Citadel's Ken Griffin on Markets, the Fed, and Building His Firm for the Next Century
(Barron's) -- The most successful companies on Wall Street have been built by those with relentless ambition -- and a strong wind at their back.
Decades of deregulation helped growth-minded CEOs turn firms such as Morgan Stanley and Bank of America into behemoths. More recently, financial entrepreneurs have leveraged booming private markets to create the likes of Blackstone in private equity, Bridgewater Associates in hedge funds, and Andreessen Horowitz in venture capital.
Now a somewhat stealthier trend, fueled by the explosive growth of technology in finance, is behind a new wave of digital-first powerhouses such as Interactive Brokers Group, Susquehanna International, Jane Street, and especially Citadel -- a burgeoning Wall Street empire controlled by billionaire Ken Griffin.
Citadel is a two-headed business beast consisting of Citadel LLC, a $68 billion hedge fund operation best known for its top-performing multistrategy flagship Wellington, and Citadel Securities, a sprawling market maker that facilitates and engages in the trading of stocks, derivatives, and increasingly bonds. Citadel -- Griffin chose the name because it "denotes a place of strength and protection," he says -- is defining the prototype of a next-gen, bulge-bracket firm, except that Citadel isn't that bulgy, with just a fraction of the employees and overhead of the traditional Wall Street firm.
As of now, the boss is happy. "It's incredibly satisfying to run one of the world's most successful hedge funds and to witness the transformative impact of Citadel Securities on the capital markets around the world," Griffin says. "Yes, I'm proud of that."
Taken separately, first, Citadel the hedge fund is a huge deal even as a stand-alone. Wellington (not related to Vanguard Wellington Fund or Wellington Management) has been a superstar, producing annual average returns of 19.2%, net of fees, since inception in 1990 -- nearly two times the market. A million dollars invested in the fund back then is worth $452 million today.
Even though Griffin says he spends the majority of his time working on the hedge fund's investment portfolio, arguably the hotter ticket is Citadel Securities. CitSec, as it is known, is a complex, sometimes controversial, ever-evolving endeavor -- which, Pac-Man-like, is on a seemingly inexorable march across capital markets, gobbling up market share in options, equities, Treasuries, and corporate bonds, and now expanding to Europe and Asia. Example: CitSec recently bought Morgan Stanley's U.S. equity-option market-maker business, leaving no major banks in the market-making business.
Citadel Securities says it now trades 25% of all U.S. equities, including 35% of retail flows plus 45 billion options quotes a day, and is a top-three trader in U.S. Treasuries and swaps. In total, it executes $652 billion in notional trades a day. The goal is clear. "Building the capital-markets firm of this generation is a vision that is increasingly becoming a reality," says Citadel Securities CEO Peng (pronounced "pung") Zhao, a Ph.D. in statistics from the University of California, Berkeley. (Griffin serves as nonexecutive chairman of CitSec.)
"This is a very different company than most people understand," says Alfred Lin, a partner at venture-capital firm Sequoia Capital who sits on Citadel Securities' board (and whose brother happens to be the head of global fixed income and macro at Citadel the hedge fund). "Citadel is taking math and their distribution and technology power to price risk using techniques not traditionally used on Wall Street."
While technology has been absolutely critical to Citadel's success, so too has Griffin's strategy. "You don't want to go up against the Wall Street incumbents," he says. "Instead, you want to understand where the market is heading and position yourself there before the incumbents arrive." The incremental rise of electronic trading allowed Citadel to move step-by-step ahead of names like Goldman Sachs Group and Morgan Stanley in a number of trading businesses.
Griffin also makes all kinds of headlines. A Republican who has given hundreds of millions mostly to GOP candidates and causes, Griffin has praised and criticized Trump. Just this past week, Griffin told Barron's: "I hope President Donald Trump appreciates that while he can score political points by attacking Jay Powell, ultimately the independence of the Fed is of the utmost importance to the American and global economy."
Meanwhile, Griffin, 56, has been adding to his personal portfolio at a stunning pace, including buying over a billion dollars worth of real estate (in New York City, the Hamptons, London, St. Tropez, Hawaii, and multiple properties in South Florida, including $400 million in Palm Beach, according to The Wall Street Journal). His art collection, estimated to be worth close to $1 billion, includes works by Picasso, Van Gogh, and Warhol, and he has bought priceless historical American documents, including rare copies of the U.S. Constitution, the Bill of Rights, the Emancipation Proclamation, and the 13th Amendment (signed by Abraham Lincoln). Then there's the $45 million stegosaurus.
Griffin's philanthropy, now directed through an entity called Griffin Catalyst, exceeds $2 billion and includes funding vaccine development during the pandemic and helping create Operation Warp Speed. On the hipper side, he recently donated $2.255 million to Mr. Beast's water philanthropy after the YouTube superstar called him out on the Today show. "It seems very important to Ken that the world knows how wealthy he is," says a business associate. "A lot of other people go to great lengths the other way."
The totality of Griffin's world is dizzying. The billions upon billions of hedge fund investments, market-making activities, and personal assets are markers of a man with great aptitude and perhaps even greater ambition.
