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Also shortlisted in this category: |
Citadel
It would be hard to find a bigger global success story in hedge fund history than Citadel. Respected around the world for its ability to put capital at risk and its 17-year track record of success in an industry where participants are not noted for their longevity, Citadel has earned a unique position amid ever-increasing competition. A far cry from the firm started by Ken Griffin in 1990, the $4.6 million convertible arbitrage fund has evolved to become a diversified financial institution, deploying approximately $15 billion in investment capital across nearly every important asset class.
“Throughout our history we have had a culture of innovation and a drive to remain on the leading edge,” says Ken Griffin, president and CEO, adding that these attributes have been critical to Citadel’s evolution and expansion into new business areas.
Despite the huge growth that other firms have struggled to make work, Citadel continues to produce the kind of performance that keeps investors loyal, while demonstrating risk management expertise that sets a standard for an industry that has been scrutinized as a possible threat to the stability of financial markets. For these reasons, Citadel receives Euromoney’s 2007 best global hedge fund award.
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“We just completed our best year ever in 17 years” |
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Last year, Citadel, partnering with JPMorgan, was able to execute a transaction of enormous size and scope for the transfer of Amaranth’s energy portfolio. Citadel’s ability to complete this transaction highlights its execution strengths and demonstrates its prowess in deploying capital. Citadel’s energy team, in a matter of days, worked nonstop to understand, price and, finally, absorb, Amaranth’s complex portfolio. “There are few firms that could have dealt with the complexity of the transaction so quickly,” says Griffin. “It’s a testament to the risk management capabilities and operational infrastructure of the firm, and to the talent of the professionals working here.” Beyond the profit on the Amaranth transaction, 2006 was an enormous success as Citadel’s two multi-strategy funds produced, according to investors, net returns in excess of 30%.
Citadel’s consistent performance and robust risk management capabilities have been recognized by the ratings agencies. Citadel was the first hedge fund to receive counterparty credit ratings from Standard & Poor’s and Fitch, and recently received the highest rating for operational quality from Moody’s.
In April 2007, S&P upgraded its ratings of Citadel’s two funds, Wellington and Kensington, from BBB to BBB+ based on strong performance, continued improvement in risk management and strong liquidity management. They are the only two hedge funds rated by S&P to have a public counterparty rating.
In 2006, Citadel managed another first. In the fourth quarter it launched a medium-term note programme. The first tranche of $500 million five-year notes was sold in the 144A institutional market to a diverse group of investors such as traditional money managers, prop desks and insurance companies, say sources familiar with the deal. “The bond offering was a natural extension of our capital structure and further enhanced the stability of our liquidity management,” explains Citadel’s CFO, Gerald A Beeson. In addition, it was yet another signal to the market of the depth of the institutional capabilities at the firm.
Indeed, Citadel is acknowledged as acting more like a financial institution and has been commended by industry participants. “There was a great deal of transparency, and Citadel was very intent on having regular disclosure to its bond investors to provide some comfort,” says one investment banker.
Keeping investors happy is crucial, says Griffin. “We are measured based on our performance and so must constantly seek new sources of alpha generation. An important source of differentiation for Citadel is the team of world-class professionals we have assembled. The ability of any one person to make an impact here is tremendous and is what continues to draw talent to Citadel.”
Citadel is among the leading market-makers for options and equities in the US. Additionally, in the first quarter of this year, it launched Citadel Solutions LLC, a hedge fund administration firm, and Citadel Alternative Asset Management, a fund of hedge funds and emerging manager incubation business.
Where is Citadel headed? Griffin responds: “Every day I have the opportunity to work with some of the most talented and committed professionals in finance. Looking back on 2006, I cherish the fact that we just completed our best year ever in 17 years. I look forward to the next 17 years because I believe Citadel will redefine the boundaries of what a firm such as ours can accomplish in finance.”
