New Hedge Fund King Griffin: US Unlikely to Avoid Recession Next Year, Optimistic About China

Citadel's founder and CEO, Ken Griffin, who was just promoted to "Hedge Fund King" last year, said in a media interview that the United States is unlikely to avoid an economic recession in 2024 and that caution is needed for 2024. Griffin expects the Fed to raise interest rates once again this year and then pause for a considerable period of time.

Griffin believes that opportunities will come from the credit market. "We will see the credit market as a source of opportunity. The credit market should be a meaningful contributor to performance later this year." Griffin revealed that Citadel is particularly focused on high-yield products in the credit market and uses long-short trading strategies.

On Wednesday, the Fed's June meeting paused interest rate hikes as expected, but hinted at two more hikes, which was more hawkish than the market expected. The Fed also expects the US economy to not decline this year.

Griffin is quite optimistic about China and expects the country's economic growth to exceed 5% this year. Griffin said that he is interested in the Chinese market in the long run. "Regardless of who the next US president is, I don't think this will change Citadel's strategy in China. The size and scope of the Chinese stock market are very attractive to our investors."

Citadel is currently applying for a Qualified Foreign Institutional Investor (QFII) license in China, which allows international investors to participate in mainland China's securities trading. Citadel's subsidiary, Citadel Securities LLC, was granted the license in February of this year.

Citadel has been actively expanding in the Asia-Pacific region and has nearly 200 employees in the region. Citadel Securities has over 250 employees. Hong Kong is the largest office location for Citadel and Citadel Securities in the Asia-Pacific region, with over 100 employees each. Last year, Citadel expanded its team in Hong Kong and added additional office space.

An earlier article from Wall Street News mentioned that Ken Griffin also believes that participating in the Japanese market is exciting now. Japan's economy has shown signs of "emerging from deflation," and Japanese companies are becoming more focused on benefiting shareholders and gradually expanding their global business. Citadel will reopen its Tokyo office this year.

Griffin also talked extensively about the popular artificial intelligence this year. He said that generative artificial intelligence is changing finance and can improve the productivity of investment professionals and software engineers. For the new round of innovation, people need to receive training to cope with the adverse effects on the job market.

Griffin said it's incredible how fascinated people are with generative artificial intelligence. Historically, technological innovation has created more job opportunities. The problem now is how these technologies will disproportionately affect certain economic sectors and types of jobs. Within Citadel, the company will use generative AI to help software developers improve their work efficiency, and employees also use Microsoft Copilot to increase productivity. Citadel is negotiating the use of OpenAI's ChatGPT enterprise license.

However, due to Citadel's long-standing position at the forefront of automation and technological progress, Griffin said that the current generation of large language models has not yet had a meaningful impact on Citadel's trading strategies.

According to anonymous sources, as of the end of May this year, Citadel's flagship Wellington Fund had a return rate of 6.1%. Citadel's stock, fixed income, macro, commodities, quantitative, and credit strategy business lines all achieved positive returns last month. Citadel's stock funds rose 7.3% in the first five months of this year, with a return rate of 1.2% in May. Tactical trading funds rose 7.1% in the first five months of this year, and global fixed income funds rose 3% in the first five months.