An ex-Citadel portfolio manager sets up a new fund. Should you join?

Two high performing equities portfolio managers left Citadel. Both set up their own funds. One is having a better time than the other.

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Bloomberg reported this week that Candlestick Capital, a New York-based fund founded in 2019 by Jack Woodruff, a long short equities fund manager who spent nine years at Citadel focused on consumer stocks, is closing. Candlestick's meagre $2.1bn of capital is being returned to investors before year-end. The 15 people that it brought across from Citadel are presumably leaving, along with its many juniors and researchers, some of whom only joined this year. 

At the same time, though, Bloomberg also reported this week that Ilex Capital, a London-based fund founded in 2023 by ex-Citadel equities traders Jonas Diedrich and Dave Sutton, is thriving. Ilex has raised another $2bn of cash this year and now manages $7bn in total and employs 42 people.

The fate of the two ex-Citadel PMs' funds is a reflection of size and of performance, which begets size. Candlestick had many years of strong double-digit returns, but lost 7% this year through to October. Ilex returned 9% through to November and raised more funds. 

Woodruff didn't respond to a request to comment for this article. In his newsletters to investors, Bloomberg reported that Woodruff would regularly bemoan the war for hedge fund talent and the cost of hiring good people. This might explain why some of his recent recruits were associates who previously occupied comparatively junior jobs in banks.

Ilex, by comparison, appears to be in a virtuous cycle of generating strong returns and hiring good people. While Ilex, too, has recruited numerous junior associates, this year's recruits also include an analyst from ExodusPoint and Seif Labib from Farallon Capital Management (and before that, Citadel). 

Equity long short portfolio managers have been popular this year as high volatility and bubble fears drive demand for discretionary stock pickers.

However, the fate of Candlestick is a reminder that even single strategy funds with a good founder pedigree can't necessarily compete with multistrategy funds that can sign over people and technology costs to investors using the pass through model.  

Jonas Diedrich also didn't respond to a request to comment for this article. Unconfirmed market claims suggest that Ilex's success is partly the result of very strict risk parameters and to intense research into the factors differentiating individual stocks within each sector.

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