Institutional Investor's Alpha Magazine - June 2008 - (Page 35)

KEN GRIFFIN ALPHA HALL OF FAME he legend of Kenneth Griffin looms large over Citadel Investment Group. Grifﬁn, who began his investment career as a sophomore at Harvard University trading convertible bonds from his third-ﬂ oor dorm room, founded Chicago-based Citadel in 1990 at the age of 22 with $4.6 million from investors. Leveraging his trading prowess and equally impressive management skills, Grifﬁn has since built his aptly named ﬁrm into a global ﬁnancial services giant. Today, Citadel manages $22 billion across a multitude of hedge fund strategies, employs more than 1,300 people and has expanded well beyond its original roots to become a force in market making and fund administration. Grifﬁn, who at 39 is the youngest member of the Alpha Hall of Fame by more than a decade, saw early on the value of securing permanent capital. In 2000, Citadel received an investment-grade rating from both Standard & Poor’s and Fitch, and two years ago it became the ﬁrst hedge fund ﬁrm to do a bond offering, raising $500 million in medium-term notes. Grifﬁn has used Citadel’s ﬁnancial strength, as well as its technological acuity and ability to analyze complex situations quickly, to proﬁt from two of the hedge fund world’s biggest recent blowups — Amaranth Advisors and Sowood Capital Management. Citadel investors have enjoyed an annualized rate of return of nearly 28 percent since 1990. How does it feel to be the only Hall of Famer who has basically had just one job his entire career? “Citadel really is at the center of the world’s markets. On a busy day we’ll trade over half a billion shares KENNETH of stock.” GRIFFIN we launched Citadel. Frank was a wonderful mentor, adviser and partner who encouraged me to build a platform. In other words, rather than focus on just one strategy, he encouraged me to assemble a team of professionals who could successfully deploy capital through a number of investment strategies. Balancing both the short-term need to drive proﬁts and the long-term focus on building a platform has been instrumental in our success over the years. Citadel has also been very opportunistic. Photographed by Martin Adolfsson for Alpha on May 23, 2008, in New York. It’s very much part of our DNA. This is an organization that thrives on the challenge of entering new markets and putting together teams and competitive advantages that put us in a leadership position over time. Such as the decision to get into energy trading? I am probably unique on your list in not having worked on Wall Street, which is a bit different than this having been my only job. When I was in college I co-managed the portfolios of two small partnerships engaged in convertible bond arbitrage. After graduation from Harvard I was hired by Frank Meyer [founder of fund-of-funds ﬁ rm Glenwood Partners] here in Chicago to manage a separate account. In my early days I continued to focus on convertible bond arbitrage, relative value and other trading strategies. How would you quantify Meyer’s impact on your career? When Enron went into disarray a few years ago, it was a great entry point for us to get into the energy trading business. And we’ve put together a team over the past couple of years that I think is one of the best in the world, a team that [in October 2006] was able to, in partnership with JPMorgan, acquire Amaranth’s enormous portfolio in just a couple dozen hours and stop, dead in its tracks, one of the most signiﬁcant ﬁnancial crises that had ever hit the energy markets. And also make some money for your investors. I owe a big part of my success to Frank’s willingness to take a risk in hiring me out of college, entrusting me with his investors’ capital and then being my partner back in 1990 when We priced the trade correctly, and fortunately we were very aggressive in the disposition of the portfolio. We were able to exit a fair number of positions that would have had losses down the road. I’m very pleased with how my team handled the situation. To go from being a nonpresence in a market, which is where we were when Enron collapsed, to just a few years later being the ﬁrm the world turns to to solve one of the biggest crises in the energy markets speaks volumes. JUNE 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 35

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - June 2008

Investor's Alpha Magazine - June 2008 Contents Letter From the Editor Longs & Shorts Cover Story: Alpha Hall of Fame Bruce Kovner Michael Steinhardt Kenneth Griffin Louis Bacon Steven Cohen George Soros James Simons Seth Klarman Julian Robertson Jr. Jack Nash Leon Levy Paul Tudor Jones II Alfred Winslow Jones David Swensen Looking Ahead: Back to the Future Research Center: Europe Hedge Fund 50 Unhedged: Let the Sunshine In

Institutional Investor's Alpha Magazine - June 2008

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