Griffin’s Knack for Sniffing Out Trouble Set to Reward Citadel

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A representative for Citadel declined to comment, while a Situational Awareness spokesperson had no immediate comment.

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Citadel approached Situational Awareness Wednesday evening and negotiated with the firm overnight, ultimately signing a contract in less than 24 hours before the market opened Thursday, said one of the people. 

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It was a quintessential Citadel play, and one that Griffin has refined to a science over the decades: see a firm in distress, swoop in fast, snag a great deal. 

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“Citadel isn’t acting as a white knight — it’s making calculated investments,” Schneller said. “Whether you describe that as being a savior or a vulture probably depends on your perspective, but it’s better understood as a sophisticated provider of crisis capital than either.” 

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Griffin has become so well-tuned to these types of transactions that his team often has a routine, according to people familiar with the matter. In past circumstances, he’s assembled a war room filled with some of the most senior executives including Co-Chief Investment Officer Pablo Salame, Chief Operating Officer Gerald Beeson, Chief Legal Officer Shawn Fagan and Perry Vais, who is head of equity quantitative research, said the people. 

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Eventually, Griffin taps a broader operational group at Citadel to clear and settle transactions, examine the cost and manage other logistics, the people said. 

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For investors, having Griffin himself swoop in is useful. Normally, investors will have to pay for the portfolio managers’ compensation, but in a situation where Griffin strikes the deal, investors typically won’t have to pay those expenses, said one of the people.

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Not every Citadel bet has panned out well. In 2021, Citadel and Point72 Asset Management gave Gabe Plotkin a $2.75 billion cash infusion to try to save his Melvin Capital Management from a retail investor-fueled short squeeze. Melvin ultimately collapsed in 2022, returning capital back to investors — though Citadel didn’t lose money on the deal, according to one of the people familiar with the matter.

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At times, Citadel’s prowess has helped it scoop up employees. In 2001, just hours after Enron filed for bankruptcy, Griffin snapped up the energy giant’s quant research team. He’s gone on to recruit teams of traders from distressed firms throwing in the towel: Visium Asset Management, Hutchin Hill Capital and Cumulus.  

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“The talent you want to hire is the talent you want to pull from someone else,” Griffin said in 2016. 

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Other times he’s been able to buy portfolios at discounts. In 2006, he scooped up natural gas positions from Amaranth Advisors, which had lost $6.6 billion and later shuttered. 

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And one year later on a Sunday morning in July, Sowood Capital Management realized its trades were in trouble and it needed to liquidate almost all of its portfolio before the market opened the next day. It reached out to Citadel, Griffin later recalled.

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“We assembled a 50-person team as fast as we could. We flew eight people to Boston to facilitate due diligence and information sharing,” Griffin said, adding that acquiring Sowood’s entire $30 billion portfolio was going to be “a Herculean task.”

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As the late hours hit, a senior point person from a competing buyer called Griffin saying they were going to call it a night and pick things in the morning, to which Griffin responded, “there will be nothing to pick up in the morning.” 

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By 6 a.m., before the market opened, Citadel had snapped up most of Sowood’s assets.

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“They will likely make a lot of money on Situational Awareness,” said J. Dennis Jean-Jacques, founder of hedge fund Ocean Park Investments. “The question is can you be patient while you’re waiting for the fat pitch, and can you going in swinging when the fat pitch comes? Citadel can and does.”

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—With assistance from Nishant Kumar, Katherine Burton and Janet Paskin.

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