Why Citadel's longest-running equities unit is focused on shorting stocks

• Justin Lubell, Citadel's Global Equities head, said shorting has been a large driver of returns.
• There's little title successful nan abstraction compared to going agelong connected stocks, he said.
• Anthony Bozza, nan laminitis of Lakewood Capital, called those who cognize who to short stocks a "dying breed."

While immoderate large bets against circumstantial stocks person blown up successful hedge funds' faces successful caller years, there's still a attraction connected shorting astatine Citadel's longest-running equities unit.

Citadel Global Equities, which started successful 2001 for Ken Griffin's $64 cardinal firm, has mostly made much successful its short book compared to its longs successful caller years, according to comments from nan unit's head, Justin Lubell. Lubell said astatine past week's Robin Hood Investors Conference successful New York, and Business Insider reviewed a summary of his comments from personification successful attendance.

Lubell appeared connected a sheet pinch Atreides Management laminitis Gavin Baker and Lakewood Capital laminitis Anthony Bozza. The moderator was billionaire Maverick Capital laminitis Lee Ainslie.

Lubell, who has tally Global Equities since 2020 aft much than a decade astatine Steve Cohen's Point72, said there's overmuch little title connected nan short side. Plenty of managers attraction connected bully agelong ideas, he said, but not astir arsenic galore put nan aforesaid clip and resources into nan short broadside of nan book.

Focusing connected nan short book and seeking retired companies to stake against helps investors connected his squad upwind volatility and lets their thought play retired complete a longer duration, Lubell said.

Some hedge costs person abandoned single-stock shorts, alternatively hedging their portfolios pinch bets against an scale of nan marketplace aliases a handbasket of stocks. There was a reluctance to target circumstantial stocks from immoderate areas of nan manufacture aft ample bets against video-game retailer GameStop led to nan implosion of Gabe Plotkin's Melvin Capital.

Even investors known for bold short bets person moved distant from nan practice. For instance, Pershing Square's Bill Ackman "permanently retired" from activistic short selling in 2022. At nan extremity of September, he had 13 agelong positions and nary shorts successful his portfolio, according to nan publically traded spot that mimics his hedge fund's holdings.

For these reasons, Bozza, who founded Lakewood successful 2007, said that those who cognize really to short stocks are becoming a "dying breed," moreover though it's easier to find a bully short thought than a bully agelong idea.

Bozza said it's uncommon to find an undervalued institution successful nan nationalist markets, but an overvalued institution does not person nan aforesaid scrutiny.