Citadel is preparing to launch a new programme that will pay external hedge funds for investment insights, broadening its efforts to source trading signals that can be incorporated into its quantitative investment strategies, according to a report by Bloomberg.
The report cites unnamed people familiar with the plans as revealing that the initiative will be housed within the firm’s Global Quantitative Strategies (GQS) division and will focus on gathering investment signals from established discretionary portfolio managers. Participating managers will be compensated for providing actionable trading ideas that can be analysed and potentially integrated into Citadel’s systematic models.
The move reflects growing competition among the industry’s largest multi-strategy firms to secure differentiated sources of market intelligence and identify additional avenues for capital deployment.
In a statement, Navneet Arora, head of Citadel’s GQS business, said the division has long combined quantitative research with discretionary inputs to inform its investment process. Arora has led the unit since 2019 after joining Citadel as a senior quantitative researcher in 2013.
The concept, commonly known as alpha capture, involves collecting and analysing external investment views to generate trading signals. The model was pioneered by hedge fund manager Marshall Wace more than 20 years ago and initially relied heavily on recommendations from sell-side analysts and other market participants. More recently, firms have expanded these programmes to incorporate ideas sourced directly from buy-side investors.
Citadel’s latest initiative represents an evolution of that approach. The firm has operated a sell-side focused alpha-capture platform, known as Alpha League, since 2008. The new programme is expected to extend the concept by tapping hedge fund managers for proprietary insights and market views.
The development comes as major multi-manager firms, including Citadel, Millennium Management and Point72 Asset Management, continue to seek scalable investment opportunities amid strong asset growth and increasing competition. Citadel managed approximately $68bn at the beginning of May, according to information published by the firm.
Performance has remained solid this year. Citadel’s Tactical Trading fund gained 2.3% in May, taking year-to-date returns through the end of the month to 10.8%, according to a person familiar with the results.
