Citadel CEO says 60/40 portfolio more attractive after yields spike (updated)

Citadel Income Fund

28/09/2022 21:53

(Adds details on Griffin's views on U.S. economy, adds
background on Bank of England)
    By Carolina Mandl and Davide Barbuscia
       NEW YORK, Sept 28 (Reuters) - Recent increases in U.S.
Treasury yields are likely to improve the attractiveness of
investment strategies such as the 60/40 portfolio, said Ken
Griffin, the billionaire founder of Citadel Securities, one of
the world's biggest market-making firms.
    "The 60/40 portfolio is much better today than at any point
in recent time," he told an investment conference in New York on
Wednesday, referring to the common investment strategy, which
splits allocations between stocks and bonds on a 60%/40% basis
to mitigate risk. 
    The strategy has been badly hit this year amid declines in
prices for both stocks and bonds. However, yields on the
benchmark 10-year Treasury, which move inversely to prices,
topped 4% on Wednesday, hitting a 12-year high. 
    "Right now, that's a much more compelling value proposition
than it was back then at 1% yield," Griffin said.
    With the Fed furiously raising rates to stave off the worst
inflation in decades, Griffin believes a recession is likely
next year. 
    "There will be one. It's just a question of when and how
hard," he said.
    Griffin's Citadel manages more than $50 billion in assets. 
    He believes that volatility in UK assets is unlikely to
spill over into other markets, after sterling tumbled to record
lows and British bond prices slid on Wednesday following
announcements of unfunded tax cuts, forcing the Bank of England
to intervene in the fixed income market.  urn:newsml:reuters.com:*:nL1N30Z1EO 
    Griffin said he was worried about the loss of confidence in
Britain. "It represents the first time we've seen a major
developed market, in a very long time, lose confidence from
investors." 
    He said U.S. equity valuations remain comparatively high,
despite a sell-off that has thrown the S&P 500  .SPX  into a
bear market this year. 
    Griffin, whose fortune is estimated at around $27 billion
according to Forbes, announced in June he was moving Citadel's
global headquarters to Miami due to concerns about rising crime
rates in Chicago.  urn:newsml:reuters.com:*:nL1N2YA1OD
    "Crime is just out of control on the streets (of Chicago),"
he said at Wednesday's conference.
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Britain's market rout stokes contagion fears around the globe   
 urn:newsml:reuters.com:*:nL1N30Z1EO
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 (Reporting by Carolina Mandl and Davide Barbuscia in New York
Editing by Ira Iosebashvili and Matthew Lewis)
 ((carolina.mandl@thomsonreuters.com; +1 (917) 891-4931;))