Citadel's Blood in the StreetMatthew Goldstein
The end of the year can’t come soon enough for hedge fund magnate Ken Griffin, whose main investment portfolio at Citadel Investment Group continues to pile up big losses.
As of Dec. 5, Citadel two main funds were down an eye-popping 49.5% for the year, according to a posting on the hedge funds website obtained by BusinessWeek. Citadel’s main hedge funds were cruising along for much of the year until September, but they sprung a leak after Lehman Brothers filed for bankruptcy on Sept. 15. Ever since the funds have been taking on water and are now looking at a long road back to recovering their past luster.
The recent performance numbers for the Kensington and Wellington funds are simply ugly. In September, the giant portfolios lost about 16% of their value. In October, the funds plunged another 22%. The declines ameliorated a bit in November, with the funds falling 14%. And things are actually better for the funds through the first week of December: the portfolios are down just another 2.5%. Then again, December is far from over.
In fairness, it’s not been all bad news for Griffin. Two smaller funds managed by the one-time $20 billion hedge fund conglomerate are both up 43%.
There’s been speculation that Griffin may look to wind down his two big funds in light of the dreadful performance, much of which has been attributed to the poor performance of their convertible bond investments. But sources close to Citadel have denied that’s even under consideration. These sources point that Citadel has better source of funding than other hedge funds and can weather the financial crisis. Two years ago, Citadel raised cash through the private sale of bonds.
Even if Citadel survives, one thing that’s no doubt been shelved is the hedge fund’s plan for an initial public offering. That’s something it was openly flirting with eariler this year.