Ken Griffin on the Current Economic Landscape and the Firm’s 2019 Areas of Focus

Ken Griffin, CEO and Founder of Citadel, recently sent our investors a letter summarizing our outlook on the current economic landscape and the firm’s 2019 areas of focus. We want to pass along some key takeaways, including:

• Three of the most significant macroeconomic dynamics we are focused on this year are a constructive resolution to the trade disputes between the US and China and between the US and Europe; a successful agreement between the European Union and the United Kingdom to bring Brexit to a reasonable endgame; and a stabilization of the political and economic uncertainty in Italy.
• We remain focused on having outstanding investment teams, investing in the capabilities that drive our competitive advantage and strengthening our investment processes.

The full letter from Ken is below:

February 25, 2019

Dear Investor,

Last year was a tumultuous year for both financial assets and hedge funds. The broad array of market conditions we experienced in 2018 provided a number of opportunities for us to hone our investment acumen and further sharpen our risk management capabilities.

2018 saw strong economic growth in the United States and in Canada, while growth disappointed in the United Kingdom and in Europe. For 2019, economists, in general, have downgraded their global economic growth forecasts, and fixed income markets are clearly pricing in lower inflation expectations. The shift in tone of the major central banks reflects this consensus.

Three of the most significant macroeconomic dynamics we are focused on this year are a constructive resolution to the trade disputes between the US and China and between the US and Europe; a successful agreement between the European Union and the United Kingdom to bring Brexit to a reasonable endgame; and a stabilization of the political and economic uncertainty in Italy.

We expect to continue to witness heightened volatility in the financial markets this year. The rapidly changing economic landscape and the fast-evolving business landscape across major sectors such as retail, technology and healthcare should provide many opportunities for us to thoughtfully deploy your capital. The rewards of those opportunities will accrue to investors who best understand the direction in which the landscape is evolving, and we are focused on conducting the investment research and analysis required to capture such benefits.

We continue to see alpha generated disproportionately by the strongest firms within each investment strategy. Firms with the greatest capabilities, the deepest expertise and the most disciplined execution continue to generate significant returns, while firms that falter on these dimensions fall further and further behind. Thus, we remain focused on having outstanding investment teams, investing in the capabilities that drive our competitive advantage and strengthening our investment processes. As the war for talent intensifies in competition and consequence, we remain committed to retaining, recruiting and developing the world’s top investment professionals.

I am optimistic about the opportunities that lie ahead in 2019 and our team’s ability to thoughtfully deploy capital in this period of uncertainty. Thank you for the confidence you place in us to manage your capital. We remain dedicated to pursuing performance worthy of that privilege.

Sincerely,

Ken Griffin