Holding a top executive job these days at Ken Griffin’s investment banking operation is as shaky as an official car starter for a mob boss. This week, the fourth top official left Citadel’s securities operation in seven months. This time the departee was given the boot by Griffin.
Patrik Edsparr, who served as chief executive officer of Citadel Securities, was asked to leave after just seven months on the job. “Regretfully, the management team and I did not see eye to eye with Patrik Edsparr on the corporate strategy we want to pursue, or the culture we want to cultivate in Citadel Securities,” Griffin told his employees in a letter.
Griffin, of course, is the founder of Citadel — formerly called Citadel Investment Group — the hedge fund firm he founded at age 22 back in 1990. He is the guy best known for starting a successful convertibles business out of his Harvard dorm.
These days the firm is better known for adversity. Although Griffin was named to AR-Alpha’s Hall of Fame in 2008, his hedge funds have been humbled of late. In 2008, his two main funds — Kensington and Wellington — fell 55 percent. That means he needs to be up more than 120 percent just to get back to even. Ouch!
Last year, Griffin’s funds were up 62 percent. However, it was only enough to make up half the losses. This year the funds are flat through four months. Small wonder his total assets under management have slumped to $13 billion from $20 billion two years ago.
Alas, Citadel is trying to diversify from its core hedge fund business. A year ago Griffin launched Citadel Securities just as the global markets were trying to climb out of their near-death experience. Rohit D’Souza, its first leader, left last October. Enter Edsparr.
According to sources, Edsparr, who was living in London, was supposed to move to New York to head up the operation, but never did. The New York employees in his group were doing perfectly fine without him and resented his exercising authority on trips to the Big Apple. Griffin also felt they were doing fine without him too. So, good-bye Edsparr.
Of course, Edsparr’s departure came after Todd Kaplan, who headed up the investment bank, resigned from the firm earlier this year. And Kaplan left shortly after Peter Santoro, who was head of institutional trading, departed in December. Sources say Santoro and Kaplan were uncomfortable working for Edsparr, who had taken over the operation after D’Souza left.
Citadel is playing down these departures as typical growing pains at a start-up trying to find its way. At the same time, Griffin tried to rally the troops in his letter. He pointed out that its Institutional Credit division now covers more than 500 institutional accounts. His secondary market share in high-yield is now “well into the double digits.”
Griffin also boasted that the firm acted as a bookrunner or co-manager on a number of high profile offerings including Harrah’s $750 million senior secured notes; Gray Television’s $365 million senior secured second lien notes, and Pinnacle Entertainment’s $350 million high yield offering.
“These accomplishments — just a few short months since launching Citadel Securities — speak volumes,” Griffin told his employees.
Now, all he needs to do is get his hedge funds above their high water mark so he can begin earning performance fees and retain top executives. That’s all.
Stephen Taub, who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
