Demystifying the financial empire Citadel Securities: "We don't make cars, but we do make banknotes"
Original source: Trading Gate
Original source: Trading Gate
Editor's note: On January 11, 2022, a piece of heavy news swept across the Crypto circle, "Citadel Securities, a world-renowned market maker, completed a financing of US$1.15 billion, Sequoia Capital, Paradigm participated in the investment", which marked that this Wall Street firm A well-known market maker has also come to the encryption world.
So far, global high-frequency trading giants including Jump Trading, Tower, Hudson River Trading, Citadel, etc. have entered Crypto. It can be said that Wall Street has completed the division of liquidity in the encrypted world.
Before that, Citadel had another intersection with the Web3.0 world. In the iconic auction of a copy of the US Constitution on November 20 last year, Citadel CEO Kenneth Griffin defeated ConstitutionDAO for $43.2 million and won the auction , and ConstitutionDAO and his People are only 200,000 dollars away from being famous in Dao world history.
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In the first and second issues of the Citadel tour series, we talked about that although the Citadel Group, established in 1990, is young, it is already a god-like existence in the financial world. Its business includes two major blocks: Citadel hedge fund, which provides asset management business, and Citadel Securities, which provides market maker business. In this tour, we will continue to talk about Ken Griffin, the founder of Citadel, and the unique cultural genes he brought to Citadel.
“What sets Griffin apart from other new billionaires is the magnitude of his ambitions. People who know him say Griffin doesn’t want to be like Julian Robertson of Tiger Management or Steve of SAC Capital. Cohn, known only for being a hedge fund legend. What he really wanted, it seemed, was to build something great: a diversified, massive financial empire like Goldman Sachs or Morgan Stanley.”
01 From a boy prodigy to a Wall Street wizard
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The one on the right is Ken Griffin in boyhood
Griffin grew up loving math and computers and was the president of the Boca Raton Community High School Math Club. In this dated photo, 17-year-old Griffin prepares for a computer competition with two other classmates. That same year, Griffin also made up an educational game called Math Shark. He also founded a software distribution company that sold by mail.
In addition to computers, Griffin showed an aptitude for business as a child. In 1980, at the age of 11, Griffin wrote a school paper on how he planned to study the stock market. He began trading actively as an undergraduate at Harvard University.
The most amazing thing at the time was that Griffin managed to convince the dorm to allow him to install a satellite dish on the roof so he could get the latest stock prices.
The satellite dish was installed, and Griffin just caught up with the 1987 "Black Monday" plunge in US stocks. Griffin was already managing $265,000 at the time. Fortunately, he was betting on the stock to fall and made a fortune. Griffin's performance caught the attention of American hedge fund pioneer Frank Meyer. After graduating from Harvard in 1989, Griffin tried to raise money for his hedge fund. Mayer suggested that Griffin move to Chicago, where his company is located, and said he would support him. Griffin agreed.
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Griffin buys islands like ordinary people buy cabbages
By mid-2008, Citadel had $20 billion in assets under management. This caused the US hedge fund industry publication "Institutional Investor" to praise him, announcing Griffin as the "miracle" boy of the hedge fund industry, describing him as "a god, a nerd, a self-taught financial all-rounder""。
Griffin's ambitions also attracted the attention of Fortune magazine. In a special report, "Fortune" wrote, "The difference between Griffin and other new billionaires is his ambition. People who know him say that Griffin does not want to be managed like a tiger." Known only for being a hedge fund legend, like Julian Robertson at SAC Capital or Steve Cohen at SAC Capital, what he really wants seems to be to build something great: a firm like Goldman Sachs or Morgan Stanley. diversified, large-scale financial institutions.”
The Citadel hedge fund lost a staggering $8 billion in the 2008 financial crisis and was forced to freeze investor redemptions. But inconceivably, Griffin did not recover from this setback, but revived Citadel with full blood, becoming one of the undisputed giants in the hedge fund industry. As of February 2022, Citadel's fund management scale is 46 billion US dollars. Griffin also spun off its high-frequency trading unit into Citadel Securities and built it into a separate and powerful company. Griffin rebuilt his empire like a magician. (For details, you can review Citadel tour 2)
After the financial crisis, Citadel rose from the phoenix. In a series of interviews with the Wall Street Journal, Griffin said, "The business is still going on. Citadel doesn't make cars, but we do make money." (“Business is business,” Mr. Griffin said in one of a series of interviews with The Wall Street Journal. “I don’t manufacture cars, but we do manufacture money.”)
02 A person who can win both the 100 meters and the marathon
The hedge fund industry is highly opaque. But even by industry standards, Citadel's secrecy is extreme. Citadel employees were required to sign a strict non-disclosure agreement. A former executive once told a media reporter: "I am not even allowed to say the word Citadel to reporters." Therefore, the internal operation of Citadel, except for a small number of insiders, everyone Little is known. We can only get a glimpse of it from media reports and observations from Griffin's friends.
