To all those Citadel and SAC doubters...

Discussion in 'Wall St. News' started by Enfinity, Jan 23, 2007.

  1. I have had greater priorities than following this up sooner but, I have not forgotten all of you Griffin haters...happy new year!


    Citadel, SAC Double Returns of Peers as Goldman Falls (Update2)

    By Jenny Strasburg and Andrei Postelnicu

    Jan. 16 (Bloomberg) -- Hedge funds run by Steven Cohen and Kenneth Griffin gained more than 30 percent last year, the industry's best performance since 2003, while Goldman Sachs Group Inc.'s flagship fund declined for the first time in seven years.

    Cohen's SAC Capital Advisors LLC returned 34 percent and Griffin's Citadel Investment Group LLC also topped 30 percent, helped by energy bets it took over after Amaranth Advisors LLC collapsed in September, according to investors in the funds. Goldman's Global Alpha Fund ended the year with a 6 percent loss.

    The average hedge fund rose 13 percent last year, up from 9.3 percent in 2005, according to data compiled by Chicago-based Hedge Fund Research Inc. Funds investing in developing markets including China and Brazil and companies involved in takeovers beat those that tried to predict broad price movements in bonds, currencies and commodities. Bets that stocks would fall were hurt by a buyout-fueled bull market.

    ``December finished with a roar, propelling managers who were already doing well and turning others around,'' Virginia Parker, head of Parker Global Strategies LLC in Stamford, Connecticut, said in an interview.

    While most hedge funds trailed the 15.8 percent advance of the Standard & Poor's 500 Index in 2006, the gap didn't hurt funds raising more money from investors. They attracted $111 billion in the first three quarters of last year, compared with $47 billion during all of 2005, according to Hedge Fund Research.

    Time Warner

    Hedge funds, which oversee about $1.3 trillion, are largely unregistered pools of capital that cater to wealthy individuals and institutions such as pension funds and endowments. Fund managers aim to make money regardless of the direction of financial markets, and usually charge a fee of 2 percent of assets and take 20 percent of trading profits.

    Cohen, 50, founded Stamford, Connecticut-based SAC in 1992 and has built one of the industry's biggest firms, with $12 billion in assets. Investments last year included Time Warner Inc., where he joined billionaire Carl Icahn's unsuccessful effort to break up the New York-based media company, and mining company Phelps Dodge Corp. Cohen opposes Phelps's $25.5 billion takeover offer by Freeport-McMoRan Copper & Gold Inc. Cohen declined to comment.

    Griffin, 38, started Chicago-based Citadel in 1990 with less than $5 million and now oversees $13.4 billion that can be invested in everything from stocks and bonds to foreign currency and natural gas. Trading profit for the year was $5 billion.

    Profiting From Amaranth

    Citadel's fourth-quarter returns were helped by profits on natural-gas positions that Citadel and New York-based JPMorgan Chase & Co. took over from Amaranth on Sept. 20. Energy returns were about 3 percent in September, according to a prospectus sent to investors in November for the firm's first bond sale. Griffin declined to comment.

    Amaranth, based in Greenwich, Connecticut, collapsed after losing $6.6 billion on energy bets, the largest loss ever by a hedge fund. During one week in September, its energy holdings lost about $4.6 billion. Amaranth had $9.5 billion at its peak.

    The fund's implosion did little to curb investors' appetite for hedge funds, said Ken Heinz, president of Hedge Fund Research.

    ``Obviously there was a large impact on people who were invested in Amaranth,'' Heinz said. ``It did not have a broader impact on asset growth industrywide.''

    New York-based Goldman, the world's largest hedge-fund manager, with $29.5 billion in assets, was hurt in 2006 by wrong- way bets on bonds, Japanese equities and the U.S. dollar. Global Alpha returned almost 40 percent in 2005, according to investors who declined to be identified because the fund's results are private.

    Lift From Stocks

    The fund, managed by Mark Carhart and Raymond Iwanowski, makes investments based on computer-based quantitative models. Goldman spokesman Peter Rose declined to comment.

