Citadel Investment Group’s flagship hedge funds, slammed by losses and redemption requests last year, are mounting a comeback that paves the way to start releasing some suspended shareholder withdrawals this fall, according to people with access to its website.
Citadel told investors its flagship Kensington and Wellington multi-strategy funds rose by 6 per cent in May, bringing year-to-date returns to 21 per cent, the sources said. The S&P 500 Index is up 4.6 per cent this year, by comparison.
The funds, onshore and offshore versions of the same investment pool, currently manage about $8 billion. Chicago-based Citadel, led by famed trader Kenneth Griffith, declined to comment.
Strong gains from bets on convertible bonds, stocks and interest rates have helped the funds recover from last year, when the funds plunged by 55 per cent. Griffin at the end of 2008 blocked redemptions to avoid damaging fire sales though angering investors.
In February, Citadel said it would begin to honour some redemption requests when markets stabilised, trading activity revived and fund performance improved. Citadel has been meeting regularly with shareholders to discuss performance and its timetable for redemptions.
Citadel has not yet returned any money to Kensington and Wellington investors, but the firm now expects it will start meeting redemption requests in the fall, the sources said.
Despite the strong recent performance, Kensington and Wellington are still deep in the hole: The funds need to rise more than 80 per cent just to reach their former high-water mark, the point where Citadel can again charge its shareholders performance fees.
(Reporting by Joseph A. Giannone; Editing by Lisa Von Ahn)