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Citadel Investment Group LLC Kenneth Griffin

Citadel Investment Group LLC

Citadel Investment Group LLC, Kenneth Griffin

Citadel Investment Group LLCThe following piece on Citadel Investment Group LLC is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool.


Resource #1: (7.16.09) Citadel Rises 9.5% as Industry Stalls

Citadel Investment Group LLC’s main funds gained 9.5 percent in June as corporate bonds rose, beating an industry indicator that was little changed.

The Wellington and Kensington funds returned 31 percent in the first six months of the year, said a person familiar with the results who asked not to be named because the information is private. Chicago-based Citadel, founded by Ken Griffin, manages $12 billion.

Hedge funds grew an average of less than 1 percent in June, according to Hedge Fund Research Inc., which compiles indexes to track industry performance. Its Weighted Composite Index rose 9.4 percent for the first six months of the year. Source

Resource #2: (4.13.09) Citadel Investment Group’s two flagship hedge funds continued their slow climb back last month, recouping another 3% after last year’s disastrous losses.

Both the Kensington Global Strategies Fund and Wellington Fund, which manage a combined $7.7 billion, were up approximately 11% in the first quarter, Dow Jones Newswires reports. The funds returned 2.6% in February and 4.75% in January, the first time in seven months the funds had posted positive returns. source

Resource #3: (3.18.09) Chicago-based hedge fund Citadel Investment Group turned up on American International Group Inc.'s list of firms it paid using proceeds from the federal government.

AIG, which has received $173 billion in aid from Washington, disclosed recipients of $52 billion it received from September to the end of 2008. Citadel received $200 million from AIG's securities lending program. source

Resource #4: (2.5.09) Citadel Investment Group’s flagship hedge funds continued their rebound last month, bringing their returns for the first two months of the year to almost 8%.

The Kensington and Wellington funds returned 2.6% in February, the New York Post reports. The funds rose 5% in January, getting Citadel off on the right foot as it tries to recoup the massive losses suffered by the funds last year. Kensington and Wellington dropped by more than half amidst the economic crisis. source

Resource #5 (12.15.08) Ken Griffin’s Citadel Investment Group, a Chicago-based hedge fund firm that manages roughly $18 billion in assets and is considered one of the most powerful hedge funds firms in the world, has barred investors from withdrawing any money from its flagship funds, Kensington and Wellington.

Both funds have shed $10 billion year-to-date, nearly half their value. After insisting for months that the firm’s liquidity position remains strong and denying rumors that Citadel approached the Treasury Dept. for an injection of cash, Griffin, faced with the possibility of a further drop in the value of leveraged loans, is refusing to allow its clients to withdraw their remaining funds until at least the end of March. source

Resource #6 (12.8.08): Hedge fund giant Citadel Investment Group has had better weeks. And years, for that matter.

Citadel’s two largest funds have lost almost half their value this year. The Kensington and Wellington funds, which manage a total of $10 billion, lost 13% in November, bringing their year-to-date losses to some 47%.

The firm has received redemption requests for about $1 billion from the funds. Chicago-based Citadel, which at the start of the year managed some $20 billion, will be left with just $12 billion by the end of the year, according to estimates.

Citadel has also cut about 40 jobs in response to its shrinking business and dismal returns. The job cuts are linked to the firm’s decision to shutter CIG Reinsurance, it’s Bermudan reinsurer, Crain’s Chicago Business reports. A dozen of the lost jobs are at the firm’s headquarters in Chicago. The Wall Street Journal reports that the firm has laid off 20 employees in recent weeks, including some in London, as it cuts back its trading, back-office and human-resources operations. source

Resource #7: (11.8.08) Citadel's largest hedge fund, known as Kensington/Wellington, fell 35% this year, through Oct. 17, Chief Operating Officer Gerald Beeson told holders of the firm's medium-term notes during a conference call.

Beeson said most of the losses happened in the month after Lehman Brothers (LEHMQ) collapsed, triggering what he called "the near-collapse of the world's banking system."
He blamed most of the fund's losses on huge dislocations between cash securities like corporate bonds and related derivatives that Citadel and other firms use to hedge those positions.

That hit Wellington/Kensington's convertible bond portfolio, its fundamental credit portfolio and the fund's holdings of investment-grade corporate bonds, according to Beeson.
Long positions the fund held in convertible bonds, junk bonds, bank loans and investment-grade bonds were hedged mainly using credit-default swaps, a type of derivative that protects investors against defaults, he continued.

