Citadel’s Ken Griffin says playing defense almost always guarantees losses even in turbulent times
Billionaire Ken Griffin , founder and CEO of Citadel, said playing defense is not the best strategy during times of turmoil and volatility, and it almost always backfires on investors. “In finance, when you’re playing defense, you’re almost certainly losing,” Griffin said to Citadel’s new class of summer interns Thursday evening. “There’s no other way to put it. Every time a portfolio manager tells me ‘I’m going on defense,’ I’m waiting to watch the red because that tends to be what happens next.” Griffin, whose hedge fund oversees $66 billion in assets as of June 1, thinks cash would be a better place to hide out than what are often considered “safe trades” in a risk-off environment. “If you are going on defense, just go to cash. Otherwise, you’re just in the ‘safe trades,’ where everyone else has already gone — and the safe trades are often where the losses are,” he said. Investors have been grappling with an extremely turbulent market this year as President Donald Trump’s policies on trade, foreign relations and taxes continue to be unpredictable. Global geopolitical risks have also intensified after Israel’s airstrikes on Iran last week. Conflict between the two nations has stretched into a fourth day . The volatility in oil prices raised new concerns about price pressures , which had just shown signs of easing. The list of worries continue to complicate the Federal Reserve’s direction for interest rates. “We’ve been extraordinarily good over the years at coaching people to be more risk neutral in their behavior. Most humans are risk averse,” Griffin said. “In finance, the closer you are to risk neutral, the more optimal your decision-making is from a profitability perspective.” Citadel’s internship program is highly selective and competitive. More than 108,000 students applied for over 300 positions this year. The firm’s acceptance rate is lower than those of Harvard University and the Massachusetts Institute of Technology . Citadel has been “incredibly successful” at “creating a culture of real risk takers, people who are willing to step up and to occasionally have a bad day, because unless you’re willing to have a bad day, you’re not going to have a great day,” Griffin said.
