The growth of Citadel Securities is even more remarkable considering its history of management turnover.

In 2008, Griffin hired former Merrill Lynch & Co. executive Rohit D’Souza to run the firm, but he left after a little more than a year. His replacement, Patrik Edsparr, who had been brought in from JPMorgan, lasted just seven months.

Then in July 2016, with great fanfare, Griffin handed the job to former Microsoft Corp. operating chief Kevin Turner. But his unfamiliarity with the world of finance came through during client meetings, where his management cliches and business-book catchphrases led to some uncomfortable encounters, Bloomberg reported at the time. He was gone shortly after the start of the following year.

Turner’s successor, Peng Zhao, who’s about to finish his third full year on the job, has brought stability. Zhao, 36, was plucked from his position as chief scientist to become CEO and is effectively a Citadel lifer, having worked there for 13 years.

Zhao is managing a substantially bigger company than when he started. Citadel Securities now employs about 700 people, up from 400 two years ago. Headcount at the hedge fund has increased roughly 10% in the same span.

At Citadel Securities, there are no investor funds, so the efforts of its employees primarily benefit those who own the business.

Last year, helped by increased volatility, their labors produced gross revenue of $5.7 billion, which excludes certain trading expenses. That resulted in $2.2 billion of earnings before interest, taxes, depreciation and amortization, compared with $524 million for Citadel LP, the entity that houses the hedge fund. Griffin owns at least 75% of both businesses.

Thriving Investments

Of course, employees also have investments in the hedge funds, so they benefit when the funds perform well. A memorandum tied to a recent bond offering shows that about 20% of Citadel LP’s $32.2 billion of assets under management come from principals and employees. Griffin has about $5.4 billion invested in Citadel funds, according to the Bloomberg Billionaires Index.

For now, those investments are thriving. The flagship Wellington Fund posted returns of 13% in 2017 and 9.1% in 2018, and is up 16.7% through the first 11 months of this year. That performance stands out in a challenging environment for hedge funds. Louis Bacon’s Moore Capital Management, founded two years before Citadel, was one of the latest victims. Last month, it announced plans to close flagship hedge funds to outside investors and return cash.

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