In a logical move, Wall Street banks are getting more conservative about which hedge funds they’ll provide crazy amounts of leverage to, and which ones are required to post more collateral. Each bank has a different ranking system. Credit Suisse has its “CS400”, its elite partners that it can’t lose, as well as its “Conversation List”, the funds whose business might not be worth the risk.
At any rate, among the funds that no longer enjoys the best service: Ken Griffin’s Citadel, which fell 53% last year.
Citadel, long a prized brokerage client because of its big trading volume, was directed by lenders to post more collateral more than once in 2008 as the market turned against it, say people familiar with the matter. The banks’ moves — made even though Citadel has some secure longer-term financing — caused Citadel to sell some securities and to reduce its use of leverage. Citadel declined to comment.
Collateral! Such humiliation.