Keep pulling the thread on Ken Griffin.
Under CEO Nir Bar Dea, Bridgewater is shifting its strategy to become a smaller, more focused hedge fund aiming for higher performance, a change from its previous model of being a large, stable institution.
Institutional investors who bought stakes in Bridgewater's management company are reportedly disappointed with the firm's new strategy, as they preferred the steady stream of management fees from a large asset pool over more volatile performance fees from a smaller one.
Two of Bridgewater's seven institutional owners have sold their shares in the management company back to the firm at a discount to their original purchase price.
The Teacher Retirement System of Texas is seeking to sell its stake in Bridgewater's management company and slashed the value of its holding by 9% last year.
Matt Levine's view is that large multi-strategy hedge funds, such as Citadel, operate more like investment banks from 20 years ago by providing liquidity and other market services, rather than acting purely as investment firms.
Ken Griffin's strategy for Citadel was founded on achieving a high "quality of earnings" through repeatable, liquidity-provision trades like convertible arbitrage, a business model previously dominated by banks.
Ken Griffin's business model for Citadel focuses on generating recurring earnings every quarter, which is a different approach from hedge fund managers like Warren Buffett or George Soros who are known for making large, directional bets.
Citadel is known for being a difficult place to work with high employee turnover, with one source in a New Yorker article describing it as a "highway wreck of human bodies."
Citadel's business model requires constantly recreating investment portfolios as trading signals decay, which drives the firm's high rate of employee turnover.
As part of its strategic shift, Bridgewater has returned capital to investors because its leadership believes the firm no longer has the capacity to effectively manage its previous large asset base.
Bridgewater employees appear to support the firm's strategic reset, as all but four current and former staffers declined a recent offer to sell their shares back to the company.
Bill Ackman's publicly traded management company, Pershing Square, is structured to give public shareholders a preferred return on the first portion of performance fees, creating a more stable, management-fee-like income stream.