Along the way, Griffin and his companies have encountered friction, false starts, falling outs, fines, and failure. The hedge fund dropped 55% -- losing $9 billion of clients' money -- during the global financial crisis, and was at death's door. CitSec tried and failed to get into investment banking. The market maker has had a number of run-ins with regulators. Yet now, after more than 30 years in the business, the tumblers have been falling into place.
A decade ago, Griffin was worth $6.1 billion, according to Bloomberg; today his net worth has ballooned to $48.3 billion, making him the world's 31st-richest person, by dint of hedge fund payouts and an 85% stake in that business, plus his 80% piece of the market maker -- the latter being valued at $22 billion three years ago after Griffin sold a 5% stake to Sequoia. Never mind the real estate and art.
Wealth accumulation by longstanding lieutenants such as Griffin's right-hand man and chief operating officer of the hedge fund, Gerald Beeson, who joined in 1993 as an intern out of DePaul University, and Zhao, who joined in 2006, is likely significant as well. Not that making a career at Citadel is easy. Both the hedge fund and CitSec look to hire what Griffin calls "great athletes," and are known to be workplaces where elbows are sharp and fools aren't suffered gladly -- or really at all.
"I thought we ran hard at Goldman," Pablo Salame, the co-chief investment officer of the hedge fund, who came from Goldman Sachs in 2019, said to a colleague. "And then I showed up here, and I realized there's a whole different gear." (Griffin is co-chief investment officer and CEO of the hedge fund.) "I would tell my team, you're playing for Real Madrid," says a former Citadel executive. "You don't get to keep your spot on the field if you're not producing."
"Ken would call you on a Sunday night at 11 p.m. and he might be screaming and yelling at you, but he was working," says another former employee. "He demanded 150%, and nothing else in your life should matter."
"Ken's not yelling at you, he's yelling with you," a person close to Citadel joked.
"Citadel Securities and hedge fund Citadel are highly performant places to work," says Matt Culek, CitSec's COO, who has worked at the firm for 13 years. "This is a place to come if you have a lot of confidence in your ability and want to challenge yourself." It's true that Citadel hardly has an issue attracting aspiring masters of the universe. "We had over 100,000 applicants for our summer intern program, and our acceptance rate was 0.4%," says Culek. "People are falling over themselves to demonstrate they deserve to be here just for the summer, and then some subset of them get to come back full time."
Griffin was STEM-smart and an achiever from his earliest days, growing up in Boca Raton, Fla., where he was president of his high school's math club. He graduated from Harvard University with an economics degree in three years. Chapters of Griffin's origin story have become the stuff of Wall Street legend, like convincing Harvard to let him install a satellite dish on the roof of his dorm so he could trade convertible bonds.
After Harvard, Griffin moved to Chicago, where Frank Meyer, a pioneering hedge fund investor, mentored him and helped seed Griffin's hedge fund. "The best advice I've ever gotten was from Frank Meyer, who in the early days of my career really pushed me to think big," says Griffin. (Meyer also pressed Griffin to build a multistrategy platform instead of a single-strategy fund.) Griffin stayed in Chicago until three years ago, when he says he became disgruntled with the crime and business environment and relocated his companies to Miami -- a triumphant return of South Florida's most successful financier native son.
As he built his businesses, Griffin leaned heavily into his math and computer science background, applying evolving technology along the way. "The term HFT [high-frequency trading] was coined here," says Zhao, who adds that a physicist working at the firm came up with the name for a strategy he created. Though Citadel Securities used to be known mostly as a high-frequency shop, Zhao says that today HFT is "part of the core competency you need to have as a modern-day market maker, but it's becoming less and less a business model."
After the hedge fund's meltdown during the financial crisis, Griffin rallied the troops, and by 2012 he had led the fund back to its high-water mark.
Performance has been strong. Over the past five years, Wellington has had annualized net returns of 23.6%, according to the Global Investment Report, versus a 14.5% annualized total return for the S&P 500. The hedge fund has returned more than $25 billion to investors over the past eight years -- a mixed blessing for the funds' limited partners, who then have the problem of where to reinvest that money.
As a multistrat hedge fund, Citadel employs a podlike structure, where individuals or groups of money managers pursue their own thesis strategies but with strong central controls. The firm isn't wedded to a single asset class or investment strategy and style, which allows Salame and Griffin and the management committee to shift the emphasis of the fund. Instead of a typical 2%-of-assets management fee, Citadel "passes through" its direct costs, such as employee salaries, which can amount to up to 7%. And it charges 20% of upside as well. Citadel is unique in that it is publicly rated investment grade by S&P Global Ratings, which, as of May 1, rated it BBB-, one notch above junk, and "stable."
"We want to generate returns that are diversifiable and where there is liquidity," says Salame, an Ecuadorean who's an aficionado of Japanese whiskies. "You have to constantly review whether your capital allocation and portfolio shape is optimal today, even though it was optimal a day ago." As a former Goldman colleague says, Salame was "demanding and one of the smartest people I've ever worked with."
