Citadel: Rumors Unfounded

From yesterday:

Rumor has it that another major hedge fund in the U.S. is headed for a meltdown and reportedly may be behind the recent drop in the U.S. dollar as it allegedly diverted capital to cover losses in energy trades. Chicago-based Citadel Investment Group has denied that it is the hedge fund in trouble, telling The Wall Street Journal that the rumors concerning it are unfounded.

More from the Wall Street Journal:

Citadel Investment Group LLC, the $12 billion Chicago hedge fund, says it continues to enjoy a successful year and isn’t suffering from big energy bets gone bad — despite speculation coursing through financial markets today that the firm is dealing with heavy losses. “We are aware of the rumors. They are completely unfounded,” says Bryan Locke, a spokesman for Citadel. Mr. Locke wouldn’t give details about the firm’s performance this year. However, an investor in Citadel said the firm remains up about 20% so far this year, despite sharp price declines in the energy markets in recent days. Citadel’s returns are better than major stock market measures this year. In early September, Citadel, which does everything from market making in options to energy trading, teamed up with J.P. Morgan Chase & Co. to purchase the energy portfolio of struggling Amaranth Advisors.

Feedback on the “+20%”:

It means nothing when they say ‘we’re still up 20%’. Amaranth was ‘up 30%’ in one week, and ‘down 60%’ the next. When funds play with highly concentrated leveraged bets, things can go sour real quick.