    The rally in global stock markets helped hedge funds that bought equities. Stocks rose more than Wall Street strategists predicted in 2006 after the Federal Reserve ended its two-year campaign to raise interest rates and energy prices declined from a July record. The Dow Jones Industrial Average returned 19 percent including dividends, while the Nasdaq Composite Index gained 10 percent.

    In Europe, the Dow Jones Stoxx 600 Index returned almost 22 percent. Asian stocks had their fourth straight year of gains, with the Morgan Stanley AC Asia-Pacific Index returning 17 percent. The MSCI Emerging Markets Index rose 32 percent.

    The Lehman Brothers U.S. Aggregate bond index climbed 4.3 percent for the year. The euro gained 11 percent against the dollar.

    Soros's Sons

    Macro funds that bet on broad economic trends rose 8.75 percent on average in 2006, according to Hedge Fund Research. The boost they got from the yearend rally in stocks was muted by falling commodity prices.

    New York-based Soros Fund Management LLC, run by George Soros's sons Robert and Jonathan, returned 12 percent in its $11.6 billion Quantum Endowment Fund. The finish marked a rebound from September, when it trailed peers with a 2.5 percent increase.

    Vega Asset Management LLC's flagship Select Opportunities fund fell 15.3 percent last year. It was down almost 17 percent through October on losing bets that bond prices would decline, according to a letter sent to clients of the New York- and Madrid-based firm. The fund's assets fell to $1 billion in early September from $2.2 billion at the end of 2004, investors said.

    Vega Struggles

    Vega's Relative Value Fund finished 2006 down less than 1 percent, compared with a 9 percent decline for 2005, according to a yearend newsletter sent to investors.

    ``We know we just have to get back and perform,'' Michael Mann, president of the firm's Vega Securities LP affiliate in New York, said in an interview.

    The $3 billion Drake Global Opportunities Fund returned 41 percent in 2006 on fixed-income investments and bets on commodities, currencies and equities in emerging markets, investors said. New York-based Drake Management LLC, founded by Anthony Faillace and Steve Luttrell, has $6.5 billion in assets under management.

    Returns of the $10 billion flagship fund run by New York- based Highbridge Capital Management LLC, the hedge-fund affiliate of JPMorgan, returned 24.7 percent in 2006. The gain beat the fund's average annual advance of 15.5 percent since it opened in 1992.

    Buyout Boom

    So-called event-driven funds, which invest in securities of companies going through bankruptcies and mergers, climbed 15.4 percent last year, Hedge Fund Research said. A record $3.7 trillion of mergers and acquisitions were announced last year, according to data compiled by Bloomberg.

    ``Bidding wars are wonderful,'' said Nancy Havens, founder and president of New York-based hedge fund Havens Advisors LLC, which has $260 million in assets focused on company events such as mergers. ``We've just had so many choices.''

    Atticus Capital LP, the $13.5 billion hedge-fund group in New York led by Timothy Barakett, also invests in shares of companies going through mergers and other corporate changes. Its flagship Atticus Global fund rose 35 percent last year.

    Fixed-income managers who invest across a range of securities including high-yield debt, mortgage-backed securities and convertible bonds had an 8.8 percent average gain in 2006, according to Hedge Fund Research.

    ``It's been a somewhat difficult climate for mundane credit strategies,'' said Parker of Parker Global Strategies. ``The managers who did well really had to be creative.''

    Harbinger Capital Partners's $4.8 billion fund that focuses on high-yield debt and assets of distressed companies gained 22 percent in 2006, according to investors. New York-based Harbinger held stakes last year in bankrupt auto-parts maker Delphi Corp. of Troy, Michigan, and New York based television- station operator Granite Broadcasting Corp.

    To contact the reporters on this story: Jenny Strasburg in New York at ; Andrei Postelnicu in London at

    Last Updated: January 16, 2007 15:33 EST
  2. What would Citadel's overall return have been without the "Ameranth Trade"?
  3. I think that's the future of hedge fund returns, more cannibalization of returns at the expense of each other. If you're a broker, shop out any misfortune to your best clients.
  4. I would never put my money with individuals who pay 150 million for a canvas with paint. Shows lack of judgement. Maybe they were good when they were beginning, but I predict marginal returns for investors with these guys. ( Note I stated ... for investors)
  5. dinoman