Citadel Cuts Risk, Plans To Boost Leverage?

Jul 28 2011 | 12:54pm ET

Add Citadel Investment Group to the list of top hedge funds cutting risk.

The $11 billion hedge fund giant is now requiring all equity managers to balance their books at the end of each trading day. The beta-neutral order was put into place in recent weeks, limiting the amount of risk that Citadel portfolio managers can take, Hedge Fund Alert reports.

Citadel isn't the only firm reining in risk: Soros Fund Management, before its announcement this week that it would return all outside capital, is currently about 75% in cash, and Moore Capital Management has also been cutting risk. Both of those firms are down about 6% through the first half.

Citadel's reasons for cutting risk may be somewhat different, however. The firm, whose flagship Kensington and Wellington funds are up about 11% this year but remain below their high-water marks, may be planning to boost leverage in an effort to get over that hump and begin charging performance fees once again, according to HFA.

The firm has denied reports that it recently raised its leverage limit on stock investments, saying that it has held steady at about six-times levered. Citadel's flagships were roughly eight time levered in 2008, when Kensington and Wellington each lost more than half their value.


In Depth

Q&A: Star Mountain's Brett Hickey On Investing In 'The Growth Engine Of America'

Sep 22 2017 | 5:06pm ET

Lower middle-market companies form the economic fabric of the nation, but they can...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...

 

From the current issue of

Business Insider has been reporting on the unusual trading activity of a mystery trader who placed a profitable short equity bet to the tune of $21 million on the Aug. 10 move in the CBOE Volatility Index (VIX).