What's the word on Citadel now?

Big_Muffin's picture
Rank: Monkey | banana points 65

How should I think about an opportunity with Citadel? Are people jumping ship? They cut a lot of headcount at Aptigon recently.

Comments (25)

Dec 11, 2018

Hearing that Surveyor just cut some teams today as well.

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Dec 11, 2018

The Aptigon reduction happened pretty publicly earlier this year, is that what you are referring to?

https://www.reuters.com/article/us-hedgefunds-cita...

    • 1
Dec 12, 2018

Yes. That's a huge cut isn't it?

Most Helpful
Dec 11, 2018

Still the best multi-manager fund out there. They all have short leashes, but Citadel has the best risk model and access to any resource you could need. Just don't start losing money after you join and you'll be fine.

    • 3
Dec 12, 2018

I suppose it's worth a shot to see if you make money and if you don't, you can still go somewhere else?

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Dec 17, 2018

well-said.

Dec 12, 2018

There are always people being hired and fired at these shops. Depends on the team/PM. As far as I know, even Aptigon did not have an external hiring freeze as recently as a few weeks ago. Not sure if that has changed.

    • 1
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Dec 12, 2018

I'm starting to sense the multi strat model is dead.

The bad multi strat firms are losing money. The good ones are too expensive to run and running money like buffet would produce better long term returns. The good ones after how expensive they are to run are generating risks free rate plus 3-4%. In the long run just taking risks premias would be better.

Citadel can't beat the true quant funds like 2 sigma or rentech . The true trading shops generate far more like drw or jump.

The thing is it's a great model to attract pension fund money. Low beta which crushed owning the risks free rate.

But now the funds that make money are industry leading quants, people taking factor and idiosyncratic risks with a lot of vol, or do a buffet kind of value.

There's a reason Goldman Sachs trades at 7-8 pe.

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Dec 14, 2018

If you can gather assets and not blow up....that's good enough, right? I think the problem isn't platforms, it's how they do L/S equity. Tough to generate alpha flipping earnings when so many pods are trading the same names. When market unwinds, vol goes up and PMs unwind positions. Sucks - reminds me of converts.

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Dec 15, 2018
slippery:

If you can gather assets and not blow up....that's good enough, right? I think the problem isn't platforms, it's how they do L/S equity. Tough to generate alpha flipping earnings when so many pods are trading the same names. When market unwinds, vol goes up and PMs unwind positions. Sucks - reminds me of converts.

The pods could make money with this model when fundamentals mattered more (2014 and before). I think the biggest change is ETF and quant funds becoming much more prevalent.

The old formula of front running mutual funds by getting more/better data and going long before MF pile in or shorting before MF exit is dead. The guys who follow that formula get into crowded positions and you've seen their faces get ripped off the last 2-3 yrs.

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Dec 15, 2018

I think the other big factor is alternative data becoming commonplace. If you read "Black Edge" (book about Point72), there's an anecdote about a Consumer PM shooting the lights out (possibly due to some alt data... roughly right time for that to be a significant edge).

But yeah, quant funds/ETFs are really fucking over pods. Maybe these PMs should hire quants to model index rebalances and build CTA positioning models so that they can turn this into an edge.

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Dec 16, 2018

*

Dec 22, 2018

what better mousetrap? geolocation is def well-known as well..i'd say next edge will come when FB finally folds and sells instagram data

Dec 16, 2018

That consumer PM was Gabe Plotkin, whose fund (Melvin capital) went from a few hundred mil to $8B in ~4 years (flat this year after a massive drawdown).

Dec 16, 2018

Do you know what the reason for the drawdown this year was?

Dec 17, 2018

Would be interested as well. Pretty sure BI did a profile on them and they crushed for the first few years (obviously how they were able to scale that much/quickly)

Dec 17, 2018
Tycho Nestoris:

Do you know what the reason for the drawdown this year was?

Just taking a look at their 13-f thru Q3 shows some bad positions on the long side, so could just be performance-related drawdown. EA, STZ, WYNN, SPOT longs haven't really worked this year. Not sure what the lockup period is, however, so could be something else as well (investor re-positioning away from HFs, etc.).

https://www.holdingschannel.com/13f/melvin-capital...

Dec 14, 2018

I'm not sure quants are doing that great either. For every 2 Sigma, there's an AQR who hasn't been doing so well.

I disagree with you about the platform model. There are mediocre investors that need to leave the industry, it's too big right now. But there will always be a demand for these products, and when we hit a massive downturn, they should show their real value.

    • 2
Dec 14, 2018

They all got crushed in the crisis. Millennium down 4%. Citadel 50% though that was a different business model.

It's a lower beta product for sure. But doesn't crush the up moves.

Have a feeling they are contributing to a lot of the momentum in the market. Tight risks limits is a big reason why the market never sells 3% without selling 15%.

Agree on the quants. Though it does seem like trading quants are crushing it.

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Dec 16, 2018

Millennium didn't get crushed in the crisis. They were flat excluding some losses relating to Lehman custodianship which they letter got back. Even the headline 4% number isn't crushed - its 30% outperformance of the market in the most difficult year ever. Millennium's track record is #1 b/c of that 50% plunge by Citadel

Dec 15, 2018

Even Two Sigma's performance hasn't been so strong.. Quant CTA strategies are well-populated so it's become more of an asset-gathering operation (as evidenced by the sharp increase in whitepapers/blog posts on their website).

In the case of AQR, the marketing pitch is centered around an appeal to authority (academic finance). For Two Sigma, it's the AI/ML stuff.

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Dec 17, 2018

I think Citadel does this fairly often... It's known to be a very cut-throat shop that is willing to let you go for losing money in a very short period of time. Even in the MO world for commodities, staying for more than 2 years is not very common.

That being said, it's a machine that will pay for performance. I wouldn't view exodus as something uncommon or negative.

Dec 17, 2018

It's usually cheapest to lay people off right before bonus time.

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Dec 22, 2018
Dec 22, 2018