Citadel shows recovering signs earning $5bn in profits against $8bn losses

Hedge fund manager Kenneth Griffin's Citadel investment Group lost $8 billion in clients' money last year, but is turning things around as markets recover and has made $5 billion in profits so far this year, the Wall Street Journal said on Wednesday.

The report said Griffin is launching four new funds and expanding in investment banking -- hoping to fill the profitable hole left by the collapse of Lehman Brothers.

"Nothing is more important to me as we approach (Citadel's) 20th anniversary than striving to earn back the losses of '08 and move forward," the newspaper quoted Griffin as saying.

He is spending the vast majority of his time focused on Citadel's biggest hedge funds, it said, in an article that referred to Griffin as the "hedge-fund king."

Until last year, Citadel commanded some of the highest fees in the hedge-fund industry, amounting to 20 percent of profits on top of fund expenses that ranged from 4 percent to 8 percent of an investor's fund assets, according to fund documents.

Now, Citadel is cold-calling investors, with Griffin and other executives involved in trying to drum up money.

In the first nine months of this year, Citadel made $5 billion in trading profits as markets recovered, the Journal said. Citadel's main fund is up 58 percent this year.

Citadel survived the economic downturn, although more than 2,000 hedge funds, or more than 20 percent of the total, shut down since early last year, according to Hedge Fund Research.

The Journal said Griffin's predicament reflects broader troubles at hedge funds world-wide. These largely secretive, complex investments, heavily reliant on borrowed money, were hammered in 2008 by the crisis in the world financial system.

So far this year, most hedge funds are showing profits again. But a series of frauds, insider-trading allegations at Galleon Management and a weak economy have kept big clients from plowing in more money, the Journal said.

Source: Reuters