"The removal of liquidity and deleveraging that's taken place around the world has caused tremendous dislocation in the price of those cash assets relative to the value of the underlying derivative hedges," Beeson said. Source

Resource #8 (11.8.08) Citadel Investment Group, one of the world's biggest hedge funds, is shuttering a Bermuda reinsurer it formed in 2004, according to a source familiar with the matter.

Citadel, which manages roughly $18 billion, thought it had a winning business plan with CIG Re because it was fully collateralized, giving the insured certainty their claims would be paid if catastrophe struck.

It is unwinding the reinsurer, according to this person, because the company's cost of capital is too high. The reinsurer, which does not have a financial strength rating, has also had a hard time competing with rivals who do.

The Chicago-based firm formed the property-catastrophe reinsurer, CIG Reinsurance Ltd, four years ago because it saw reinsurance as uncorrelated with its other investment strategies.

The $1.9 trillion hedge fund industry has been having a rough time of late. On average, funds have lost roughly 19 percent this year, and analysts expect there will be collapses.

Recently, questions over Citadel's fate have dogged it, prompting Chief Executive Ken Griffin to hold a call with investors last month, when he firmly brushed aside talk that the firm he founded 18 years ago might fail. Source

Resource #9 (10.29.08) Now that it’s working with the Chicago Mercantile Exchange, Citadel Investment Group is trying to make nice.

The Chicago hedge fund giant is scaling back its role in the ELX Electronic Liquidity Exchange, which aims to challenge the CME Group’s dominance in U.S. Treasury bonds and other futures. The move comes after the two Chicago firms joined forces to found a clearinghouse for credit default swaps. That venture is scheduled to debut next month. Read More...

Resource #10 (10.29.08) Citadel Investment Group is shuttering a $1 billion fund of hedge funds.

The fund, Fusion, is run by Citadel Alternative Asset Management, set up by the Chicago hedge fund giant last year. The fund will return external money—which accounts for just about 5% of its assets—to investors, and will move the rest of the money, which is internal, to CAAM’s two seeding and incubation funds, Pensions & Investments reports. Read More...

Resource #11: (10.26.08) Citadel Investment Group LLC, addressing investor concerns that its hedge funds may be forced to liquidate, said it has $8 billion in untapped bank credit, 30 percent of its assets in cash and ``modest'' client redemptions.

The firm had no material losses from trading partners as its main Wellington and Kensington funds fell about 35 percent this year through Oct. 17, Chief Operating Officer Gerald Beeson said on a conference call today with bondholders. Year-end redemptions will be a ``few percent'' of assets.

``The dislocations that we have experienced in the market also create tremendous future opportunities within our portfolio,'' the Chicago-based firm's founder, Kenneth Griffin, said on the call.

Speculation about hedge-fund closings has swirled as global stocks lost $30 trillion in market value in the past year. U.S. managers may lose 15 percent of assets to withdrawals while their European rivals shed as much as 25 percent, Huw van Steenis, a Morgan Stanley analyst in London, wrote today in a report to clients.

Combined with investment losses, industry assets may shrink to $1.3 trillion, a 32 percent drop from the peak in June, van Steenis said.

Griffin, 40, who started Citadel in 1990, has posted the biggest losses of his career in 2008 after increasing wagers on loans and bonds before the markets plunged.

Resource #12: Kenneth Griffin, who manages the massive Citadel Investment Group Inc. hedge fund, has produced a sterling record over the past 20 years. Actually, he's one of the world's top money managers. But, in "Black September," Griffin's tracked record got trashed. Apparently, his flagship fund is down as much as 22% for 2008.

Interestingly enough, Wall Street has been abuzz with rumors that Citadel is dumping lots of shares – putting further pressure on the markets (and may have accounted for some of yesterday's losses on the Dow and S&P). But Citadel is not alone. Other hedge fund operators have also suffered major losses.

One key issue has been the erratic regulatory response to short selling (essentially, the ban made it illegal for hedge funds to make profits). Of course, investors have also been requesting redemptions. Source.

Resource # 13: Citadel Investment Group LLC, the Chicago-based asset-management firm founded by Kenneth Griffin, is seeking about $1 billion for a new global macro hedge fund, according to a person with knowledge of the matter.

The fund is set to be managed in London by Kaveh Alamouti, 54, whom Citadel hired this year from New York-based Moore Capital Management LLC, according to the person, who asked not to be identified because the plans are private. Citadel oversees $20 billion. Read more...

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1 comment:

Anonymous said...

Thanks for this thorough introduction to Citadel.

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