Ken Griffin’s Citadel Investment Group, a Chicago-based hedge fund firm that manages roughly $18 billion in assets and is considered one of the most powerful hedge funds firms in the world, has barred investors from withdrawing any money from its flagship funds, Kensington and Wellington.
Both funds have shed $10 billion year-to-date, nearly half their value. After insisting for months that the firm’s liquidity position remains strong and denying rumors that Citadel approached the Treasury Dept. for an injection of cash, Griffin, faced with the possibility of a further drop in the value of leveraged loans, is refusing to allow its clients to withdraw their remaining funds until at least the end of March.
From The Wall Street Journal:
Investors who asked to withdraw money at year end from Kensington and Wellington, with a combined $10 billion in assets, won’t be allowed to, the Chicago firm said in a letter on Friday. Otherwise, $1.2 billion would have come out, complicating Citadel’s attempt to resuscitate its performance following its hedge funds’ worst-ever year.
The move follows repeated assurances from Citadel that redemption requests wouldn’t pose a problem. The firm’s total assets have shrunk to about $13 billion from $20 billion at the start of the year. Mr. Griffin says in the letter that “in today’s highly volatile markets, maintaining financial flexibility must be a priority.”
Recently, Griffin cut back on staffing in Europe and Asia in an attempt to navigate tumultuous credit markets. However, if global equity markets will continue declining, that will produce an even greater round of hedge fund redemption attempts, particularly at the end of the year, which is a time when many investors look to reallocate their portfolios.