Citadel's performance hits new low
Citadel Investment Group has hit a record low in its 18-year history as de-leveraging and investments in convertible bond arbitrage strategies have taken their toll on the $15bn (€12bn) alternative asset manager.
This year has marked Citadel’s worst performance since the company was founded in 1990 with double digit overall declines in September and October.
The slide in performance stems from its multi-strategy funds—Citadel Kensington Global Strategies Fund and Citadel Wellington Fund, according to a source familiar with the situation. In November alone, Citadel lost 13%.
Citadel has subsequently cut 40 from its workforce after its hedge funds lost 47% for the year through November.
The job cuts will come from the firm's trading and investment teams across its fundamental credit business, which focuses on investing in credit, energy, reinsurance and its $1bn fund of hedge funds, which was shut down in October.
Citadel shut down its $1bn fund of hedge funds, Fusion, in October. The hedge fund manager was responsible for 95% of the investment in Fusion. It reallocated the assets to its hedge fund seeding fund, Discovery, and its incubation fund Pioneer, which are also part of the alternative asset management unit.
Some administrative staff were also let go as well, the source said.
Citadel joins a handful of hedge fund managers that have indicated they will make or have made staff reductions, including UK hedge fund managers Absolute Capital Management and GLG Partners.
The funds' performance was impacted by investments in convertible bond arbitrage strategies. Convertible bond arbitrage funds have suffered aggregate losses ranging from 35% to 50% this year, according to data from Hedge Fund Research.
In a conference call in October, Citadel’s chief financial officer, Gerald Beeson, said the hedge fund manager’s losses have been caused by "the unprecedented de-leveraging that took place around the world over the past several weeks," according to Dow Jones Newswires. (Dow Jones owns Financial News.)
Despite the poor results, a trio of Citadel funds tied to the fund manager's market-making business are up a collective 43% for the same period, according to the source. The three funds have a total of $3bn in assets under management.
The level of redemptions stemming from poor performance across hedge funds, could reach $650bn by the end of the year, according to US advisory boutique Empirical Research Partners, raising the spectre of additional job cuts for hedge funds.
—Write to Stephanie Baum at sbaum@efinancialnews.com
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