Former Goldman Sachs CEO Lloyd Blankfein, a friend of Griffin's, is one of the few people who has publicly commented on Griffin. He compared Griffin's talent to sports legend Michael Jordan.
“Michael Jordan was Michael Jordan not just because he jumped higher and ran faster, he was in a class of his own. Ken was similar to Jordan in his field. Ken was a great deal member, but he was also a great businessman, and those things don’t often come together in one person. It’s like a runner who wins both the 100-meter dash and the marathon.”
Within the Citadel group, Griffin is more respected than loved. The company culture is brutal even by Wall Street standards. “You can’t expect a lot of empathy within a company,” a former employee told the Financial Times last year. “It can be an advantage for the company when it’s stressful and crazy at work.” The former employee also said he thought Griffin felt the pressure differently than other people. "He wants to be the best at everything, and it's up to everyone at Citadel to help him achieve that."
Griffin himself has made no secret of such a competitive environment. "If you're the type of person who enjoys competition, you love working at Citadel very much," he said.
For a long time, employees saw Griffin as a "strict and impatient" boss. Jamil Nazarali, principal of Citadel Execution Services, recalled asking Mr. Griffin for his opinion on how much to buy a competitor. Griffin replied, "It's your f—ing business—how much do you want to pay for it?" ("It's your f—ing business—how much do you want to pay for it?")
In 2013, Griffin was so dissatisfied with the short-term losses of one of the company's stock-picking departments that he asked employees to report quarterly on the more than 1,700 companies the company focused on. He conducts spot checks on these reports. Citadel's high employee turnover rate was once the focus of attention in the industry. Lloyd Blankfein, the former CEO of Goldman Sachs, once revealed that for a long time, Griffin would participate in the minute details of the company's decision-making. He said that even among people with a very "intense" (focused, high-intensity work) personality, Ken would rank in the top ten.
Another Wall Street mogul, Daniel Loeb, was less kind to Griffin. In an email to Griffin, he called Griffin a "gerbil" and said Griffin's Citadel was "the Gulag." (You are surrounded by sycophants, but even you must know that the people who work for you despise and resent you. I assume you know this because I have read the employment agreements that you make people sign. He said, you are surrounded by sycophants, The people who work for you hate and despise you. I can see that from the agreements you make the people who work for you sign)
Of course, as a big boss, Griffin is also constantly evolving his skills. As his financial empire continues to expand, he has also learned to spend most of his time on the investment process rather than on individual position decisions. "I'm constantly trying to find a balance between pushing people too hard and not pushing them hard enough," he said.
However, we must admit that as the founder of the company, his personality genes have a profound impact on Citadel's culture. Zhao Peng, CEO of Citadel Securities, said that he respects Griffin very much. He said that most of the way he handles and evaluates things is learned from Ken. Even if Ken isn't as involved in the finer details of day-to-day operations as he was before, his cultural impact on Citadel is profound.
03 Broken Fairy Tale
In 2012, Griffin's divorce from his ex-wife (his second wife) received a lot of media attention. His ex-wife is a beautiful Frenchman and also a Wall Street fund manager. The two held their wedding celebration at the Palace of Versailles in France, and its extravagant grandeur shocked the world's wealthy circles.
The beautiful ex-wife Dias gave birth to 3 children for Griffin, which can be regarded as trying her best to inherit excellent genes. Later, the two were also very affectionate. It is generally believed that in this marriage, Dias injected culture and temperament into Griffin. Griffin later became rich and began to collect a large number of modern art.
But even such an eye-catching golden boy and jade girl made a mess when they broke up. Ex-wife Dias said Griffin had an argument with her and grabbed a bedside lamp and threw it at her. The ex-wife also asked Griffin for 1 million US dollars a month in living expenses, saying that she hoped to move to New York with her three children, thinking that Chicago was too dirty. Under the exposure of the media, Griffin seemed to give in, and the two finally reached a settlement.
How Griffin spent hundreds of millions of dollars to buy luxury houses, and how he invited singers to sing for his employees, is often the focus of media attention. In 2019, he bought a penthouse at 220 Central Park South for $238 million in New York, setting a record for the most expensive residential purchase in the United States.
In 2021, Griffin also spent $43.2 million, defeating bidders, for a copy of the 1787 version of the U.S. Constitution. Griffin set a world record for the highest bid for any print, book and historical material, Sotheby said.
"My son called me and asked me to buy it. I just told myself, I must have this constitution," he later told the media. Losing to Griffin in the bidding was an organization called ConstitutionDAO, a group of 1,700 virtual currency players who raised a total of $40 million through social media. Griffin later told the press that he would loan the Constitution to the museum for free.
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