I love how people with accounts of MAX six figures have perfect foresight wrt operations like Citadel. You guys are right, they're idiots. Clearly.
6 or 7 figures doesn't make any difference, the fact is that even a lowly retail piker like myself can see that they are engaging in highly leveraged strategies that are not the picture of low risk conservative trading that you connected big shots are painting.
And my point is that you have no idea what they're doing, nor have you (most likely) run a large pool of money. Therefore, you are not qualified to comment on what is conservative in that situation, or not. No one claims Citadel owns a bunch of T-bills. The point of a hedge fund is to TAKE risk but manage it correctly.
really. citadel is a very different story thn LTCM. as i said before in this thread, cit is a multi strategy fund of fund having thousands of positions at any one point of time. but do not get me wrong. i would not invest in them. there is better opportunity in smaller funds IMHO. and you cannot just grow and grow without affecting your sharpe (though rentec seems to prove the opposite ... exceptions happen ... ). yet they are a solid shop and so far the critical people on this thread who come seem to be small account traders with limited insight in big trading operations. nothing bad about that, i just mention it get perspectives in place.
If they have their positions allocated in liquid instruments, then leverge is not an issue. However, if they are leveraged and illiquid, any major unexpected event might put a big hole in their dent. The bonds would tank and whoever invested in them would face massive losses. Anyone here willing to take such risks?
each and every strategy runs risks. a crash in US stocks by 25% over this week will leave hardly no one unaffected. without judging a real strategy with real data on a real portfolio all we are doing here is gossipping IMHO. talking for talking's sake.
great, hedge funds selling debt to public - hey Joe, you need a million net worth to buy into a hedge fund, but you can now happily and safely own their bonds via your Ford or GM pension fund next, look for venture capital to go all debt financed. i may be wrong but imo this credit inflation binge has reached such proportions that it has become a moral hazard: everyone is leveraged to the hilt already, so the thing to do is keep leveraging more and more 'till the end since it will go down all the same... $100 billion hedge funds; $100 billion buyouts... seems new $100 billion financing ideas coming out on a regular basis... it seems now only a major credit event will be able to halt this and reset the benchmarks back to realistic risk-adjusted levels; until then, let the bingeing and wall street creativity flourish
http://www.bloomberg.com/apps/news?pid=20601087&sid=asqNfx.iW_rU&refer=home Citadel Hedge Fund Sells $500 Million in Notes, Person Says By Mark Pittman Dec. 7 (Bloomberg) -- Citadel Investment Group LLC, the hedge fund controlled by Kenneth Griffin, sold $500 million of five-year notes today in the first-ever sale of bonds by a hedge fund, according to a person familiar with the transaction. The fund sold the notes at a yield of 1.90 percentage points more than similar-maturity Treasuries, said the person, who declined to be identified because the sale is private. The average yield premium, or spread, on similarly rated notes is 1.22 percentage points, according to data compiled by Merrill Lynch & Co. The sale by Chicago-based Citadel may allow it to rely less on financing from Wall Street investment banks. The bonds will be sold through a medium-term note program. Medium-term notes are unsecured, continuously offered obligations with maturities ranging from nine months to 40 years. Each note issue is drawn down from the program level, which in Citadel's case is $2 billion, according to Fitch Ratings. The notes are frequently used by the world's biggest financial institutions, including Citigroup Inc. and Bank of America Corp. Bryan Locke, a spokesman for Citadel, declined to comment. Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. are managing the transaction for the hedge fund, which has $12.8 billion of assets. Fitch and Standard & Poor's assigned investment-grade ratings, Fitch at BBB+ and S&P one level lower at BBB. Debt rated above BB+ is considered investment grade. Both are the first public debt rankings for a hedge fund, unregistered pools of capital from wealthy individuals and institutions that allow managers to participate significantly in the gain or loss of the money invested. Citadel, founded in 1990, keeps 20 percent of all trading profits and charges all expenses to investors.
The question in everyone's mind (at a recent conference) is if this is the start or end of the bubble?