The unusual thing about Citadel versus other multistrategy hedge funds
Citadel is not like other multistrategy hedge funds. Millennium aside, it has more assets than most. It also employs more people. But its people are a slightly different type.
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The chart below shows the split between investment and non-investment employees at major funds. At Citadel, investment employees are only 39% of the total. At Millennium, they're 48%. At Point72, they're 44%.
The figures are derived from hedge funds' ADV forms, where investment staff are defined as people perform investment advisory functions, including research. The SEC defines investment advisors as people giving advice about market trends, people advising about investing in securities and people providing asset allocation advice, among other things.
If Citadel doesn't have a large proportion of investment advisors, who does it have instead? The fund declined to comment for this article, but we suspect that its 1,800 people working outside investment advisory roles are in areas like technology and risk management instead.
Citadel is known for having highly centralized risk management and tech functions. Risk management at the firm is run by Joanna Welsh. Welsh is in charge of Citadel's 50+ person portfolio construction group, which itself runs Citadel's proprietary risk factor model that's constantly simulating scenarios to check its exposure. The fund also plans to have around 500 people in Miami by the end of this year, many of whom work in technology. Then there are quants, and the rest.
The upshot of Citadel's comparatively low emphasis on investment advisors, is that those it does have manage more assets under management than at rival multistrats. At Citadel, average AUM per member of the advisory team is $56m versus less than half that at Millennium.
Speaking off the record last year, one hedge fund inside said Millennium's portfolio managers are more autonomous than Citadel's. "At Millennium it's almost like you're operating your own mini hedge fund and your experience will vary considerably according to the pod," they said. "At Citadel, you are joining Citadel. The experience is more universal. There's a Citadel formula and you follow it."
The only other major multistrategy fund with a staffing ratio similar to Citadel's is Schonfeld, which is focused more heavily on systematic strategies and presumably needs more technologists and fewer advisory staff, despite complaints about its technology.
Beyond the multistrats, the fund with the fewest investment staff as a proportion of the total seems to be Bridgewater, where 80% of the 1,200 employees are in non-investment roles.
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