U.S. Markets

Hedge fund Citadel cuts Aptigon unit headcount by 34 percent: sources

(This March 6 story corrects to remove Bryn Harder’s name as among those cut in paragraph 7 as he remains employed at Aptigon Capital.)

NEW YORK (Reuters) - Citadel, one of the world’s largest hedge fund managers, has cut staff by more than 30 percent in one of its stock-picking units in what several people with direct knowledge of the layoffs described as a surprise move.

From late February through Monday, 49 people had lost their jobs at the firm’s two-year-old Aptigon business. They include portfolio managers, analysts, associates and other ancillary staff, according to four people who were not authorized to speak publicly about internal Citadel matters.

That shrinks Aptigon’s headcount by roughly 34 percent, one of the biggest hedge fund downsizings in recent times, industry investors said. More than a dozen people from Aptigon have been reassigned to other positions in the firm, the sources said.

“We changed the leadership of Aptigon Capital because the prior leadership had failed to demonstrate it could generate the performance we expect from a Citadel business. We are committed to the success of Aptigon and will continue to recruit leading talent to the team,” Citadel spokesman Zia Ahmed said.

Ahmed declined further comment.

The departure of industry veteran Richard Schimel, who was wooed to Citadel by its founder Ken Griffin in 2016 after Schimel ran Diamondback Capital and Sterling Ridge Capital, was reported by several news outlets on Feb. 22.

But the cuts have also included money managers Rob Stenhouse, Matt Dublin, Jon Greenbaum and Brett Caughran, as well as executives David Bonfili and Keith Brenner, the sources said. They declined to comment for this article.

The cuts came as a surprise because Aptigon is a relatively new business that Citadel had been pouring resources into and many of the portfolio managers had recently begun to put money to work.

Aptigon manages money for Citadel’s main multi-strategy Kensington and Wellington funds which returned 13 percent last year. Aptigon was flat last year, several people with knowledge of the numbers said.

Citadel changed direction at Aptigon because its goal is to deliver consistently strong returns, Ahmed said. More than two-thirds of the Aptigon portfolio managers lost money during their time at Citadel, he added.

But some were puzzled that Griffin, who signed off on all of the hires, moved so quickly on experienced managers Citadel spent millions of dollars to lure from prominent firms.

“We were only beginning to put capital to work last year and if performance metrics had been an issue, I would have thought there would have been conversations and warnings,” said one former portfolio manager. “But that didn’t happen.”

Several sources said there seemed to be growing friction between Griffin and Schimel as the two men had very different styles and Schimel was trying to trying to build a collaborative culture at Aptigon.

Aptigon’s launch was the first time that Chicago-based Citadel, which manages $27 billion, established a major presence in Connecticut, home to many rival hedge funds including Steven A. Cohen’s Point72 Asset Management. The business also had an office in San Francisco, which is now closed, sources said.

Schimel, who had worked for Cohen early in his career, was brought on board in mid-2016 to build a new multi-sector global equity unit from scratch. Earlier in 2016, Citadel cut roughly a dozen people at another of its stock picking units Surveyor Capital and last year it shut down another stock unit, Ravelin, and merged it into its Global Equities unit.

Many of Aptigon’s portfolio managers came from Visium Asset Management, which was going out of business in the summer of 2016 and had more than a dozen portfolio managers ready to move to a rival firm. Griffin made them lucrative offers, including pay packages and promised cash to hire analysts, and touted Citadel’s state-of-the-art trading technology, the sources said.

Of the original group of portfolio managers who moved over from Visium only two remain with Citadel, the sources said.

Some of Schimel’s hires, who generally had not been at Citadel for more than a year, are still with Citadel however.

Neel Parekh, who shut down his Night Square Capital to join Aptigon, and Chris Connor, who closed down Ardmore Global Investors to join, also remain. Recent recruits Noah Yosha, who once worked for HealthCor Management, and energy investor John Meloy, who came from Balyasny Asset Management, are also still with Citadel.

Reporting by Svea Herbst-Bayliss; Editing by Lauren Tara LaCapra and Susan Thomas