Citadel Investment Group

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Citadel Investment Group is a 12 billion dollar Chicago-based hedge fund founded by billionaire trader Kenneth C. Griffin, and is one of the world's largest hedge funds. The firm is known for its daily trading volume, which amounts to 1-2% of daily trading activity in New York and Tokyo. It also requires longer "lock-up" periods from investors than many other hedge funds. Though Citadel employs over 1000 individuals globally, its flagship operation is located in Citadel Center, a $355 million office tower in downtown Chicago (in 2006 the tower was purchased for $560 million by Robert Gans [1]) [2]. Citadel also has offices in New York, Tokyo, Hong Kong, San Francisco, and London [3]. Of the 100 largest hedge funds, only Citadel is based in Chicago [4]. Citadel is the 11th largest hedge fund in the world [5].

From the period January 1, 1988 through May 30, 2004, Citadel Investment Group had achieved an annualized net return of approximately 28%, making it one of the best performing hedge funds within that period. In 2005, Citadel Investment Group underperformed 10 of 12 peers ^{[citation needed]}. On the negative side, it has become known as the "Chicago revolving door", due to turnover of its staff (aprox. 35% in 2005) ^{[citation needed]}. In 2005, Citadel was ranked by Absolute Return Magazine as one of the ten largest hedge funds in the United States [6].

Despite prior talk in Wall Street that Citadel was considering an IPO and Kenneth C. Griffin mentioning that possibility in an interview, in April 2006 a spokesman for Citadel said the firm currently has no such plans [7]. However, in November 2006 Citadel became the first hedge fund to publicly issue debt bonds. In an arrangement managed by Goldman Sachs and JP Morgan, Citadel announced it would sell $2 billion worth of notes. [8] The bonds have been given an investment-grade rating by Standard & Poor. [9]

[edit] Investments

Citadel reportedly has a large stake in Google [10], Conor Medysystems [11], Alexion Pharmaceuticals [12], FirstFed Financial Corporation [13], uranium [14] (an $11 million stake in Cameco [15]), Dow Jones & Co., KB Home [16], Enzon Pharmaceuticals [17], K-V Pharmaceutical Company [18], the London Stock Exchange [19], and Banta Corporation [20]. In November 2002, Citadel invested $100 million in Xcel Energy [21]; in November 2006, Citadel agreed to invest $28 million in mining company China Shen Zhou [22].

In 2004, Citadel founded CIG Re, a Bermuda-based catastrophe reinsurer [23]. In 2005, the hedge fund founded a $500 million catastrophe reinsurer in Bermuda called New Castle Re [24].

Citadel also has multiple subsidiaries such as Kensington Global Strategies (Citadel's largest fund [25]), Wellington Partners [26] (Citadel's oldest fund and its flagship fund [27]), Citadel Equity Fund [28] and Citadel Derivatives Group, which controls 10% of the Philadelphia Stock Exchange [29]. In 2000, Citadel's Wellington affiliate achieved a 52.6% return [30]. Since January 2005, Citadel Derivatives Group has been a Lead Market Maker on the trading floor of the Pacific Coast Exchange [31]. In a strategic partnership with about ten other financial institutions, Citadel Derivatives Group is also a joint owner of the International Securities Exchange [32].

In 2006, Citadel and JP Morgan Chase became white knights after taking over the energy division of Amaranth Advisors, which had suffered a 65% ($6 billion) loss in assets [33] [34].

Citadel's daily trading activity reportedly accounts for "more than 10% of daily U.S. listed equity options contract volume" [35].