Citadel Shifts Capital, Will Focus on Seeding

New York (HedgeCo.Net) – Citadel Investment Group announced yesterday it will shut down its $1 billion fund of hedge funds portfolio and use the capital to invest in other businesses.

The Fusion fund was launched a year and a half ago, with nearly 95 percent of the capital coming entirely from Citadel.  The money will be used to invest in businesses that finance new asset managers.  The remaining 5 percent of capital will be returned to investors.

"We have seen strong interest in the incubation and seeding strategies that we’ve developed," Katie Spring, spokeswoman for Citadel told Bloomberg News.  "We believe these will be important components of expanding investment talent over the years to come.”

This move comes after months of swirling rumors that the $18 billion firm, headed by Kenneth Griffin, may not be able to weather this year’s credit crisis.  Citadel’s largest fund, the $10 billion Kensington Global Strategies, has fallen 30 percent this year stemming from losses tied to convertible bonds.

Seeding has seen a spike in popularity in recent years.  It involves focusing on new and emerging funds and fund managers in hopes of someday partaking in profit sharing once the fund experiences success.  Seeding is something that new hedge funds generally seek out if start-up capital isn’t readily available, to help get their fund off the ground.  New hedge funds may receive anywhere from half a million dollars to several hundred million dollars.

Julie Scuderi
Senior Editor for HedgeCo.Net

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