Ken Griffin: To the Mightiest Companies Will Go the Spoils

Hedge fund magnate Ken Griffin sees the strongest dogs in the corporate pack doing the best at running up outsized returns in 2019, he says in his latest letter to investors. And from the looks of things, he’s talking about the FAANG stocks.

His $30 billion Citadel hedge fund company expects the most robust companies to do best in what he termed “the heightened volatility in financial markets.” Not, oh, value plays.

Makes sense. Although the first two months of the year have done well, a number of macro factors are disconcerting: a slowing global economy, some laggard indicators in the US, ongoing trade turmoil between Beijing and Washington, and a holy mess brewing with Britain’s misbegotten exit from the European Union.

Griffin’s brief and general letter didn’t offer any firm insights into exactly where he is taking Chicago-based Citadel. But his returns from last year, as reported by Bloomberg News, show how solidly he has lined up with the major players in the corporate arena, particularly in the tech part of it.

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His flagship, multi-strategy Wellington Fund was ahead 9% for the year. In 2018, the S&P 500 had a total return of -4.3% and, according to Hedge Fund Research, hedge funds lost 4.1%.

Among Citadel’s top equity holdings at year-end 2018, by the count of RegionalStocks.com, were Amazon (7.8%), Apple (1.9%), Alphabet (1.5%), and Facebook (1.5%). In other words, the FAANG stocks that rode high for a long time until they ran into trouble in late 2018. Of course, all of these tech titans are stuffed with cash and generate enormous profits and revenues. A lot of investors expect them to turn around, with a vengeance.

Citadel also has healthy positions in large financial stocks, such as Bank of America, Morgan Stanley, and Citigroup. plus leaders of the industrial segment like Boeing, a sector that happens to be doing better than tech lately. The one problematical company is Tesla, which has struggled to produce electric cars and stop producing red ink.

In 2018, says Insider Monkey, Citadel bought shares in leading lights like Alibaba, Taiwan Semiconductor, and Lowe’s.

So things are going pretty well for billionaire Griffin nowadays. He just bought a Manhattan penthouse for $238 million, a record for a home in the US. This guy thinks big, always.

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Tags: Citadel, Hedge Funds, Ken Griffin

Unlike its peers, Swedish pension backup fund AP6 saw very positive returns in 2018, but those rewards are bittersweet as its chief is leaving.

The retirement reserve raked in 9.6% from its investment portfolio, increasing its assets to $3.7 billion. AP6 prides itself on its allocations to unlisted assets, and with good reason.

The space provided 16.1% returns for the year, which helped the fund average a 13.2% return over the last five years, outperforming its benchmark by 1.6 percentage points..

However, AP6 was not as effective as 2017, where it returned 12.3%, with a 20.3% harvest from unlisted assets. It has still had a superior performance than several of the other four AP funds in 2018, which watched a rough stock market wash away anticipated positivity.

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Outgoing Managing Director Karl Swartling said the returns came from areas that “have the highest return in sub-segments and geographic locations,” adding that performance results were high for both direct and fund investment sections of its portfolio.

The alts-oriented fund announced Swartling’s departure days before the news. He will leave on March 1 after seven years on top, to lead an undisclosed business after the summer. Deputy Managing Director Margareta Alestig Johnson will be the acting chief until it finds a new leader.

“It has been seven eventful and very developing years. When I took office, the Board had decided on a new overall strategy,” said Swartling, alluding to its unlisted assets focus and private equity portfolio. “AP6 has very competent and professional employees that I will miss.”

From 2014 through 2017, the fund had restructured by splitting two-thirds of its portfolio between direct (39%) and fund investments (37%), spread across the consumer discretionary, industrial goods, IT/telecom, and health care sectors. The remaining 24% of AP6’s portfolio is in liquidity investments. It has completely divested from all holdings that predate this implementation.

Tags: AP6, Karl Swartling, Pension, Returns, Sweden