Ignorance is bliss — except when it costs you and your clients billions.
Ken Griffin, the billionaire founder of hedge fund titan Citadel, said that he didn’t appreciate the fragility of the US banking system in the lead-up to the 2008 financial crisis — a blip that amounted to the “biggest mistake” of his career.
“I did not forsee a day where the government had to intervene to bail out basically everybody,” Griffin said in a video interview with Institutional Investor‘s Julie Segal, in which the pair partake in a game of Uno.
Griffin said that his firm had run a large leveraged balance sheet like the big banks.
“That became our Achilles heel,” he said.
Citadel lost $US8 billion of its clients’ assets in 2008 with a 55% loss in the firm’s big hedge funds, according to a Wall Street Journal report from the time. Rumours circled that the firm would shutter.
“It was incredibly humiliating, let’s not kid ourselves,” Griffin said in the II video. “We had never had a double digit loss in 17 years.”
The firm, of course, still exists, and managed $US26.2 billion at the start of the year in hedge fund assets, according to the Hedge Fund Intelligence Billion Dollar Club ranking. That’s higher than what the firm managed in 2007, with around $US20 billion, per the Journal.
“Don’t act like a bank, unless you are a bank,” Griffin said. “That was a really big lesson learned from 2008.”
You can watch the full video over at Institutional Investor.