Anything on Citadel Credit?
There was an old post on this topic with a interview with Marina Lutova Meyers, the previous credit PM, but I found credit guys at Citadel don't stay longer than 2-3 years. (maybe this is a citadel thing, rather than a credit team thing...)
Pablo Salame, came to head the credit franchise, replacing Eric Felder, in late 2019, and I do see he has bought in a couple of new guys to the team. Wanted to understand what's the latest with the credit strategy. Anything on this team would be much appreciated!
Here is what I observed / guessed: Citadel was never a distressed / special sits shop, and I don't think Pablo is intend to move big into this direction. In fact, I would be surprised if they would take any directional bet, whether it's carry trades or concentrated homerun trade. Key strategy seems to be the market-neutral convert arbitrage. If all the above comments are true, maybe the credit analysts are not as critical as the more fundamental shops, and will not be required to generate much leads or do much deep dive analysis.
Bump
This is a pretty niche topic so I’m glad to add value as much as possible. Citadel has tried for years to get into the long/short credit business but the fact is that it’s traditional model that makes l/s equity a success just doesn’t work too well for long/short credit. in answer to your question, they do take directional bets and bet big on event driven and RX situations (Oi comes to mind). But they also have tighter risk limits and have to be hedged. they don’t have to be market neutral but all the “variables” need to be appropriately hedged. the previous iterations of citadel credit all had distressed HF guys come in, and this vintage is the same thing. when they leave (as in the case with the london citadel credit team, after it liquidated), they end up at king street, Elliott, etc.
^ but as you can see, it’s damn tough to run a credit strategy like that while adhering to l/s equity type risk limits. my understanding is it’s less levered than the crazy 8-15x equity money and thus little looser risk limits.
Would love to hear more on this:
Obviously with the illiquidity though we to run so much gross in credit, but what do they typically run?
Any idea on risk limits/return targets in credit?
What have you heard about the culture in the credit teams?
Have you heard anything on number of teams or performance?
How do exits look if blown out? Other HF’s mostly?
Out of curiosity, as I'm working on a take-private where a MM interestingly has taken an activist role in the company, have you seen Citadel take any such role? Very against their typical strat but this deal has piqued my curiosity
I personally haven’t but we have to remember citadel and multi-managers are true multi-stray hedge funds. the most prominent seem to be the global equities, surveyor long/short equity pods but I do know there are pods for everything else from macro to event-driven to convert arb to credit opps so I wouldn’t be surprised if there is an activist pod group as well tbh.
Citadel recently formed an activist / 'constructivist' group called Ashler Capital. Still building out that platform from what I've heard.
Everyone I know there loves it in good times and absolutely hates in bad times (meaning there were there). Lose money and get fired. If you are that good at L/S credit to not lose money, great shop. If you will lose money (temporarily), worst place to be.
Ken Griffin is also an absolute asshole of a boss (don't get to $15bn being a nice guy).
Good feedback:
any color if as much a sweatshop as equities side?
heard anything on comp?
is culture/everything really PM dependent?
how does career trajectory look for someone coming in as an mid career analyst?
bump, these are great questions to which I'd like to know the answer
I can tell the op having traded converts that they are absolutely not a “market neutral” product as they are pitched to be. Sure they are for the first leg down but that second leg...
On Citadel a bunch of the (perhaps non HY) credit guys I know are very market maker types. Similar to MLP. A lot of them talking about nicking 1/4 pt here a 1/2 there etc. literally low return churning the book etc. It takes a lot of effort. All to make like no pnl (but with a high sharpe).
This is by no means a post to insult or look down upon market making but just to illustrate how a number of hedge funds and buy side places think about certain products or strategies.
this is true of almost all systematic strategies in credit, options, equities etc; after that all you need is leverage. I'm more surprised this year there hasn't been more blow ups considering how levered Citadel, MLP run.
But yes, very high churn on positions and looking for high Sharpe (which generally mean low returns on notional).
How do they do market making as a pod differently from a bank?
Sadly I really can't comment on either.
All I know of is that they will generally shy away from higher yielding things unless there is some real edge. This is because higher yielding stuff is higher yielding for a reason and thus less liquid and much tougher to hedge/churn. Places like MLP are all about risk management and liquidity (much more so than "investing" or whatever) because what they have promised (and delivered) to clients is a very steady return regardless of market conditions. That does not lend itself to actual fundamental "investing" in which there will be real drawdowns while one waits for a catalyst or change or whatever.
The credit team in Europe did hold illiquid positions and what normally would be only the playing field of distressed/drawdown funds. I never understood how that would work in Citadel's risk environment. I guess it doesn't given they disbanded the team...
I've heard that most other l/s credit teams at other MMs are more like market makers like one of the above posters said.
Any updates here? Looks like they're hiring across credit at an analyst and PM level. Even looks like they're looking to get back into distressed - according to the analyst posting on their site.
For Mike Gorun and Daniel Shatz teams I assume. Got linkedin requests from Mike. I have an ex who works for Marina - does a mix of IG and HY credit there. No distressed really.
Curious to hear what is happening to Citadel's corporate credit team post Dan Shatz's departure. Anybody have colour on who is running the corporate HY / stressed / distressed business, how they have been performing and what type of situations they get involved in? Understand that at least in Europe the guy focussing on corp L/S has left and there hasn't been a replacement.
bump
Love the government name drops
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