News that two well-connected hedge funds — Bridgewater Capital and Citadel — were having a very bad 2016 caught the market by surprise Thursday.
Bridgewater Associates lead by Ray Dalio and Citadel’ Ken Griffin are both the consummate inside money managers on Wall Street. Both are highly regarded and very private in their personal lives.
So when news came out this week that both shops had funds that were down low double digits the Street took notice.
Citadel is reportedly one of the main shops dealing with the Plunge Protection Team‘s market activity. When the group need to make market saves they are said to use Griffin’s shop to mask their activities through his trading desks.
That’s how inside these funds are, so to be caught flat-footed on the December rate hike seems unlikely at best.
Yet Dalio, who manages $150 billion, has been out talking about the Fed returning to easing sooner than later. This tells me he was on the other side of the December rate hike and is now talking his book.
Griffin, who just settled a very contentious divorce in October, can’t be hurting too bad from the market downturn, he just plunked down $500 million for two pieces of art this week and also just spent $200 million on a condo overlooking Central Park in the last two months or so.
Citadel, which manages $26 billion, operates out of Chicago HQ, but has offices in NYC, just announced 14 staff would be laid off at the firm.
Reports also came out earlier this month that Dalio feuding with his heir apparent at the firm, Greg Jensen. In reportedly got to the point where Jensen asked senior employees and shareholders to vote on their character and conduct in a bid to resolve the dispute. Dalio denied that there was animosity between the two and that the firm was fine.
Given the newly reported loses, one could guess that Jensen did not agree with Dalio on the Fed continuing to leave rates at zero in December and began jawboning to staff in January that Dalio was wrong and look at the losses we are taking now.
That would be the only reason for the very private Dalio to be out in the press recently talking up his “easing” scenario recently.