Ken Griffin, the ambitious Chicago-based hedge fund manager, assembled Wall Street analysts on a conference call yesterday to insist that his Citadel Investment Group remained solvent after weeks of rumours about spiralling losses. More than 700 investors, analysts and other market players who have been nervously watching developments in the hedge fund industry swamped phone lines to hear Mr Griffin and his lieutenants declare this was a period of unprecedented panic and that the banking system would be different forever – but that Citadel was hunkering down and able to survive the turmoil.
The firm's flagship Wellington and Kensington funds were down 35 per cent since the start of the year, and that almost all of the decline has come in the four weeks since the collapse of Lehman Brothers caused a convulsion throughout the industry. Faced with calls from their bankers to reduce the amount of risk that they take, and by likely or actual redemption requests from their investors, hedge funds have been shrinking in size, dumping assets and shifting into cash and super-safe investments such as US government debt.
Citadel now holds 30 per cent in cash and Treasuries, and has access to $8bn in credit lines, meaning that it does not face a liquidity problem, callers heard. "We need to do what we've done in 18 years successfully," Mr Griffin said. "We need to make good investment decisions."
The shrinking of the hedge fund industry is one major factor in the turmoil on global markets. Some $43bn was pulled out of fund by investors in September alone, according to data from TrimTabs Investment Research.
Mr Griffin said Citadel had received only "modest" redemption requests. The company's shares are not publicly traded, but some of its bonds are.Reuse content