Hedge Fun
Over the past 15 years, Kenneth Griffin has quietly—even secretively—built one of the world's largest and most successful hedge funds. Now he and his wife, owners of a $60-million Cézanne, are rising stars on the city's culture and charity scenes.
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To say the privately owned Citadel plays it close to the vest is an understatement. Its Web site is spare and uninviting, sharing few specifics about the company; corporate signage on the outside of its 37-story office tower is modest at best. The same reserve permeates Citadel's corporate offices, whose walls are white and bare, reflecting none of Griffin's passion for vibrant Impressionist hues. Employees pass pleasantries in the halls and elevators, but tend to steer clear of asking mundane, shop-related questions like "What are you working on now?" Within the Citadel culture, such conversations are supposed to occur on the basis of what the CIA might call "a need to know."
Workdays lasting 12 to 14 hours-even for temporary employees-are the norm. The upper floors of the building, where Citadel's traders work, enjoy a panoramic view of Lake Michigan and the Loop. But with millions of dollars at risk at any given time, there's no window gazing. Traders sit at workstations intently eyeing data flashing on banks of small computer screens before them. They are expected to execute financial transactions in split seconds or risk losing their price advantage.
And when some Citadel workers talk about the weather, chances are it's more than mere conversation. The hedge fund employs a small team of meteorologists who work out of a computerized weather center-a space where even WGN-TV's meteorologist Tom Skilling would feel at home. That's unusual for a hedge fund, but it allows Citadel's traders to stay abreast of global weather patterns, which can affect the prices of commodities contracts.
Citadel's investment professionals are continually on the hunt for breakthrough ideas and computer applications from which the hedge fund can profit. Scattered throughout the offices are large white erasable boards, used by staffers to write computer code, map out business models, or just hash out problems. Citadel employs at least 70 Ph.D.'s in mathematics, physics, and other scientific or technical disciplines; they devise the mathematical formulas that drive the company's trading strategies.
It's a pretty good bet most people would not know what any of Citadel's white-board equations and jottings meant. But that doesn't stop a public-relations person from telling this reporter that anything seen on a white board during a tour of the headquarters is strictly off the record.
Despite all this cloak-and-dagger, Griffin is quick to respond to questions. Over the course of two interviews (one in person, the other by phone), his only "no comment" surfaces when he is asked to verify that he pulled down a $240-million salary last year and to comment on whether it is too much, considering the current shareholder and political backlash aimed at excessive pay packages for CEOs of publicly traded companies.
But Griffin doesn't back off from characterizations of Citadel's intense work environment. Nor does he shy away from the "What have you done for me lately?" management ethos that keeps Citadel's top executives and staff from becoming complacent. On the contrary: Griffin says his employees are competing with the East Coast's roughest and toughest rivals, and he doesn't want Chicago's less hectic pace and lifestyle to dull their competitive drive. "We're not going to get there by counting past accomplishments," Griffin says. "There's a level of urgency."
To move ahead, Griffin is focusing on some parallel missions. First, he's dead serious that in the years ahead, Citadel must break out of the hedge fund crowd to become an international "merchant bank," which can quickly pump capital into an assortment of investments, including stocks, commodities, companies, developing countries, and anything else that promises hefty returns. It will look for opportunities in areas that may frighten other investors and funds, Griffin says, noting that Citadel leaped into the churning energy commodities market right after the Enron debacle (hiring a number of former Enron traders) and is doing all right.
Another example of going places other investors avoid: he's looking for investment opportunities in Russia, despite concerns about widespread political and corporate corruption. Directing his remarks to Russia's prime minister, Mikhail Fradkov, at an investment conference in June, Griffin said: "The economic and political course pursued by the Russian authorities opens up fantastic possibilities for investing capital."
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