The fact that Griffin owns the two Citadels makes for a singular and potentially conflicted structure. Executives on both sides of the house, as they describe it, stress that there is zero communication between the two, and that no trading information from the market-maker business passes over to the hedge fund. The two firms do share office space in some cities, such as New York, where both are slated to move into a proposed 1,600-foot-tall Park Avenue tower, sharing some back office functions and even a logo. Furthermore, Citadel Securities does, in fact, use trading information from its market making business, not in the hedge fund, but in Citadel Securities itself.
Like other market makers (also known as nonbank liquidity providers), such as Jane Street and Virtu Financial, CitSec receives orders from retail and institutional clients. It processes customers' trades by executing them mostly on an exchange or sometimes on an alternative trading system such as a dark pool. Citadel can make money off the spread between the bid and offer, but more important, it can use those securities in myriad strategies including hedging, mitigating risk, or trading for its own account. It's a hideously complex, esoteric business, but a very profitable one. In the first quarter of this year, CitSec had $3.4 billion in net trading revenue, up some 45% from the same period last year, while net income climbed 70% to $1.7 billion, according to Bloomberg.
"Ken tells an amazing story about when he developed conviction on a trade, which he was right on," says Billy Hult, CEO of Tradeweb Markets, a bond trading platform of which Citadel is a customer. "When Ken went to take the trade off, he realized how much money the market maker was making by unwinding his trade, and he said, 'Wow, there are two great businesses to be in -- the business of investing, and the business of market making -- and they're both really lucrative.' "
CitSec's market-making business also entails the somewhat controversial business of payment for order flow, much scrutinized during the GameStop imbroglio in 2021, where Citadel pays retail brokerage firms like Robinhood Markets and Charles Schwab to process their trading orders. In the first quarter of 2025 alone, Citadel paid brokers $388 million -- much of that for options contracts, according to Global Trading -- more than any other market maker. Citadel says it gets the most orders because it has the best execution, and that the money it pays to the brokers is essentially rebating back part of the spread. Those payments allow brokers to offer rock-bottom-priced or even free trading to investors -- which begets more trading, which benefits Citadel.
Trading data, which is nonproprietary, can be fed into Citadel's massive computing stack, where 260 Ph.D.s have access to some 100 petabytes of data -- more than the entire collection of the Library of Congress. Citadel data scientists and traders can use that information to identify inefficiencies between securities and arbitrage opportunities to obviate risk and make trades. Some are longer-term trades, says Zhao, while an HFT strategy, in which time is measured in 500 millionths of a second, makes thousands of small trades. Profiting from the spread on customers' trades, mitigating risk, and trading for its own account are closely intertwined. Revenue from those activities "can't be separated in a rational way," according to Zhao.
Market conditions recently have been ideal for Citadel Securities. Citibank says that year-to-date average daily volumes through July are 17.2 billion shares, a record high and up over 2.5 times from 2017. So far in 2025, stocks below $5 have represented 31.7% of total volumes, reflecting the latest meme-stock craze. And zero-day-to-expiration options are booming as well. All that trading means more volume for Citadel.
"The equity market is robust in pricing, but also reflects that the U.S. government is running a very large fiscal deficit, which is incredibly stimulative for the economy and healthy for corporate profits," Griffin says. "That, combined with a weaker dollar, has created tailwinds. There is one salient issue in the equity market now: How much of the hype of AI will translate into the reality of a more productive, more prosperous future?"
Going forward, Citadel has limitless possibilities, says Sequoia's Lin. "They can invest. They can trade and make a market. They can use math to help trade, absorb, and price risk better or help clients do that. They can provide advanced analytics and technology. They can provide intelligence to banks and to customers."
"We're still in early innings, even for some of our core products," says Jim Esposito, the president of Citadel Securities, who came over from Goldman last year. "In equities, we're skewed to the U.S.; in fixed income, we're just getting started. I'm spending time with Ken and Peng thinking about geographic and product expansion. We're everybody's favorite strategic partner to chat with, from technology platforms like Google to private-equity firms like Apollo [Global Management]."
Espo, as he is known, is amping up client-facing efforts at this tech-first company as it pushes more into bond trading and European operations, which can require high-touch relationships with senior clients and government officials.
"We're seeing higher levels of uncertainty in the world," says CitSec COO Culek. "That's going to increase the need for price discovery, which will lead to more market activity." Culek also points to strength in retail trading, event-based derivatives (trading on elections, economic data, or policy decisions), and crypto. "We're bullish on the growth of that set of opportunities," he says. "We see revenue others are already making that we can capture over time, and we can envision entirely new revenue in the future, some of which we are going to proactively create ourselves."
Griffin continues to be thoroughly engaged. "Some people who have Ken's success at his age start doing things like getting married in Europe," says a top executive at a major financial institution. "But Ken is uniquely still driven. That's a really important factor in why they succeeded and why they'll continue to succeed."
While one generation of Wall Street entrepreneurial titans, including the likes of Bridgewater's Ray Dalio and Blackstone's Steve Schwarzman, is winding down, another, with Griffin at the fore, is still gearing up. "Where we are today represents a phenomenal starting point for where these businesses will go over the next century," says Griffin.
With ambition like that, and a digital wind in his sails, what sounds audacious might just be plausible.
