed in its published accounts on October 5.
While the profit increase is undoubtedly impressive, it is not the sole indicator of Balyasny's exceptional year. Turnover figures tell an equally compelling story, with an impressive 163% increase compared to the previous year, amounting to a total turnover of £374.9 million. However, this remarkable growth in financial success also coincided with a significant uptick in operating expenses. In the fiscal year, operating costs soared to £352 million, a substantial increase from the prior year's £138 million.
One of the primary drivers behind the surge in expenses was the substantial rise in salaries and bonuses. Balyasny Europe Asset Management disbursed a staggering £269 million in employee compensation, a significant uptick from the previous year's £104 million. Notably, the highest-paid member of the hedge fund's team received £22 million, a notable increase from the £4 million reported in 2021.
To accommodate its growing business and bolster its workforce, Balyasny embarked on an extensive hiring spree. This expansion saw a remarkable increase in the hedge fund's average number of monthly employees, surging from 158 in 2021 to 266 in 2022. Throughout the year, Balyasny made strategic hires to strengthen its portfolio management team in London.
In August, the hedge fund welcomed David Hill, a former senior trader at Hartree Partners, as a portfolio manager, supporting the firm's investment strategy in energy products. Simultaneously, Grigory Shevchenko, formerly of Uniper, joined Balyasny as the Chief Operating Officer for commodities in Europe, stationed in London. In October, Andrea Mondelci, who previously served as the head of equities at Man AHL, became a portfolio manager at Balyasny.
Balyasny Asset Management, originally founded in 2001 in Chicago by Dmitry Balyasny, Scott Schroeder, and Taylor O'Malley, expanded its presence beyond the United States, establishing additional offices in Canada, London, and Asia. Initially focusing primarily on long/short equity trading, which still constitutes 70% of the firm's risk exposure today, the hedge fund enjoyed remarkable success in its early years, boasting an impressive annualized return of 12% for the first 16 years.
However, 2018 marked a challenging turning point for the firm, characterized by significant performance losses, a 50% drop in assets under management from $12 billion to $6 billion, and the withdrawal of client investments. During this tumultuous period, Dmitry Balyasny candidly communicated the firm's struggles in an email to staff, describing the firm's performance as subpar and expressing a lack of urgency among employees. This email ultimately found its way into the hands of Kenneth C. Griffin, the founder and CEO of Citadel LLC, a rival hedge fund also based in Chicago. Griffin used this email as an illustrative example of the consequences of poor corporate culture. In response, Balyasny Asset Management initiated a significant workforce reduction, cutting 125 jobs, approximately 20% of its workforce.
Following this challenging period, the firm implemented substantial changes, including significant staff hires, a revised risk management approach, and a transition towards institutional investors as clients, rather than high-net-worth individuals. By 2019, Balyasny had returned to profitability.
In February 2022, the firm diversified its investment strategy by venturing into private startup investments, aligning with trends observed in other hedge funds. Additionally, in March 2022, Balyasny announced the creation of a new equities unit named Corbets Capital, with offices in New York and Greenwich, Connecticut. As of May 2022, the firm managed assets totaling $15.7 billion, supported by a team of 1,100 employees, including 470 investment professionals. As of April 2023, the firm reported assets under management totaling $19.5 billion.
