Article: Market turmoil a test for Citadel; Hedge fund's moves to cash in on crisis encounter hidden risks.(News)

Byline: STEVEN R. STRAHLER

Citadel Investment Group LLC's recent purchases of beaten-down assets in distressed housing and credit markets came straight out of the giant hedge fund's playbook: Pounce on bargains when markets overcorrect.

A knack for spotting such arbitrage opportunities has fueled the $15-billion fund's growth and produced double-digit returns for its investors. But two of three high-profile deals Citadel struck this summer have developed complications that suggest its latest bid to profit from market turmoil is no sure thing.

Chicago-based Citadel, founded in 1990 by CEO Kenneth Griffin, last month nearly doubled its stake in ...

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