How Did Ken Griffin Make His Money?

Why Is Ken Griffin Famous?

Ken Griffin has done several things to make him a popular figure in the investment world and beyond.

His name first reached a wide audience in 2003 when he became the youngest person on the Forbes 400.

At 34 years old, he had a net worth of about $650 million.

2007-2008 Financial Crisis

Griffin also made headlines during the 2007-2008 financial crisis when he banned investors from withdrawing money from their Citadel accounts.

Early in the recession, Citadel’s investments were losing millions of dollars per week. Not surprisingly, many investors were afraid of losing everything, so they were angered by Griffin’s decision. Citadel’s assets under management rebounded in 2009 and has continued to grow.

Since 1990, when Griffin founded Citadel LLC, the hedge fund has generated about $66 billion in net gains, making it the most successful hedge fund in history.

GameStop Short Sell

Ken Griffin received national attention again in 2021 for his role in the GameStop short squeeze.

The GameStop short squeeze started with a Reddit group that encouraged investors to purchase GameStop shares.

The sudden attention pushed the company’s stock price above expectations, so many traders shorted the stock.

Melvin Capital had devoted an undisclosed amount of money in the short, which led to it losing 30% of its value. Citadel invested $2 billion in Melvin Capital.

A few days later, the Robinhood electronic trading platform restricted clients from purchasing shares in GameStop. This drew media attention because Robinhood relies on Citadel’s payment for order flow.

Critics saw this as Griffin, who owns 85% of Citadel, stepping in to control other investors so he could benefit. He faced questions from the House Financial Services Committee, but no legal actions were pursued against Griffin or Citadel.

Several independent lawsuits targeted Robinhood for knowingly preventing clients from investing in GameStop.

What Is Ken Griffin’s Trading Strategy?

Ken Griffin doesn’t talk much about his personal trading strategy, but his background in mathematics and economics suggests that he takes a quantitative approach.

Quantitative trading strategies typically rely on algorithms to determine the most effective way to manage assets.

Top hedge funds like Citadel likely rely on machine learning and artificial intelligence to further improve their algorithms.

With help from technology, they can refine their algorithms in near real time to stay ahead of emerging market trends.

What Is Citadel’s Trading Strategy?

Given that Ken Griffin owns 85% of Citadel, it’s reasonable to assume his personal trading strategy influences the approach Citadel takes. After all, most of his wealth comes from the hedge fund.

Citadel employs a broad range of professionals with backgrounds in more than 60 disciplines. More than 40% of Citadel’s employees hold advanced degrees in subjects like aeronautics and computer science. It has teams dedicated to:

• Engineering
• Business operations
• Investing; and
• Quantitative research

This strategy gives Griffin and his advisors deeper insight into how industries will perform.

While an experienced investment advisor might see opportunity in the numbers from an aeronautics company like General Dynamics Corp, someone with a PhD in physics can review products to determine whether they offer the industry significant value.

This dual approach adds context that helps Citadel determine how it should invest capital.

How Did Ken Griffin Make His Money?

Ken Griffin made his money, $35.9 billion in total, as the founder of Citadel, the most successful hedge fund in history.

Griffin showed exceptional promise as an investor long before he graduated from Harvard with a degree in economics.

While enrolled as an undergraduate student, he convinced the university’s administrators to let him install a satellite on his dorm’s roof. The satellite made it possible for him to receive frequent stock market updates, a critical advantage for investors in the mid-1980s.

Harvard has a policy against letting students run businesses from dormitories, but it allowed Griffin to pursue his interests. He quickly began earning thousands of dollars from buying put options in Home Shopping Network.

Shortly after making this move at Harvard, Griffin had a contact at Merrill Lynch invest $100,000 he had raised from his friends and relatives.

Griffin started his first hedge fund when he was 19 years old. He founded the fund shortly before the stock market crash called Black Monday. Griffin correctly believed that the market had overvalued many companies, so he shorted them, making it possible for him to profit as the world economy lost about $1.7 trillion.

After Griffin graduated, he moved to Chicago to work for Glenwood Capital Investments. He was given $1 million in capital to manage. Griffin generated a 70% return that far exceeded expectations.

Griffin’s early success gave him a chance to found Citadel LLC with backing from Frank Meyer at Glenwood. With $4.6 million in assets under management, he earned 40+% returns several years in a row.

He has since used Citadel’s financial success to acquire other companies, hire researchers, and expand his investments into more sectors. He still benefits from shorts, but his fund also includes traditional investments.

How Much Money Is Ken Griffin Worth?

According to Bloomberg, Ken Griffin has a net worth of $35.9 billion, making him the 40th richest person in the world.

Most of Griffin’s wealth comes from his stake in Citadel, so his net worth fluctuates with the hedge fund’s performance.

Recent Wall Street surges have added billions to Citadel and Griffin’s net worth.

Who Are The Richest Hedge Fund Managers?

Successful hedge fund managers can oversee billions of dollars in assets, so they have opportunities to earn tremendous amounts of money. The five richest hedge fund managers are:

• Ken Griffin, Founder of Citadel and Citadel Securities ($37.8 billion)
• Jim Simons, Co-Founder of Renaissance Technologies ($30.7 billion)
• David Tepper, President of Appaloosa Management ($20.6 billion)
• Steve Cohen, Founder of SAV Capital Advisors and Point72 Asset Management ($19.8 billion)
• Ray Dalio, Founder of Bridgewater Associates ($15.4 billion)

While these amounts show the general wealth of extremely rich hedge fund managers, it’s important to note that changes in the stock market can affect their net worths quickly. Depending on how they manage their assets, their assets could grow or shrink by millions, or even billions, per day.

Who Owns The Biggest Hedge Fund In The World?

Ray Dalio currently owns the biggest hedge fund in the world. His company, Bridgewater Associates, manages $124.32 billion in assets.

Ken Griffin’s Citadel hedge fund is the sixth largest. The other biggest hedge funds include:

• Renaissance Technologies ($106 billion AUM)
• AQR Capital Management ($94.5 billion AUM)
• Two Sigma ($67.47 billion AUM)
• Millennium Management ($57.67 billion AUM)
• Tiger Global Management ($51 billion AUM)
• D.E. Shaw ($45.77 billion AUM)
• Coatue Management ($42.34 billion AUM)
• Davidson Kempner ($40.8 billion AUM)

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