Wednesday, 26 November 2014
Last updated 8 hours ago
Dec 28 2010 | 2:52am ET
This holiday season, Citadel Investment Group is celebrating more than just another year of double-digit returns. The Chicago hedge fund giant is now 20 years old.
Citadel founder Kenneth Griffin celebrated the milestone in a letter to investors with a discussion of the firm's highs and lows and what he's learned over two decades building one of the world's largest and most well-known hedge funds.
Unsurprisingly, the letter is something of an elegy to his grandmother, one of Citadel's first investors and the woman Griffin credits with making him a success, who died this summer.
"On the 20th anniversary of Citadel's founding, and six months after her death at age 98, I am confident our performance has justified her belief in Citadel," Griffin wrote. "It also demonstrates the timelessness of the values and principles she passed on to me," which Griffin offers in "four simple lessons": Hire the best people and create a culture of opportunity, take calculated risks, embrace opportunities and never lose sight of what is important.
Griffin also offered a look at some of the downs of the last two decades, including the firm's controversial decision to suspend redemptions from its flagship hedge funds during the financial crisis two years ago, which he call "one of the most difficult" he ever had to make.
"While our boldness has served us well, we are not blind to the lessons of 2008," he assured. "We were overly confident that we could weather any financial storm. Now, we are firmly grounded in the understanding that even the best-run firms—with strong balance sheets and industry-leading risk-management tools—can face almost unimaginable market forces."
He also took the opportunity to dispel any misconceptions arising from the high rate of high-level turnover at Citadel in recent years, especially from its nascent investment-banking division. Far from being a revolving door, "more than half of our current analysts began their careers at Citadel as associates," he said.
Meanwhile, the firm appears poised to follow up last year's 62% jump with another double-digit performance. The flagship Kensington and Wellington funds are up about 10% this year, Reuters reports. The two remain below their high-water marks, requiring another 20% in gains to recoup all of 2008's losses.
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