Why Citadel CEO Ken Griffin sees some rough weather ahead

Robert Reed, Chicago Tribune on

Published in Business News

The company has assets of $27 billion under management and five major investment funds. Last year, its flagship Wellington fund delivered a 13 percent annual return, which was solid but lagged behind the broader Standard & Poor's 500 index's 19 percent gain. Since its 1990 inception, Wellington has posted an average 19 percent annual return, according to industry data.

Meanwhile, Citadel is keenly watching for signs of global disruption, "including a trade policy misstep or military conflict," according to Griffin's letter. Again, the Citadel CEO didn't put a fine point on his concern by identifying specific hot spots.

But it wouldn't be startling if Griffin, like other business chiefs, is alluding to a possible trade war with China, the largest buyer of U.S. debt. And perhaps the threat of a shooting war with North Korea.

In his letter, Griffin vowed to relentlessly recruit more whip-smart financing types to his firm. Citadel employs around 950 people locally and 2,200 worldwide.

In an industry where computer algorithms -- which were blamed for much of Monday's historic 1,175 stock point drop -- are often seen as the emerging backbone of investment picking and trading, Griffin stresses the need for more human analysis and problem-solving. Asked at a recent conference if robots were going to take over trading in 10 years, Griffin's quicksilver response: "Not a chance."

Griffin, who started his hedge fund in 1987 from a Harvard University dorm room with a $265,000 stake, is pretty well-known in Chicago. But it wasn't always that way.

In 2005, I wrote a Chicago magazine story about Griffin becoming a rising star in the city's commercial, cultural and charity scene. At the time, it struck me was how many top-shelf business and civic people didn't know much, if anything, about Griffin. With his business and personal fortune growing, Griffin was only starting to make his mark on the city's cultural and civic life.

Armed with massive wealth, Griffin has built a reputation as a local philanthropist, funneling millions of dollars to Chicago's art museums and other institutions. Recently he donated $125 million to the University of Chicago in support of its economics department.

In late 2016, Griffin gave Chicago a $12 million gift to complete the creation of two separate bike and pedestrian paths along the 18-mile Lakefront Trail -- that he regularly used -- and shortly after this donation gave another $3 million to build 50 soccer fields across the city.

Obviously, the richest person in Illinois is good at spreading and enjoying his wealth, which includes paying an eye-popping $58 million for a Chicago penthouse -- the highest local price ever paid for a residence -- and assembling an art collection that includes expensive French impressionist masterpieces.

Yet as Griffin's letter indicates, even a multibillionaire can fret about a shifting economic landscape.

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