Ken Griffin was facing a calamity.
As Covid-19 roiled the economy in March, equities tanked and bond markets went haywire. Hedge funds run by Griffin’s Citadel were bleeding money as the computer models that guide some of their decisions struggled to comprehend the pandemic.
For Griffin, it was also a chance to profit from some of the biggest opportunities in his 30-year career. His traders went to work scouring beaten-down credit markets, snapping up finance-company debt and taking advantage of wild fluctuations globally.
“It was a macro trader’s dream,” Griffin, 52, said during an event last week for the Robin Hood Foundation, a New York-based non-profit. After taking some losses, Citadel wanted to put money to work “when people are panicking.”
Like many hedge funds, Griffin’s firm lost money during those harrowing days in March, and, like many rivals, also benefited from unprecedented moves by the Federal Reserve and the promise of a $2 trillion stimulus package from Congress. Paul Tudor Jones, who interviewed Griffin at the event, described the Fed’s actions as “so incredible and breathtaking you almost couldn’t even believe it at the time.” So much so, even the legendary hedge fund manager said he didn’t take advantage as much as he should have.
Remarkable Year
Griffin, who started trading convertible bonds from his Harvard University dorm room, did ride those opportunities. His firm’s flagship fund reversed losses in March and has since kept going. His Wellington fund was up more than 19% this year through mid-October and assets at the hedge fund business have swelled to $35 billion. About $6 billion of that belongs to Griffin.
That would make a remarkable year for any investor, but it’s not even the biggest contributor to Griffin’s fortune.
About the same time that the hedge funds went on the offensive, Citadel Securities — a separate trading part of Griffin’s empire run by Peng Zhao — largely left its Chicago and New York offices and set up shop at emergency facilities in Connecticut and the Four Seasons Palm Beach in Florida, building a temporary trading floor to keep going during the pandemic.
The business, which makes markets in equities, options, fixed income, commodities and currencies, became one of the biggest beneficiaries in global finance as trading soared. Profit margins rose to 67% in the first half of 2020, a 10% gain compared with the same period last year. It also got a boost from trading on apps like Robinhood Markets, an area where Citadel dominates. Trading revenues exceeded $3.8 billion in the first six months of the year.
Those dual arms of Griffin’s business fueled an almost $5 billion increase in his fortune in 2020 to more than $20 billion, according to the Bloomberg Billionaires Index. The majority comes from Griffin’s estimated 85% stake in Citadel Securities, which is worth $11.2 billion.
A Citadel spokesman declined to comment on Griffin’s wealth, the firm’s performance or valuation.
Inflationary Scenario
Griffin’s concern now is the impact rapid growth in monetary supply and massive deficits will have on not just the dollar, but fiat currencies generally. Citadel held a sizable gold position in recent months for the first time in a while, he told Jones at the Robin Hood event. Griffin suggested investors focus on assets that perform in an inflationary scenario: precious metals, some energy products and real estate.
The 220 Central Park South building stands in New York, U.S., on Wednesday, Jan. 23, 2019. Just days after buying one of the most expensive residential properties in London, Citadel founder Ken Griffin set a U.S. record with the $238 million penthouse at 220 Central Park South.
Citadel’s funds don’t invest in real estate in a “meaningful way,” Griffin said. But he certainly does.
This year he bought Calvin Klein’s oceanfront estate in the Hamptons for $84 million. It was part of a more than $600 million real estate splurge on trophy properties in London, New York, Palm Beach and Miami since the beginning of 2019, including $238 million for a Manhattan penthouse. Most will be developed into homes for Griffin’s family and many are in locations near existing or planned Citadel offices, according to a person with knowledge of his holdings.
He’s also the owner of a world-class art collection. Bloomberg reported in June that he bought a Jean-Michel Basquiat painting for $100 million to be hung at the Art Institute of Chicago. His works, which include Andy Warhol’s “Orange Marilyn” and Jackson Pollock’s “Number 17A,” are worth more than $1 billion, according to Bloomberg estimates.
Political Spending
Unlike many other billionaires, Griffin doesn’t have a family office and real estate and art are his biggest investments outside of Citadel, the person said.
He has given significant sums to charity, donating $40 million for Covid-19 relief this year and more than $1 billion to philanthropic causes over his career.
He has also spent big on politics, giving $46 million to Republicans this cycle, making him the fourth-biggest individual GOP donor for the period, according toOpenSecrets.org.
Lately, he’s been particularly incensed by Illinois Governor Jay Pritzker’s campaign to move the state to a graduated-rate income tax system.
In an email to Citadel employees last month, Griffin described his fellow billionaire as a “shameless master of personal tax avoidance,” and declared that other states, including Florida and Texas, have made compelling cases for businesses like Citadel to leave Illinois. Griffin spent $54 million as of Oct. 25 opposing the tax change.
‘Really Negative’
At the Robin Hood event, Griffin wouldn’t be drawn into discussing who he thinks will win this week’s election. But he said its impact on markets would be determined by the size of a Democratic takeover of the Senate, with a “blue tidal wave” presenting a problem.
“You’ll see debates like D.C. for statehood, Puerto Rico for statehood, you’ll see some incredibly progressive economic proposals,” he said. “I think that’s actually really negative for assets.”
Alternatively, if Democrats win just a narrow majority, he sees centrists “fortunately being in a very powerful position,” where taxes would increase but not in a “crippling” manner.
–With assistance from Katherine Burton.
This article was provided by Bloomberg News.
