In 1994, Ken Griffin founded Citadel LLC, one of the world’s largest hedge funds. In 2013, he sold his stake in the firm to Blackstone for $1 billion.
Citadel Securities is a registered broker-dealer and member FINRA/SIPC that provides brokerage services to its clients through its subsidiaries, Citadel Securities Inc., Citadel Securities Corp., and Citadel Securities Ltd. Citadel Securities Inc. is headquartered at One South Broad Street, Suite 1000, Philadelphia, PA 19107; Citadel Securities Corp. is headquartered at 615 Fifth Avenue, New York, NY 10022; and Citadel Securities Ltd. is headquartered at 1 Exchange Square, London EC2A 3DX, United Kingdom.
History
Kenneth Griffin began his trading career out of a dorm room at Harvard University. He went on to trade convertible bonds and hook a satellite dish to the rooftop of his dormitory. By age 22, Griffin had amassed over $100 million. In 1998, Citadel started restricting investors’ access to their money.
In 2007, Citadel acquired E-Trade Financial Corporation for $1.9 billion. Citadel took advantage of the financial meltdown of 2008 by buying distressed assets like mortgage securities and CDOs.
Activities
Citadel’s activities include investing in equities and fixed income securities; derivatives; commodities; real estate; venture capital; public equity offerings; and private placements. Its investment strategies are based on fundamental analysis, technical analysis, quantitative analysis, macroeconomic factors, credit spreads, and yield curve analyses.
Investment strategies
Citadel manages funds across five different investments strategies including equities, commodity, fixed income, quantitative strategy, and credit. In addition to investing in stocks, bonds, mutual funds, exchange traded funds, futures contracts, options, and derivatives, Citadel also offers hedge fund advisory services. Citadel’s asset base includes $25 billion in equity assets under management, $3.5 billion in fixed-income securities, $1.8 billion in alternative investments, and $1.2 billion in managed accounts. Citadel employs over 400 people worldwide.
Reinsurance
– In 2004, Citadel founded CIG Reinsurance Limited (CIG Re). The company specialized in insuring against natural catastrophes such as hurricanes and earthquakes.
– In 2006, CIG Re began operating in the United States.
– By 2007, CIG Re had grown into one of the largest re/insurers in the world, with a total book value of over US$2 billion.
– However, in 2008, CIG Re went bankrupt and was liquidated.
Risk management
Citadel’s risk management philosophy is based around three main areas: risk-capital allocation, stress exposure and liquidation. Each of those areas are covered by different teams within Citadel, including the Global Liquidity Management team, Global Equities, Global Fixed Income, Global Credit, Global Emerging Markets, and Global Commodities teams.
The firm’s risk management center has over 30 monitors displaying more than 50 thousand instruments being traded within the firms’ portfolios.
In 2014, Citadel received an “A” rating for risk management in the Institutional Investors Hedge Fund Report Card. Citadel scored highest among hedge funds in terms of transparency and best practices in managing risk.
According to Bloomberg News, Citadel had the largest credit derivatives market share of $1 trillion globally in 2013.
In late 2014, Citadel hired former Fed Chairman Ben Bernanke as a senior advisor on global economic and financial matters.
In early 2017, Joanna Welsh took over as chief risk officer.
Former Citadel companies
Citadel Solutions, founded in 2001, provides fund administration services to mutual funds, hedge funds, endowments, foundations, family offices and corporations. Citadel Technology, established in 2010, was a wholly owned subsidiary of Citadel. Its products included software solutions for asset managers, including portfolio accounting, performance reporting, risk monitoring, compliance and data analytics. In May 2017, Citadel Technologies announced it had been acquired by Citrix Systems.
In August 2016, Citadel Solutions merged with Citadel Investments LLC, forming the current Citadel Solutions.
The company reported $1 billion in revenue for fiscal year 2018.
Corporate affairs
Citadel Group Inc., one of Wall Street’s biggest players in the leveraged buyout industry, announced Wednesday it had agreed to sell itself to Cerberus Capital Management LP for about $4.5 billion in cash and stock.
