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Citadel to cover operating expenses

Chicago Tribune – Citadel Investment Group is covering "a substantial portion" of its operating expenses this year, a break from passing those costs on to clients, Katie Spring, a spokeswoman for the Chicago-based hedge fund, said Thursday.

"We felt it was the right thing to do." Spring said, citing Citadel’s "long-standing relationship with our investors."

Citadel declined to specify how much of the costs it would absorb, but estimates range from $200 million to $300 million. When management fees were high relative to returns in 2005, Citadel founder Ken Griffin reimbursed investors. The hedge fund will again start charging its standard fees in January.

Citadel’s two largest funds have suffered losses of almost 50 percent through November. Assets under management total around $13 billion and clients have requested about $1 billion worth of redemptions. Hedge funds typically finance operations by taking 2 percent of assets, then retaining 20 percent of profits to pay employee performance bonuses. Citadel bills investors for expenses, which can represent as much as 8 percent of assets, and keeps 20 percent of profits. Among expenses charged to investors are annual bonuses to Citadel employees, according to people familiar with the hedge fund.

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