Business Today

Ken Griffin, monetary prodigy turned business large

Practically 4 a long time in the past, the South Florida Solar-Sentinel profiled three precocious members of the Boca Raton Group Excessive College’s pc membership. Whereas their classmates had been capturing hoops, the “disc-drive pushed trio” had been prepping for a problem-solving competitors with different Palm Seashore geeks later that month.

It’s unclear what occurred with Satish Vadapalli and Wayne Wong, who labored out the challenges with pen and paper earlier than passing on options for his or her third member to bash into a pc. However the latter would go on to depart a serious mark on the monetary world.

Kenneth Cordele Griffin is right this moment one of many world’s wealthiest folks, with a fortune estimated at $26.5bn by Forbes. He’s largely recognized for operating his $40bn Chicago-based hedge fund Citadel. However in actuality, his lesser-known but arguably extra necessary computer-powered buying and selling agency Citadel Securities is now the most important key to his wealth — and mounting controversy.

This week Griffin sold a $1.15bn stake in Citadel Securities to enterprise capital corporations Sequoia Capital and Paradigm, electrifying the finance business. The agency is the world’s largest algorithmic “market-maker”, dealing with over 1 / 4 of all US shares purchased and offered day-after-day. Now it’s eyeing cryptocurrencies, and a probable preliminary public providing.

The deal valued Citadel Securities at $22bn, including $5bn to Griffin’s web price and lifting him to 26 within the Forbes desk of the richest Individuals. Many fellow financiers had been agog on the deal.

“What made Michael Jordan Michael Jordan is not only that he jumps increased and runs sooner, he’s sui generis. Ken is comparable in his subject,” says Lloyd Blankfein, the previous chief govt of Goldman Sachs and a pal of Griffin. “He’s a fantastic dealer, however he’s additionally a fantastic businessperson, and people issues don’t usually go collectively. It’s like a runner who wins in each the 100m sprint and a marathon.”

Nonetheless, Griffin has additionally change into a magnet for ire. For some he embodies the finance business and its supposed ills. In Chicago his political machinations raise hackles. Conspiracy-minded retail buyers on web boards equivalent to WallStreetBets painting him because the malevolent head of an evil monetary empire, despite the fact that the US monetary watchdog debunked their claims.

Internally, Griffin is extra revered than cherished, and the tradition is alleged to be brutally intense, even for Wall Road.

“There’s not a variety of empathy,” one former worker informed the FT final yr. “That may be an asset when issues are going loopy, as I don’t assume he feels stress the identical approach as everybody else. There’s simply this need to be the most effective at every little thing, and everyone seems to be both serving to him accomplish that, or not.”

In an FT interview final yr, replete with the lengthy pauses and fully-formed clipped sentences he speaks in, Griffin shrugged off such complaints: “If you happen to’re wired to take pleasure in being a superb competitor, you’re keen on working right here,” he mentioned.

There have been a couple of hints of Griffin’s towering drive within the Solar-Sentinel profile. The 17-year outdated — captured in spectacles, a matted stripy shirt and basic zip-up Adidas jacket — was already a prodigy on the time.

Lively within the pc membership, he was additionally president of the maths membership and a budding entrepreneur. The center-class teenager had arrange a mail-order software program agency promoting instructional programmes to varsity professors out of his dwelling, which allowed him to cover his youth from prospects.

His first dalliance with finance got here in 1980, when the 11-year outdated Griffin wrote a school paper on how he deliberate to check the inventory market. But it was as a Harvard undergraduate that he first began buying and selling aggressively, famously convincing his dormitory to let him install a satellite dish so he may get up-to-date inventory costs.

The dish was put in simply in time for the Black Monday crash of 1987, when Griffin was already managing $265,000. Happily, he was betting on shares falling, and made a killing. Griffin’s returns attracted the eye of hedge fund pioneer Frank Meyer, who bankrolled the launch of Citadel.

By 2001, Institutional Investor declared him the “boy wonder” of his business. “Griffin is to hedge funds what pimply confronted dotcom billionaires had been briefly to the Web: the boy god, nerd made good, self-taught polymath of finance,” it wrote. Just a few years later, all of it virtually got here crashing down.

Column chart of Annual net returns of Wellington (%). showing Citadel has recovered from a near-death experience in 2008

Regardless of a fame for avoiding errors, Citadel misplaced an astonishing $8bn within the monetary disaster. It was finally compelled to freeze investor withdrawals, usually a dying knell.

As an alternative, Griffin resurrected Citadel as one of many hedge fund world’s undisputed giants, spun out its high-frequency buying and selling arm as Citadel Securities and constructed it right into a formidable firm in its personal proper. In 2020 Citadel sat fourth on the checklist of the highest-grossing funds of all time, with cumulative good points for buyers of about $42bn, whereas Citadel Securities churns out earnings from the retail buying and selling growth.

There are few indicators that Griffin is especially involved by the opprobrium of web boards. When 1000’s of cryptocurrency fanatics collected over $40m to purchase a uncommon first-edition copy of the US Structure final yr, he outbid them on a whim, inflicting outrage. The successful bid of $43.2m amounted to lower than three days of Citadel Securities’ buying and selling revenues.

“2008 almost introduced him down, and he’s rebuilt like a magician. It’s phenomenal,” mentioned one hedge fund govt. “He’s type of just like the Elon Musk of cash.”

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