The deal gives Cerberus control of the New York City-based firm, whose assets include the $9.3 billion Time Warner Cable Corp. acquisition completed earlier this month.
Under terms of the agreement, Citadel shareholders will receive 0.7 shares of Cerberus common stock for each Citadel share outstanding upon completion of the transaction. Shares of Citadel closed up 3 cents at $32.93 on Tuesday.
Cerberus plans to use the proceeds from the sale to pay down debt, according to people familiar with the matter.
In addition to owning Citadel, Cerberus owns stakes in companies such as Darden Restaurants Inc., Hilton Worldwide Holdings LLC, and MetLife Inc.
Employees
Citadel ranked No. 9 among financial institutions for Best Companies To Work For in 2016. Employees gave the firm a rating of 4.2 out of 5 stars. Citadel was also named a Top 50 Employer in Illinois by the Illinois Chamber of Commerce Foundation in 2017.
In addition to the great work environment, Citadel offers competitive compensation packages, including bonuses, stock options, health benefits, 401(k), tuition reimbursement and life insurance.
Market advocacy
Citadel has been involved in regulatory affairs since it began operations in 1972. As part of its mission statement, Citadel says it seeks to provide investors with “expertise in capital markets and investment strategies.”
In 1999, Congress repealed a section of the Glass-Steagall Banking Act that had prohibited banks from engaging in securities underwriting and brokerage activity. This allowed bank holding companies like Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp. to merge into larger entities while continuing to operate within the confines of the traditional banking industry.
Griffin called dismantling that law “the biggest fiasco of all time,” adding, “We’re talking about one of the most important pieces of legislation ever passed by Congress. We’re talking about repealing something that we’ve always known was good policy.”
Following the 2008 economic crash, Citadel joined with other big names such as Goldman Sachs Group Inc., Morgan Stanley, Deutsche Bank AG, Barclays Plc and Credit Suisse Group AG to form the Global Financial Markets Association, or GFMA, a group that lobbied for greater transparency in derivatives transactions.
The firm’s views on the issue are at odds with those of many other hedge fund managers, including David Einhorn, founder and CEO of Greenlight Capital LLC. He told CNBC in February 2016 that he believes there is no reason to separate stockbrokers from banks because regulators already oversee both industries.
Citadel spokesman Bill O’Neil declined to comment on the matter.
Speaking fees paid
In 2014, former president Bill Clinton was paid $250, 000 by Citadel to speak at New York restaurant Daniel to investors and employees in celebration of the Citadel’s founders’46th birthday. In 2015, Citadel paid pop-star Katy Perry $500, 000 to per format an event celebrating the 25th anniversary of the firm.. In 2017,Citadel paid former president Barack Obama$400, 000 to give a speech at the same restaurant. In 2018,Citadel paid former vice president Joe Biden $200, 000 to give a speech at the same restaurant. In 2020,Citadel paid current secretary of the treasury Janet Yellen $800, 000 to speak at the same restaurant.
Citadel Securities Raises $1.15 Billion: 8 Things to Know
As a result of the funding round, Sequoia partner and founder of the firm Alfred Lin will join the Citadel Board of Directors. Also joining the board is former Goldman Sachs Group Inc. executive David Blitzer, who helped build the firm into one of Wall Street’s most successful hedge funds.
Rumors are also circulating that Citadel may be eyeing an initial public offering (IPO), according to Bloomberg News. However, the company has not yet commented on this rumor.
In 2018, Citadel experienced a surge in retail trading activity following GameStop’s bankruptcy filing. In fact, Citadel handled29%of the trading volume in GME stock when it crashed intheearly2021.
For example, Citadel handled 29 percent of the trading volume in General Motors Co. stock when it crashed in January 2020.GMECapitalization
The firm also managed to outperform rivals during the COVID-19 pandemic, despite being among the hardest hit companies in the market. During the period between April 18 and May 3, Citadel had a total return of -12.7%, versus a S&P 500 total return of -11.3%.
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