Citadel funds rebound 60 percent but still in the hole

NEW YORK (Reuters) - Citadel Investment Group's flagship hedge funds are up nearly 60 percent this year, according to people familiar with the matter.

That performance earns back much of 2008's massive losses but still leaves the firm deep in the hole as it pursues money for four new funds.

The Chicago firm's multi-strategy Kensington and Wellington funds fell by 55 percent last year, losing $8 billion of client money. And though the funds have surged so far in 2009, they are still nearly 30 percent below prior peaks.

Founder Kenneth Griffin, 41, assured investors that 2008 will not be repeated and has devoted his energies to earning back last year's losses. The recent strong performance has generated some mixed reviews.

Citadel declined to comment.

On one hand Citadel's investors, asked to resubmit withdrawal requests after the 2008 ban was lifted in October, pared back their demands to about $1 billion, down roughly half from previous estimates.

Combined with $250 million already paid out, withdrawals will represent about 10 percent of the $14 billion currently managed by Citadel. At its peak in late 2007, Citadel managed $20 billion.

At the same time, Citadel is in the market raising cash for four new hedge funds. The people familiar said since fund-raising began in the second quarter, $500 million of new money has been committed for its equities, global macro, convertible debt and mortgage funds.

The global macro fund has attracted $100 million for a strategy with a $2 billion capacity, the sources said.

Funds have been hard to come by this year, as many big investors hold back or reassess their appetite for hedge funds. Citadel also began its efforts when the 2008 redemption gate, never popular among investors, was still in place.

(Reporting by Joseph A. Giannone, editing by Matthew Lewis)