Citadel Retreats in Asia After Earlier Expansion

Date: Monday, December 8, 2008
Author: Bei Hu and Tomoko Yamazaki, Bloomberg

Citadel Investment Group LLC, the hedge-fund manager founded by Kenneth Griffin, will close its Tokyo office and cut other Asian operations, eliminating 37 jobs less than a year after adding people in the region.

The layoffs, which affect more than half of Citadel’s employees in Asia, include dismantling the team that invested the firm’s own money in companies going through events such as takeovers and spinoffs. Its remaining Asian businesses will be run from Hong Kong, Katie Spring, a spokeswoman for the Chicago- based firm, said today.

Griffin had ramped up the Asian unit in April, hiring Nick Taylor from Credit Suisse Group AG for a new position as head of principal investments for Asia and Europe. David Noh was brought in from Merrill Lynch & Co. as head of Asian merchant banking. Citadel, whose two largest funds have slumped 47 percent this year, said in October that it will wind down a $1 billion fund that invests with other managers.

“Even the funds that are doing well are cutting people, so those that are suffering, they are going to cut costs -- it’s industrywide at the moment,” said Angus McKinnon, senior partner at Tozai Investment Advisory Ltd., a Tokyo-based hedge- fund adviser. “I think there is more to come.”

Citadel will cut 25 jobs in Hong Kong, leaving 25 to 30 people in the office, while 12 jobs will be eliminated in Tokyo. Citadel employed 1,400 globally, according to an Oct. 20 press release.

Year of Losses

Hedge funds globally are reducing jobs, limiting withdrawals and liquidating funds as a credit crunch and a 46 percent drop in the MSCI World Index in 2008 put them on course for the worst year on record. Hedge funds have lost about 18 percent this year, according to Chicago-based Hedge Fund Research Inc.

The operations to be run out of Hong Kong include stocks, options and foreign-exchange trading, as well as China investments and merchant banking, which holds securities not traded on exchanges for the longer term.

“We continue to evolve the business to focus on the greatest potential opportunities and to scale back where the opportunity set is no longer as attractive,” Spring said.

Citadel’s two largest funds, Kensington and Wellington, lost 13 percent last month. The funds, which had a combined $10 billion in assets, received demands from investors to withdraw $1 billion by the end of the year, people said.

Griffin, 40, had posted just one losing year since starting the firm in 1990, a 4 percent decline in 1994. The changes in Asia were previously reported by Dow Jones Newswires.

Takeovers Plummet

Today’s decision came as bankers at Barclays Capital and Nomura Holdings Inc. said the value of mergers and acquisitions worldwide may decline 30 percent in 2009 to about $2 trillion. Takeovers so far this year are down 36 percent from the same period of 2007, according to data compiled by Bloomberg.

Tim Throsby, Citadel’s former Asia head, left last month. Throsby and Taylor declined to comment.

Citadel recruited Taylor from Modal Capital Partners, an internal hedge fund at Credit Suisse Group, earlier this year to expand principal investments in Asia and Europe. He is leaving the company. The hedge-fund manager hired nine people for the business in Asia and Europe in August.

Hedge funds may cut as many as 10,000 jobs this year as they struggle with their biggest losses in almost two decades, New York-based executive search firm Options Group said in October.

Managers including Ramius LLC, a New York-based firm once overseeing $11 billion, London’s GSA Capital Partners LLP and Concordia Advisors LLC have cut jobs and offices in Asia to reduce costs.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices, and participate substantially in profits from money invested.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net; Tomoko Yamazaki in Tokyo at yamazaki@bloomberg.net