Citadel raising global macro fund: source

NEW YORK Mon Mar 9, 2009 11:04am EDT

NEW YORK (Reuters) - - U.S. hedge fund Citadel Investment Group LLC, hit by heavy losses and client redemptions last year, hopes to raise $2 billion for a new fund making bets on currencies, interest rates and other trades on broad economic trends, a person familiar with the plans said.

Citadel declined to comment.

The firm told potential investors the new Citadel Global Macro Fund Ltd could eventually grow to a maximum of $5 billion, the source said.

Funds investing in the "global macro" style were among the rare few that that performed well through the past year, increasing the market's interest in these funds. Still these are challenging times for the hedge fund industry, which has seen customers pull out money in droves.

Citadel in December barred withdrawals from its flagship Kensington and Wellington funds, which fell by more than half last year.

These funds now manage $8.1 billion, down half from their high flying peaks. The Chicago-based firm overall has contracted to about $11.5 billion under management from more than $20 billion last year.

Recently Citadel CEO Kenneth Griffin told investors his funds would slowly allow redemptions to begin as early as the second quarter if the funds met certain thresholds.

The new fund will be managed by a team led by Kaveh Alamouti, a former Moore Capital Management trader who has run the global macro portions of Kensington and Wellington since joining last year.

The fund would charge 2 percent of assets as a management fee, 20 percent of profits and a fee of 0.25 percent to defray trading and back office costs, the source said.

By comparison, Kensington and Wellington have charged management fees of 6 percent and even 9 percent, plus 20 percent of profits, reflecting the intense investor demand for these funds.

Citadel also intends to launch a fund focused on stocks and another focused on convertible bonds, the source said.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.