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Citadel looks to credit bets as US recession looms

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The prospect of the US economy going into recession later this year, has prompted Citadel boss Ken Griffin, whose firm racked up a record $16 billion return for clients last year, to increase his focus on credit trading, according to a report by Bloomberg.

In an interview in Hong Kong, Griffin reportedly said that his hedge fund is particularly focused on the high-yield credit market, with a mix of long and short strategies. “We’ll look at the credit markets as a source of opportunity,” he said. “Credit should be a meaningful contributor later this year, and next for Citadel.”

The Federal Reserve paused its programme of interest rate hikes for the first time in 15 months this week following a slowdown in US inflation in May, although Griffin is expecting one further increase before an extended pause. 

According to Bloomberg Economics, the current baseline is for a US recession to start in the third quarter of this year, while a Bloomberg survey of analysts puts the probability of one occurring within the next 12 months at 65%.

According to unnamed Bloomberg sources, Citadel’s flagship Wellington fund is up 6.1% so far this year, while the firm’s equities, fixed income & macro, commodities, quant, and credit strategies all delivered positive returns last month.

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