The hedge fund industry is well known for the roller coaster rides of the companies that constitute it as well as the mercurial and dynamic individuals that lead it. And amongst the extreme highs and the very lows of that industry, there are a select group that are able to withstand the storms and still come through. Amongst them are Citadel headed by the intense, focused and dynamic Kenneth Griffin. From being able to steer the ship through the dark and record breaking financial storms of 2008, when citadel lost about $8 billion, to now having $26 billion assets under management, as reported in the recent profile of the company and its owner in the Wall Street Journal, it has been a carefully managed and orchestrated rise that takes note and considers the volatility inherent in the market, but does not shy away from it.
During those dark days of 2008, where other companies folded, restructured their operations, minimized risks by lowering the expected rates of returns, or, focused on improving their image, Citadel’s approach was more focused on staying confident in its strengths, recovering from the losses and winning the long game that it knew so well. Learning from the crisis, the firm now carefully monitors and evaluates risks and leverages technology in making sure it stays on message. This includes warning and alerts sent out firm-wide when market changes increase the risk in their portfolios beyond acceptable limits, to making sure the firm is overall equally balanced between rising and falling markets. But then focusing on the opportunities available, and always maintaining an aggressive approach has been Ken’s forte since he started trading stocks at 19 in his dorm at Harvard. Reducing risks only would and could not be the only reason for the stellar performance, and would, of course, not fit with the owner’s philosophy of making the most of market opportunities. The firm has expanded aggressively in areas where it has seen other firms exiting a market. Market making now contributes 10% of Citadel’s revenue with about a third of US stock orders from individual investors now routed through its systems, with plans of doing the same with options in China. Its commodities operations, by itself, is the biggest commodities funds in the world. The quantitative trading, arm with about $3 billion under management, could be turned into a separate fund.
It hasn’t though been all plain sailing for Ken. There is the very public divorce and the high turnover in some of the divisions due to the exacting and intense management style. But these too has been used as learning lessons. Though hurt by the public disclosures, he has decided to go for private settlement discussions with his ex-wife. At work too, he has recognized the struggle between micro-management and delegation leading him to redefine his involvement in the day-today and minute details of company operations.
The article can be found at http://www.wsj.com/articles/citadels-ken-griffin-leaves-2008-tumble-far-behind-1438655887