Hedge fund firm Citadel, one of the world’s biggest, returned 10 percent to its investors this year, more than double what its peers earned on average.
The Chicago-based firm’s flagship Kensington and Wellington funds climbed about 10 percent, according to a person who has seen the numbers but was not allowed to discuss them publicly.
For Kenneth Griffin, a 42-year-old investor who began trading from his Harvard dorm room decades ago, the news is a happy way to mark the 20th anniversary of his roughly $11 billion firm.
Hedge funds, on average, returned 4.4 percent this year, according to data from Hedge Fund Research. For many mangers the year was difficult as they grappled with volatile markets, a slower-than-expected U.S. economic recovery and Europe’s debt crisis.
A Citadel spokeswoman could not be immediately reached.
For Citadel, 2010 started on a bright note when investors expressed fresh confidence in Griffin’s abilities by allocating roughly $1 billion to the firm in the first months.
For years, Citadel was one of the industry’s most popular hedge funds, easily taking in about $1 billion in new money a year as investors wanted a piece of Griffin’s outstanding record. Before the crisis the firm’s assets peaked at about $20 billion.
But the financial crisis hit Citadel and Griffin hard — the flagship funds lost about 55 percent and Griffin, like many other hedge fund managers, restricted investors’ rights to take their money out by suspending redemptions. Griffin called that one of the most difficult decisions he ever had to make.
But 2009’s 62 percent gains and Griffin’s strong record — before 2008 the firm had lost money only once before, in 1994 — restored investor confidence. Also Griffin said that he learned from the crisis.
“We will be more judicious in our use of leverage and restrained in our trading of less liquid or highly complex instruments,” Griffin said in a letter that was sent to investors on Wednesday. The letter was meant to mark the firm’s 20th anniversary and discussed many of its highlights.
Reuters obtained a copy of the letter on Thursday.
“We were overly confident that we could weather any financial storm,” he wrote about the 2008 financial crisis.
“Now we are firmly grounded in the understanding that even the best run firms — with the strongest balance sheet and industry leading risk-management tools — can face almost unimaginable market forces,” he wrote.
