U.S. Markets

Hedge fund Citadel joins industry's standard-setting body

BOSTON (Reuters) - Hedge fund giant Citadel on Wednesday became the latest U.S. investment firm to join the Hedge Fund Standards Board, the industry’s global standard-setting body said in a newsletter.

The London-based group said hedge fund managers Citadel plus Bermuda-based Hiscox Re Insurance Linked Strategies Ltd and Hong Kong-based Myriad Asset Management Ltd have joined as signatories. U.S.-based pension fund Pennsylvania Public School Employees’ Retirement System, which invests in hedge funds, joined as an investor, the newsletter said.

Citadel, founded by Kenneth Griffin, invests some $26 billion in assets and saw its flagship Wellington fund end 2016 with a roughly 5 percent gain, having recovered from losses at the start of the year. Since its launch in 1990, the fund has delivered an average return of 19 percent a year.

Some 125 hedge funds, which jointly oversee around $1 trillion or roughly a third of the industry’s assets, have signed on since the group’s founding in 2008, pledging to adhere to standards in how funds communicate with investors, value assets and manage risk, for example.

As the hedge fund industry works to shed its reputation of being secretive, some investors have urged fund managers to join the group.

Powerhouse firms including Bridgewater Associates, Och-Ziff Capital Management, Pine River Capital Management and Renaissance Technologies are signatories as are smaller firms such as IONIC Capital Management.

To join, signatories must show they uphold the group’s standards, which also cover sections related to proxy voting and borrowing stocks and establishing a board that tackles potential conflicts of interest.

The Hedge Fund Standards Board works with members on issues that have caught regulators’ attention, including guarding against cyber attacks. The group recently staged simulations to see how well hedge funds have fortified themselves against cyber-attacks such as potential demands for ransom from hackers, Thomas Deinet, the group’s executive director said in an interview.

Reporting by Svea Herbst-Bayliss; Editing by David Gregorio