Citadel Swoops On Lehman Equity Chiefs
Citadel Investment Group has hired Neil McDonald, head of automated market making for Europe at Lehman Brothers in London.
Citadel Investment Group has hired Neil McDonald, head of automated market making for Europe at Lehman Brothers in London. Tim Throsby, global head of equity derivatives for Lehman Brothers in New York, has also left the firm and some officials say he is heading to Citadel as well. Throsby and McDonald could not be reached. The market buzz is that the hedge fund giant is setting up as an equity derivative market maker, as several officials said McDonald, who was a key player in Lehman's market making effort, will likely take up a similar role at Citadel. The geographical reach of the operation could not be ascertained.
The Chicago-headquartered fund, which runs USD12 billion in assets, already has an affiliate called Citadel Derivatives Group which makes markets predominantly in exchange-traded options. "The line between hedge funds and banks is blurring," noted one hedge fund manager, who said it makes sense for large hedge funds to diversify their business by making markets. One equity derivatives market official agreed. "Market making makes perfect sense when you have large amounts of capital, the very best technology and very technical people," Citadel qualifies on all counts. Calls to Ken Griffin, president and ceo of Citadel in Chicago, were referred to Scott Rafferty, head of investor relations. Rafferty did not reply to messages by press time.
One hedge fund trader and former flow trader at a major broker/dealer added that market making has been one of the few options strategies that has worked in today's low volatility, tight credit spread environment. But he cautioned, "Clients are very wary of dealing with operations which have a huge prop activity."
Vanessa Oakes, spokeswoman for Lehman Brothers in London, did not comment on replacements for Throsby and McDonald by press time.