Ken Griffin thought November was bad.
The embattled head of Citadel Investment Group, whose flagship funds declined 12 percent last month, is facing the prospect of a dismal December.
Though we’re only 10 days into the month, sources said a drop in the value of leveraged loans might further pinch Griffin’s Chicago-based hedge fund, whose Kensington and Wellington flagships have shed $10 billion year-to-date – nearly half their value.
On Wall Street, both Griffin’s friends and foes are closely watching the health of the firm. The worry is that an escalating crisis might trigger another tidal wave of trouble for the market, given the hedge fund’s size and scope.
Jitters surrounding rising unemployment and corporate defaults – highlighted by the recent bankruptcy of Sam Zell’s Tribune Co. – have reached a fever pitch over the past few weeks, and have heightened concerns that more firms will stumble from an inability to make debt payments.
Indeed, the Markit LCDX index, a leveraged-loan-linked measure of investor confidence, is at or near a record low of about 75 cents on the dollar.
Recently, Griffin has cut jobs and retreated from his recent push into Asia markets in an attempt to navigate tumultuous credit markets.
Citadel also issued letters last Friday to Kensington and Wellington investors offering them a one-time chance before the end of the year to invest in its well-performing, market-making Tactical fund. That may serve as little consolation to investors who’ve been pummeled by the flagship funds’ losses, though.