Key Takeaways
- • Ken Griffin's Citadel displayed an internal email from Dmitry Balyasny during a February all-hands meeting in which Balyasny told staff "We are getting our butts kicked," citing poor long-short performance and acknowledging investors questioned whether employees were underperforming.
- • Balyasny Asset Management, which manages approximately $7 billion, returned 4.2% through Q1 2019, significantly trailing Citadel's 6.35% return and underperforming the S&P 500's 13% gain over the same period.
- • Balyasny conducted a major restructuring at year-end 2018, firing one-fifth of its workforce in response to performance pressures and unmet expectations—a signal of the competitive intensity between the two Chicago-based hedge funds.
- • The rivalry between Citadel and Balyasny has escalated into an aggressive talent war, with Balyasny actively recruiting Citadel portfolio managers despite the geographic proximity of their headquarters (separated by one mile and the Chicago River).
- • Griffin used the Balyasny email as a cautionary example of "poor culture" in Citadel's internal meeting, though the method by which he obtained the confidential communication remained unexplained to staff.
Summary
The competitive tension between Ken Griffin's Citadel and Dmitry Balyasny's eponymous hedge fund has intensified into what sources describe as a significant "turf war" within Chicago's hedge fund landscape. While all hedge funds compete for talent, data, and alpha generation, the rivalry between these two firms appears to have reached a new level of intensity, marked by performance disparities and explicit competitive messaging from leadership.
The most visible escalation occurred in late February 2019 when Griffin presented an internal Balyasny email—dated April of the previous year with the subject line "Adapt or Die"—during Citadel's annual all-hands meeting. In the email, Balyasny candidly acknowledged that his firm was "getting our butts kicked," specifically referencing poor long-short strategy performance. The communication also addressed investor concerns about whether Balyasny staff had joined the firm expecting to "enjoy not working too hard." Griffin framed the email as an example of how "poor culture can do to a firm," drawing a parallel to Enron in the same presentation. However, sources within Citadel interpreted the message not as a lesson in organizational culture but rather as competitive motivation to outperform Balyasny.
The performance gap between the two firms supports Balyasny's self-critical assessment. Through the first quarter of 2019, Citadel returned 6.35% while Balyasny delivered 4.2%—a 235 basis point spread—despite both underperforming the broad market's 13% gain. This performance differential reflects broader operational challenges at Balyasny, which prompted management to restructure operations and reduce headcount by approximately 20% at year-end 2018. A source at Balyasny characterized the email as an effort to "light a fire under the team," indicating the restructuring and layoffs were direct responses to performance shortfalls and unmet investor expectations.
Adding another dimension to the conflict is Balyasny's aggressive recruitment efforts targeting Citadel portfolio managers—an active talent war that exploits geographic proximity despite the firms' vastly different asset bases and track records. The methods by which Griffin obtained Balyasny's internal correspondence remain unclear, raising questions about information flow and competitive practices within the Chicago hedge fund ecosystem.
The most visible escalation occurred in late February 2019 when Griffin presented an internal Balyasny email—dated April of the previous year with the subject line "Adapt or Die"—during Citadel's annual all-hands meeting. In the email, Balyasny candidly acknowledged that his firm was "getting our butts kicked," specifically referencing poor long-short strategy performance. The communication also addressed investor concerns about whether Balyasny staff had joined the firm expecting to "enjoy not working too hard." Griffin framed the email as an example of how "poor culture can do to a firm," drawing a parallel to Enron in the same presentation. However, sources within Citadel interpreted the message not as a lesson in organizational culture but rather as competitive motivation to outperform Balyasny.
The performance gap between the two firms supports Balyasny's self-critical assessment. Through the first quarter of 2019, Citadel returned 6.35% while Balyasny delivered 4.2%—a 235 basis point spread—despite both underperforming the broad market's 13% gain. This performance differential reflects broader operational challenges at Balyasny, which prompted management to restructure operations and reduce headcount by approximately 20% at year-end 2018. A source at Balyasny characterized the email as an effort to "light a fire under the team," indicating the restructuring and layoffs were direct responses to performance shortfalls and unmet investor expectations.
Adding another dimension to the conflict is Balyasny's aggressive recruitment efforts targeting Citadel portfolio managers—an active talent war that exploits geographic proximity despite the firms' vastly different asset bases and track records. The methods by which Griffin obtained Balyasny's internal correspondence remain unclear, raising questions about information flow and competitive practices within the Chicago hedge fund ecosystem.
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