Citadel delivers 10 pct gain on 20th anniversary

* Citadel flagship funds gain about 10 percent in 2010

* Firm manages roughly $11 billion

By Svea Herbst-Bayliss

BOSTON, Dec 23 (BestGrowthStock) – Hedge fund firm Citadel, one of
the world’s biggest, returned 10 percent to its investors this
year, more than double what its peers earned on average.

The Chicago-based firm’s flagship Kensington and Wellington
funds climbed about 10 percent, according to a person who has
seen the numbers but was not allowed to discuss them publicly.

For Kenneth Griffin, a 42-year-old investor who began
trading from his Harvard dorm room decades ago, the news is a
happy way to mark the 20th anniversary of his roughly $11
billion firm.

Hedge funds, on average, returned 4.4 percent this year,
according to data from Hedge Fund Research. For many mangers
the year was difficult as they grappled with volatile markets,
a slower-than-expected U.S. economic recovery and Europe’s debt
crisis.

A Citadel spokeswoman could not be immediately reached.

For Citadel, 2010 started on a bright note when investors
expressed fresh confidence in Griffin’s abilities by allocating
roughly $1 billion to the firm in the first months.

For years, Citadel was one of the industry’s most popular
hedge funds, easily taking in about $1 billion in new money a
year as investors wanted a piece of Griffin’s outstanding
record. Before the crisis the firm’s assets peaked at about $20
billion.

But the financial crisis hit Citadel and Griffin hard —
the flagship funds lost about 55 percent and Griffin, like many
other hedge fund managers, restricted investors’ rights to take
their money out by suspending redemptions. Griffin called that
one of the most difficult decisions he ever had to make.

But 2009’s 62 percent gains and Griffin’s strong record —
before 2008 the firm had lost money only once before, in 1994
— restored investor confidence. Also Griffin said that he
learned from the crisis.

“We will be more judicious in our use of leverage and
restrained in our trading of less liquid or highly complex
instruments,” Griffin said in a letter that was sent to
investors on Wednesday. The letter was meant to mark the firm’s
20th anniversary and discussed many of its highlights.

Reuters obtained a copy of the letter on Thursday.

“We were overly confident that we could weather any
financial storm,” he wrote about the 2008 financial crisis.

“Now we are firmly grounded in the understanding that even
the best run firms — with the strongest balance sheet and
industry leading risk-management tools — can face almost
unimaginable market forces,” he wrote.
(Editing by Steve Orlofsky)

Citadel delivers 10 pct gain on 20th anniversary