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Ken Griffin’s Citadel recently sold Omnium, a hedge fund servicing company with $70 billion under administration, to Northern Trust.(The amount it sold for hasn’t been reported. UPDATE: We hear its about $100 million. More below.)
Apparently people in the hedge fund community are wondering, why would Citadel sell a company that does a lot of its back and middle office work?
What’s weird is that “while Omnium wasn’t exactly Citadel’s back office,” according to someone familiar with Citadel, “they were always pitching it as such.”
“I have no idea why they would sell it. Rather counter-intuitive.”
Omnium provided hedge fund services (like accounting, for example) for a variety of third party clients. Citadel owned Omnium and was a client. While a number of their groups had their own back and middle office personnel, other parts of Citadel relied on the company for service, according to our source.
Of course it might not be counter-intuitive to market it using the Citadel name and then sell it at all – Citadel is a big, successful fund. Using the Citadel name to market a company it owns makes sense.
But still, without a price disclosure, the question remains: why sell it?
Could owning it be perceived as a conflict of interest somehow?
UPDATE: Someone familiar with Citadel tells us that, after Madoff, there’s a sensitivity towards due diligence (like that performed by Omnium) being performed by the same company. Future investors might be better reassured by Citadel’s due diligence being performed by a separate company outside of Citadel.
Also, here’s more on Omnium: Citadel founded the company about 4 years ago. It created and maintains the technology that Omnium uses, and licenses it to them. At first, the company was more closely involved with just Citadel. Then, it took on other clients. Recently, Citadel re-named the company and moved its offices. And now they’ve sold it for ~$100 million. Citadel will continue to licence and maintain the technology.