Thu. Jan 20th, 2022


Nearly four decades ago, the South Florida Sun Sentinel profiled three premature members of Boca Raton Community High School’s computer club. While their classmates were shooting hoops, the “disc-driven trio” was preparing for a problem-solving competition with other Palm Beach geeks later that month.

It is unclear what happened to Satish Vadapalli and Wayne Wong, who worked out the challenges with pen and paper before passing on solutions for their third member to bash in a computer. But the latter would continue to leave a big mark on the financial world.

Kenneth Cordele Griffin is today one of the world’s richest people, with a fortune estimated by Forbes at $ 26.5 billion. He is best known for managing his $ 40 billion Chicago-based hedge fund Citadel. But in reality it is a lesser known but probably more important computer-driven trading company. Citadel Securities is now the biggest key to his wealth – and growing controversy.

This Week Griffin sold a $ 1.15 billion stake in Citadel Securities to venture capital firms Sequoia Capital and Paradigm, which electrifies the finance industry. The firm is the world’s largest algorithmic “market maker”, handling more than a quarter of all US stocks bought and sold every day. Now look at cryptocurrencies, and a likely initial public offering.

The deal valued Citadel Securities at $ 22 billion, which added $ 5 billion to Griffin’s net worth and put it at $ 26 billion in the Forbes table of the richest Americans. Many co-financiers were furious about the deal.

“What made Michael Jordan Michael Jordan is not only that he jumps higher and runs faster, he is sui generis. Ken is similar in his field, ”said Lloyd Blankfein, the former CEO of Goldman Sachs and a friend of Griffin’s. “He is a good trader, but he is also a good businessman, and those things do not often go together. It is like a runner who wins in both the 100 m and a marathon. ”

Griffin nevertheless also became a magnet for anger. For some, he embodies the finance industry and its supposed evils. In Chicago its political mechanisms stuttering increases. Conspiratorial retail investors on internet forums such as WallStreet Bets portrays him as the malicious head of an evil financial empire, even though the American financial watchdog deny their claims.

Internally, Griffin is more respected than loved, and the culture is said to be brutally intense, even for Wall Street.

“There is not much empathy,” one former employee told the FT last year. “It can be an asset when things go crazy, because I do not think he feels stress in the same way as everyone else. There is only this desire to be the best in everything, and everyone helps him either to achieve it or not. ”

In an FT maintenance last year, crammed with the long pauses and fully formed cut sentences in which he speaks, Griffin stopped such complaints: “If you’re wired to enjoy being a good competitor, you like working here,” he said. said.

There were some tips from Griffin’s tower in the Sun Sentinel profile. The 17-year-old – trapped in glasses, a tangled striped shirt and a classic adidas zippered jacket – was already a prodigy at the time.

Active in the computer club, he was also president of the maths club and an emerging entrepreneur. The middle-class teenager founded a mail-order software company that sells educational programs to university professors from his home, which allowed him to hide his youth from customers.

His first connection to finance came in 1980, when 11-year-old Griffin a school written paper on how he planned to study the stock market. Yet it was as a Harvard undergraduate student that he first started trading aggressively, convincing his residence to allow him. install a satellite dish so he could get updated stock prices.

The dish was installed just in time for the 1987 Black Monday crash, when Griffin was already driving $ 265,000. Fortunately, he bet on stocks falling, and committed a murder. Griffin’s returns have caught the attention of hedge fund pioneer Frank Meyer, which bankrolled the launch of Citadel.

By 2001, Institutional Investor had the “son wonder”Of its industry. “Griffin is to hedge funds that dotcom billionaires faced with pimples was briefly for the internet: the boy god, nerd who made good, self-taught polymath of finances,” it wrote. A few years later, everything almost collapsed.

Bar graph of Annual net returns of Wellington (%).  showing that Citadel recovered from a near-death experience in 2008

Despite a reputation for avoiding mistakes, Citadel lost an astonishing $ 8 billion in the financial crisis. It was eventually forced to freeze investor withdrawals, often a fatal blow.

Instead, Griffin Raised Citadel as one of the hedge fund world’s undisputed giants, it spun out its high-frequency trading arm as Citadel Securities and built it into a formidable company in its own right. In 2020, Citadel was fourth on the list of the highest-income funds of all time, with cumulative profits for investors of about $ 42 billion, while Citadel Securities withdrew profits from the retail boom.

There are few signs that Griffin is particularly concerned about insulting internet forums. When thousands of cryptocurrency enthusiasts raised more than $ 40 million last year to buy a rare first edition of the US Constitution, he surpass them on a whim, causes indignation. The $ 43.2 million winning bid was less than three days from Citadel Securities’ trading income.

“2008 almost destroyed him, and he was rebuilt like a magician. This is phenomenal, ”said one hedge fund manager. “He’s kind of the Elon Musk of money.”

robin.wigglesworth@ft.com



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