Thursday, 27 October 2016
Last updated 16 min ago
Apr 15 2014 | 12:25pm ET
Don't expect to find Michael Lewis' Flash Boys on Kenneth Griffin's list of favorite books from this year.
Griffin's hedge fund, Citadel Investment Group, has done very well indeed with high-frequency trading strategies, which Lewis argues are essentially insider-trading that have "rigged" the U.S. stock market. The Chicago-based firm's Tactical Trading Fund is up more than 300% since its launch in 2007, Bloomberg News reports.
The $830 million fund has suffered only five losing months since its debut, and has never lost more than 1% in any of them. Tactical Trading boasts annualized returns of 26% since inception.
While Citadel's flagship hedge funds, Kensington and Wellington, were losing more than half their value in 2008, Tactical Trading was up 31%. That marked the fund's height as a high-frequency trading vehicle; a year later, Citadel began to diversify the vehicle with other strategies, adding an equity market-neutral component in 2009 and statistical arbitrage in 2010, presaging similar moves by HFT firms as returns have lagged amidst greater competition.
High-frequency trading now accounts for only about a quarter of Tactical Trading's profits, and the strategy is used exclusively in non-equity futures.