With over $15bn in
assets under management (AUM), the firm remains one of the world's largest hedge fund managers and its daily trading volume amounts to approximately 3 percent of average daily trading activity in
London,
New York,
Hong Kong and
San Francisco. Additionally, the firm's Citadel Securities businesses execute and route more than 30 percent of average US listed equity options trading volume and more than 8 percent of average NASDAQ and NYSE equities volume.
[1] Although Citadel employs over 1,400 individuals globally, its flagship operation is located in the Citadel Center a $355m office tower in the heart of downtown Chicago; in 2006 the tower was purchased for $560m by Robert Gans.
[2] [3] Citadel also has offices in New York,
Hong Kong,
San Francisco, and
London [4] Of the 100 largest hedge funds, Citadel's is the only one based in Chicago. Citadel is the eleventh largest hedge fund manager in the world;
[5] it is also the second largest multi-strategy hedge fund manager in the world.
[6]
[edit] Citadel Securities
Since Griffin founded the firm 20 years ago, it has diversified its business from a hedge fund manager to a financial institution focused on alternative investment management and advisory, attempting to fill the demand gap created by the collapse of
Lehman Brothers and
Bear Stearns. The firm's investment banking unit, Citadel Securities, comprises investment banking advisory, a sales and trading platform, and an industry leading market making franchise. Proud of Citadel’s growth, Griffin has stated, “The name Citadel means strength and it speaks to our culture of performance, risk management and our ability to succeed in volatility."
[7]
[edit] Credit Market Derivatives Exchange
In March 2009, Citadel and the
CME Group announced they had received SEC approval to launch a joint
clearing and exchange solution for the $43 trillion
credit default swap (CDS) market, called the Credit Market Derivatives Exchange, or CMDX.
[8] In addition to improving transparency, the exchange offers immediate confirmation of trades, avoiding the operational risks associated with unconfirmed CDS transactions.
[9] In an interview Citadel's Ken Griffin and Craig Donahue, CEO of the CME Group, confirmed that the platform is up and ready and that interest has been high.
[8]
Credit default swaps play an important role in a company's risk management procedure, which has made CMDX a compelling solution as institutions seek "transparent, secure and liquid market alternatives,” said CME Group Executive Chairman Terry Duffy.
[10] The creation of the exchange was proposed as a solution to one of the many causes of the
financial crisis of 2007–2010,
[11] as its transparency can provide regulators with immediate access to positions and trading information.
[11]
[edit] Fee structure
An April 2005 Bloomberg news article noted that David Shaw's
D.E. Shaw & Co., which then had $14.7 billion in assets under management, and
Tudor Investment Corporation both had less than half as many employees as Citadel does.
[12] It stated that unlike most other hedge funds where investors are charged a flat management fee of 1-2 percent of assets and 20 percent of profits, the investors that invest in hedge funds managed by Citadel bear the entire cost of running the company, a bill that historically has equaled 3-6 percent of assets for the computer systems and larger-than-average staff.
[12] Morgan Creeks' Yusko was quoted as saying "Their expense structure is high compared with others. Ultimately, we overlooked it because their returns were so high." However, in 2008, Citadel “gave back about $300 million in fees it had collected during money-losing months.”
[13]
[edit] Corporate culture
The local press has called Citadel "Chicago's revolving door". (People close to the firm say turnover is on a par with a typical investment bank's.)
[1] Commenting on this reputation, Mr. Griffin has said, “People say...’It’s a tough place to work. It’s demanding. It’s unrelenting.’ I look at these as strengths inherent in strong companies... I’m very proud that we have a sterling reputation when it comes to doing what we say we’re going to do.”
[5] Mike Pyles, Citadel's Head of Human Resources stated that "When the markets change, we don't accept lower returns. We aren't that kind of firm. We expect the manager to go and figure out how to make money in the new market. We make no apology for it."
[14]
A 2005 Bloomberg interview noted that "[Griffin] keeps a row of management-theory books on a credenza behind his desk, and he says he tries to emulate one of America's most celebrated business leaders, former
General Electric Co. CEO
Jack Welch."
[12] Griffin is the son of a former GE project manager.
[15]
Philip Halpern, former endowment manager of the
University of Chicago, stated "I like to see some broad experience set when I invest in managers. My concern is that Citadel doesn't have that. The turnover has been too high over the years."
[16]
