Citadel Freezes Investor Redemptions In Its Two Biggest Funds
In a move that really can't have surprised anyone, the Citadel Investment Group froze redemptions from its two biggest hedge funds until March 31st of 2009, at the earliest.
Kenneth Griffin, CEO of the Citadel Investment Group, sent out a letter to his investors on Friday, stating that investor redemptions from the Kensington and Wellington funds (Citadel's two largest) have been temporarily frozen. Griffin went on to say that the company agonized over this decision, but that it was made with the best intentions of the company and investors at heart.
Griffin also stated that the company will absorb a "large portion" of the management fees for the two funds, which normally total approximately 3-4% of the company's total assets.
The Kensington and Wellington funds have been absolutely pummeled this year. Both funds were down 49.5% through December 5th, leading many to speculate whether or not Citadel will still exist in a year.
The company froze redemptions after investors requested $1.2 billion dollars of their money back from Citadel's two largest funds.
2008 has been an extraordinary year for Citadel and Kenneth Griffin.
The company has been knocked off of their lofty perch as one of the top hedge fund companies in the world.
The company has been forced to make public statements numerous times regarding the overall health of the company, and to address rumors that they have declared are "false". The WSJ published a couple of stories about Citadel, one that said that counterparties to Citadel were being questioned over their exposure to the company, and another that said that banks were requesting more collateral from the hedge fund company. Citadel issued statements both times, saying that both stories were false.
The management of Citadel also held a hastily-organized conference call earlier in the year, saying that the company was still in decent health and had ample credit available.
Are the frozen investor redemptions just another nail in Citadel's coffin?
Or can they possibly pull through this horrific year and restore investor confidence in their company?
Filed under: Hedge Fund News