The Bad Investment Climate of 2014

Investment firm Citadel’s founder and CEO, Ken Griffin, has finally made it to the top of Institutional Investor’s The Rich List which name the past years most successful hedge fund managers. Griffin achieved the prized position by bringing in a staggering $1.3 billion last year. The top position was close. Three managers with 2014 earnings of over $1 billion were in contention: James Simons, founder of East Setauket; Raymond Dalio, founder of Bridgewater Associates; and, of course, Griffin. In the end, Griffin beat out Simmon’s $1.2 billion and Dalio’s $1.1 billion.

The people on The Rich List have always been managers who pulled in that money as a representative of a certain company. That changed this year. Simons, who no longer runs the regular operations of the company he founded, became the first person ever to be named on the list who was not representing a company when pulling in the winning money. Although the top three brought in so much, the total of all the earners of the list was much lower than it has been since the financial crisis of 2008. Those who made the list are just a representative of the low average.

Last year was a bad investment year pretty much across the board of professional investors. In fact, several people who almost always take respectable positions on the list, didn’t even qualify. As evidenced in how he made the top of The Rich List, Kenneth was unlike most fund managers in actually having a great year on behalf of Citadel. Citadel might have had a good year, but not all of its investors found individual success. It is likely that certain employees of Citadel, like asset manager Derek Kaufman, eyed their more successful peers with envy. Like many asset managers, Kaufman had a very bad investment year in 2014. Over the course of the year a long list of his trades resulted in huge losses.

Kaufman had been one of Citadel’s best employees since 2008. However, after such a horrendous year Citadel had to let him go. Griffin, who had such a great year in 2014, will be taking on the additional leadership of those employees directly under Kaufman. At the same time as one important employee is leaving, another is arriving in the form of Federal Reserve Chair Ben Bernanke, who will be coming on board Citadel as a senior adviser. Although Citadel did have a better 2014 than many investment firms, it is not completely unlikely the bad investment year inspired this recent hire.

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