Citadel LLC (formerly known as Citadel Investment Group, LLC) is an American multinational hedge fund and financial services company. Founded in 1990 by Ken Griffin, it has more than $62 billion in assets under management . The company has over 2,600 employees, with corporate headquarters in Miami, Florida, and offices throughout North America, Asia, and Europe. Founder, CEO and Co-CIO Griffin owns approximately 85% of the firm. As of December 2022, Citadel is the most successful hedge fund of all time, posting $65.9 billion in net gains since inception in 1990.
Citadel LLC is a separate entity from the market maker Citadel Securities, although both were founded and are owned by Griffin.
History
Kenneth Griffin started his trading career out of his dorm room at Harvard University in 1987, trading convertible bonds. As a sophomore, he hooked a satellite dish to the roof of his dormitory. After graduating with a degree in economics, Griffin joined Chicago-based hedge fund Glenwood Partners. Citadel was started with $4.6 million in capital. Citadel was originally named Wellington Financial Group after its flagship fund. The company name was changed to Citadel in 1994. Within eight years, the firm had more than $2 billion in assets under management.
In 1998, Citadel started requiring investors to accept terms that "significantly restrict[ed] their ability to withdraw their capital", according to Institutional Investor. When hedge fund Long Term Capital Management collapsed later that year, Citadel's capital lockdown made it "a rare buyer, as desperate hedge funds unloaded bond inventory". In 2006, Citadel and JP Morgan Chase took over the energy portfolio and division of failed hedge fund Amaranth Advisors, which had suffered a 65% ($6 billion) loss in assets. In November 2006 Citadel issued $2 billion of investment grade bonds to borrow money at a lower rate than it would otherwise be able to.
In 2001, Griffin began recruiting the energy traders from Enron the day after it collapsed for a new business including "a team of traders, meteorologists and researchers" building amongst the industries biggest energy trading groups at the time.
In 2007, Citadel invested $2.5 billion in E-Trade. This transaction included acquiring E-Trade's securitized subprime mortgages, collateralized debt obligations (CDOs) and second lien loans, as well as 12.5% senior unsecured notes, and 84,687,686 shares of common stock (equal to 19.99% of the then currently outstanding shares). Citadel received a seat on the board of directors. Citadel sold its remaining stake in E*Trade in 2013.
During the financial crisis of 2007–2008, for 10 months, Griffin barred his investors from withdrawing money, attracting criticism. At the peak of the crisis, the firm was losing "hundreds of millions of dollars each week". It was leveraged 7:1 and the biggest funds at Citadel finished 2008 down 55%. However, they rebounded with a 62% return in 2009.
On January 17, 2012, Citadel's flagship funds, Citadel Kensington Global Strategies Fund Ltd and Citadel Wellington LLC, crossed their respective high watermarks, earning back the 50% of assets lost during the 2008 financial crisis. Having made up the losses, Citadel could once again charge client fees for managing their money and take a percentage of profits. Citadel under Griffin's leadership was reported as differentiating from hedge funds rivals post-2008 financial crisis with an "aggressive expansion". Starting at the beginning of 2014, over an 18 months period the hedge fund's assets under management increased $10 billion; from $16 billion to $26 billion as a result of "a 29% rise for its main hedge funds and a flow of new cash". In January 2020, Citadel Securities paid a $97 million settlement to China, after Chinese regulators ended a long-standing investigation into Citadel and other companies.
During the coronavirus pandemic Citadel LLC created a "bubble" for a class of 100 interns by renting out a luxury resort in Wisconsin.
In January 2021, Citadel and Point72 Asset Management invested $2.75 billion in Melvin Capital, after Melvin Capital lost 53% of its value owing to the GameStop short squeeze.
In a letter to employees on June 23, 2022, Griffin announced they would be moving their headquarters to Miami, Florida, due to a more favorable business climate and increased crime complaints in Chicago.