There was time not so long ago when the alternative asset managers seemed liked they were poised to compete with Wall Street's top broker dealers. Flush with massive profits and hubris, various private equity firms like KKR and hedge fund-oriented firms like Citadel boldly proclaimed their intentions to start up investment banking operations across the board.

So how have these plans fared? It's fair to say that ambitions have been scaled back. This was starkly illustrated by the news from the Financial Times that Citadel is planning to close its equity research unit and sell its investment bank. Citadel Securities was meant to compete to become a full-on diversified investment bank, advising on deals as well as underwriting securities. "However attempts to build the business were impeded by the departures of several key executives. Rohit D'Souza, who was hired to run the securities trading business in October 2008, left after a year. His replacement, Patrik Edsparr, departed after a shorter period. The bank also saw the heads of other divisions depart."

The hedge fund firm, run by Ken Griffin, apparently does not intend to exit all capital markets BD-like activity, but will focus more on market making and electronic trading. Perhaps an internal dark pool is on the way? The firm made a big splash when it tried to rescue several big name financial firms. Unfortunately, its bid to save E*Trade has not fared well. It has lost a lot of money and recently called for the board to put the company up for auction.

For more:
- here's the FT article

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