A Closer Look At Ken Griffin’s Portfolio

Updated on

A detailed review of Ken Griffin’s investing approach and Citadel Advisors’ largest holdings which includes SPDR S&P 500 ETF Trust (NYSEARCA: SPY), Amazon.com, Inc. (NasdaqGS: AMZN), and Facebook, Inc. (NasdaqGS: FB).

Get Our Activist Investing Case Study!

Get The Full Activist Investing Study In PDF

See 2017 Hedge Fund Letters.

Ken Griffin’s Knack For Investing

Ken Griffin is the founder and CEO of Chicago-based hedge fund manager, Citadel Investment Group. He is widely recognized as one of the most successful hedge fund managers of the last two decades. Griffin also owns Citadel Securities, a market making firm.

Griffin began trading actively while still an undergraduate at Harvard. He reportedly made big profits in the crash of 1987, at the age of 19. In 1989, after graduating, he joined Frank Meyer’s Glenwood Capital Investments in
Chicago. He is believed to have returned 70% on his positions in his first year of trading at Glenwood. The following year, Meyer helped Griffin raise $4.6 million to found Citadel.

Today, Citadel is the second largest multi-strategy hedge fund firm in the world, and manages over $27 billion. Citadel, which employs a staff of over 1,400 individuals, is highly regarded by those wishing to work in the investment industry. In 2015, Griffin said the company would interview 10,000 candidates to fill 300 positions. He also said it was easier to get into Harvard than to get a job at Citadel.

Griffin’s successful career has helped him accumulate a personal fortune of $9.1 billion. He is a prominent and often outspoken political donor and supports candidates and groups that support his belief in a limited government. Griffin is also a prominent art investor – in 2006 he paid $80 million for a Jasper Johns painting, which at the time was the highest price ever paid for a work by a living artist.

A Master of the Business of Money Management

Citadel engages in multiple strategies, including market-making and investing in distressed assets. While Ken Griffin has an enviable personal track record as a trader, Citadel’s success may have more to do with his leadership. The firm emphasizes employing the best talent, investing in the best technology and a focus on risk management and rigorous quantitative analysis. Citadel doesn’t have a particular investing or trading style, but aims to be the best at everything it does.

In a letter to investors, Griffin stressed the role partners and staff have played in Citadel’s success. He stressed the importance of recruiting the best talent, saying, “The early days of Citadel had a constant rhythm: research, problem-solve, program, trade, interview.”

The firm has always invested heavily in technology to give it an edge. In 2009 Citadel turned its IT department into a profit center by spinning it off as a separate company, Citadel Technology.

Citadel manages strategies across multiple asset classes including equities, bonds, credit and commodities. It uses exhaustive quantitative analysis to underpin its strategies in each market. It also runs 500 ‘doomsday scenarios’ each day to stress test its portfolios. The company’s risk management center is reported to have 36 monitors displaying all the firm’s positions.

Citadel is also very opportunistic. Griffin will often buy distressed assets when he believes investors are capitulating. If one looks at some of his notable investments, they often occur when a particular market is in the middle of a large sell-off. Griffin believes that these are the times when sentiment is at its lowest point, creating rare opportunities. In 2006, Citadel bought Amaranth Advisor’s natural gas positions when the fund was in the midst of a high-profile collapse.

Citadel itself ran into trouble in 2008 when liquidity in the convertible bond market dried up. Griffin only managed to save the fund by barring investors from withdrawing their funds. Citadel’s two largest funds finished 2008 down 55 percent, though they did manage to return 62 percent in 2009.

The firm also enters new markets when established players are in trouble. For instance, Citadel entered the energy trading business in the wake of Enron’s collapse. More recently, Griffin hired 17 equity traders and analysts from Visium Asset Management when the company closed down after former traders were charged with fraud.

Citadel consists of autonomous teams that focus on specific strategies and markets. As an aggressive business manager, Griffin will often shut down underperforming units, redeploying the best staff to other teams and retrenching the rest. Earlier this year he dismissed 21 staff members at one of its equity trading desks, Aptigon Capital.

Below I take a look at the hedge fund's largest holdings as revealed in its most recent 13F filing.

Citadel Advisors' Largest Holdings

The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the Citadel Advisors page. The following table summarizes the firm's largest holdings reported in the last filing:

Citadel Advisors Largest Holdings
Ticker Name Holding ($mil) % Of Portfolio
SPY SPDR S&P 500 ETF TR $18,032.1 11.4%
AMZN AMAZON COM INC $5,614.5 3.5%
FB FACEBOOK INC $3,109.6 2.0%
IWM ISHARES TR $2,821.5 1.8%
GOOG ALPHABET INC $2,602.3 1.6%

The seven positions above represent 23.5% of the fund's total portfolio. SPDR S&P 500 ETF Trust (NYSEARCA: SPY) is its largest holding with a long position in the ETF worth $18,032.1 million.

Amazon.com, Inc. (Nasdaq: AMZN) is Ken Griffin's second largest position and represents 3.5% of his firm's total portfolio.

Facebook, Inc. Common Stock (Nasdaq: FB) is Citadel Advisors's third largest position and represents 2.0% of his firm's total portfolio.

Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, Citadel Advisors's holdings above represent positions held as of December 31st and not necessarily reflective of the fund's current stock holdings.

However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.

Article by Brian Dentino, Finbox.io

Leave a Comment