Citadel Said to Shut $200 Million Fund After Manager Leaves
March 30, 2011, 3:39 PM EDTBy Katherine Burton and Saijel Kishan
March 30 (Bloomberg) -- Citadel LLC, the $11 billion hedge fund run by Ken Griffin, is shutting one of its residential mortgage funds after Bill King, the portfolio manager, left the Chicago-based firm, according to three people familiar with the situation.
King, who joined Citadel in 2008 from JPMorgan Chase & Co., left on March 7 following the appointment of Glenn Perillo as co-manager of the firm’s mortgage funds, according to the people, who asked not to be identified because the firm is private.
Some clients in the $200 million mortgage fund for U.S. investors wanted to take out their money following King’s departure, prompting Citadel to liquidate the fund, the people said. It had returned about 9 percent since it opened in June 2010.
Devon Spurgeon, a spokeswoman at Citadel, declined to comment.
Citadel has been expanding its business beyond its main multistrategy Wellington and Kensington funds. Those funds tumbled 55 percent in 2008 and have yet to recoup the losses, meaning they generate no performance fee income for the firm. Citadel, whose assets peaked at $21 billion in 2007, runs three other single-strategy funds.
“Single-strategy funds are more dependent on the portfolio manager than a multistrategy fund, so if a manager leaves, the firm is left with a black eye,” said Geoff Bobroff, an East Greenwich, Rhode Island-based consultant who advises money- management firms.
Citadel also runs a $100 million mortgage fund for offshore investors that it may also close, the people said.
Funds Up 8.5%
Perillo joined Citadel in 2008 from BlackRock Inc., where he specialized in residential mortgages. He will continue to manage a separate $700 million account that invests in mortgage securities for a sovereign wealth fund.
Griffin worked closely with Perillo on Citadel’s investment in E*Trade Financial Corp., according to one of the people. In November 2007, Citadel injected $2.55 billion into the online broker to help it weather losses from bad loans and shore up its banking unit. Citadel recently cut its stake to less than 20 percent.
The $7.5 billion Kensington and Wellington funds have climbed about 7.5 percent this year through yesterday, compared with a return of 1.3 percent, on average, for multistrategy funds, according to a daily index compiled by Chicago-based Hedge Fund Research Inc.
--Editors: Steven Crabill, Josh Friedman
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To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net.
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net
