Sunday, December 13, 2009

Citadel trying to start its own investment bank

Citadel Investment Group or the “Citadel” is one of the largest hedge funds in the world with approximately 15 billion dollars in assets under management(AUM). Founded by Kenneth Griffin in 1990 and based in Chicago, Illinois, the Citadel specializes in a variety of investment strategies such as convertible bond arbitrage, algorithmic trading, and macro-event driven. The Citadel trades in almost all OTC and exchange markets in equities, fixed income, currencies, and commodities. Last year, the Citadel lost 55% in two of its main funds: Wellington and Kensington. Although the funds have recovered more than 50% this year, there is still a ways to go for the funds to return to their former status.

Recently the Citadel has started an investment banking and advisory arm in hopes of replacing the void left by the collapse of Bear Stearns and Lehman Brothers. Mr. Griffin hired Rohit D’Souza: a former banker at Merrill Lynch, approximately 12 months ago to run this new unit. However Mr. D’Souza recently left the firm and was replaced by Patrik Edsparr: a former banker at JP Morgan Chase & Co. Mr. Griffin is known for his hands-on management style which may have contributed to Mr. D’Souza leaving. The Citadel has recently arranged its first syndicated loan for Targa Resources; a gas and pipeline in Houston. Will the Citadel be able to take investment banking and advisory services market share from other firms such as Goldman Sachs and Morgan Stanley and become a major player? Although the syndicated loan is a positive first step, the revolving door leadership of the newly formed unit and the Citadel in general is troubling. The quick change in leadership is not a good sign to companies in need of investment banking and advisory services who crave more stable leadership rather than the constant change that hedge funds typically exhibit.

By: Jason Wu - WFU MBA 11'

For further information, please see the full Bloomberg article:

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