Former portfolio managers from Citadel are attracting increasing amounts of capital from some of the hedge fund industry’s largest multi-manager firms, highlighting the growing importance of external investment programmes, according to a report by Business Insider.
The reports cites industry data, regulatory filings, and market reports, as showing that at least a dozen hedge funds founded by former Citadel investment professionals have secured backing from established multi-strategy managers. Investors include firms such as Millennium Management, Schonfeld Strategic Advisors, Verition Fund Management, and Qube Research & Technologies.
The trend reflects a broader shift within the hedge fund industry, where leading firms are increasingly allocating capital to externally managed portfolios and separately managed accounts (SMAs) in an effort to diversify sources of alpha while maintaining strict risk controls.
Many of the firms established by former Citadel portfolio managers employ market-neutral equity strategies, seeking to generate returns while limiting exposure to broader market movements. These strategies remain in strong demand among institutional investors, with market-neutral equity funds continuing to attract substantial inflows.
Millennium has been among the most active allocators to externally managed funds. The firm previously backed Kodai Capital, founded by former Citadel portfolio manager Neville Shah, before the fund returned capital to investors in 2025. Shah has since joined Millennium as an internal portfolio manager.
Millennium also previously allocated capital to Meridiem Capital, founded by former Citadel investor Khalid Malik, although that investment has since been redeemed. Schonfeld remains an investor in the fund.
Elsewhere, Izzy Englander is reported to be supporting the launch of Hong Kong-based quantitative hedge fund Third Epsilon, established by former Citadel quantitative portfolio manager Paul Dou following his departure from Citadel in 2024.
Not all external investment arrangements follow the same structure. While some emerging managers are launched primarily with capital provided through separately managed accounts from large hedge fund platforms, others use these allocations to complement more traditional commingled fund structures.
One example is London-based FIFTHDELTA, founded by former Citadel portfolio managers Niall O’Keefe and Tio Charbaghi. The firm has received SMA capital from investors including Squarepoint Capital and Walleye Capital, with the capital reportedly invested on the same terms as its commingled fund investors.
