Citadel has vaporized almost 50% of its clients’ capital so far this year. Now, after insisting for months that its liquidity is strong, the firm is adding to the pain by refusing to allow its clients to withdraw their remaining funds until at least the end of March.
This move will likely torpedo Citadel’s remaining credibility. We’d say it would also be the death knell for Ken Griffin’s reputation, but Wall Street stars have recovered from far worse, and Ken probably will, too. (It may be time to just start all over again, though. Even if all goes perfectly it will likely take Citadel a few years to get back to the high-water mark again).
WSJ: Kenneth Griffin’s Citadel Investment Group barred investors from withdrawing any money from its two biggest hedge funds until at least the end of March, reflecting increased strain on the firm after its funds fell almost 50% this year on investment losses.
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.”