Citadel Trader Who Lost $1 Billion in 2014 Resigns

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Ken Griffin
Ken Griffin, founder and chief executive officer Citadel LLC. Photographer: Patrick T. Fallon/Bloomberg

Derek Kaufman, global head of fixed income at Citadel LLC, is leaving the hedge fund firm after losing $1 billion last year in a variety of trades, according to a person familiar with the matter.

Kaufman, 40, resigned two weeks ago and his portion of the portfolio has been liquidated, said Katie Spring, a spokeswoman for the Chicago-based firm founded by Ken Griffin. Calls to Kaufman weren’t answered. The rest of Kaufman’s team is remaining and the senior members will now report to Griffin, Spring said.

Citadel’s fixed-income operations are divided into 18 portfolios that focus on different geographic regions and various parts of the credit markets. Most of them were profitable in 2014, offsetting the losses Kaufman incurred in the part that he oversaw. The $4 billion Global Fixed Income Fund ended the year up 0.75 percent, said the person, who asked not to be named because the firm is private.

Citadel, which manages about $26 billion in assets, hired Kaufman in 2008 from JPMorgan Chase & Co. where he was a proprietary trader, to expand its fixed-income operation beyond its main multistrategy funds. His fixed income fund had pulled in $2.7 billion out of the $3.9 billion that the firm raised from clients in the first eight months of last year.

Attracting Money

Kaufman also managed money for the main Kensington and Wellington funds. Those funds returned about 18 percent in 2014, and are up 7 percent this year, the person said. Similarly managed funds across the industry gained 2.1 percent on average last year, and are up 2.1 percent in the first three months of 2015, according to data compiled by Bloomberg.

Kaufman is the second departure from Citadel’s senior ranks this year. In January, Brandon Haley, head of global equities, left after nine years at the firm.

Separately, the firm said today that it hired former Federal Reserve Chairman Ben S. Bernanke as a senior adviser to consult on monetary policy, financial markets and the global economy.

Talks between Citadel and Bernanke, who led the U.S. central bank during the longest and deepest economic downturn since the Great Depression, started six months ago, a person with knowledge of the situation said. He will initially start meeting with Citadel’s investors in Europe and Asia, said the person, who asked not to be named because the details are private.

Griffin said Bernanke’s insights on monetary policy and capital markets will be “extremely valuable to our team and to our investors.”

Related News and Information: Ben Bernanke to Advise Billionaire Ken Griffin’s Hedge Fund