Hedge fund hiring wars: Marshall Wace vs. Citadel edition

If you thought hedge funds were cute places paying tens of millions while everyone pats one another on the back, we regret to inform you that this is not always so. And if you still need persuading, we would like to refer you to the recent court filings of Citadel and Marshall Wace. 

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The two funds are locked in a battle over Marshall Wace's recruitment of Citadel's Daniel Shatz, whom Marshall Wace says was a "top credit portfolio manager" at its rival. Shatz left Citadel in 2023. He joined Marshall Wace 15 months later after a period of gardening leave, and he is now Marshall Wace's global head of credit. Citadel says Shatz violated his employment agreements and stole secret recruitment information, and the situation between his current and former employers has been fraught ever since.

For its part, Marshall Wace seems to hold a very great dislike for Citadel.  In its court filing, Marshall Wace describes Ken Griffin's firm as a "behemoth" that it says is "well known for its aggressive tactics" when recruiting. Marshall Wace claims that Citadel "has been accused of engaging in bullying and intimidation" [it does not say by whom] when it "does not get its own way" while it's hiring. Marshall Wace also says that Citadel is only "lashing out" now because one of its employees chose to join a competitor and scornfully suggests that: "Apparently, Citadel, lulled into competitive complacency and believing that they can simply buy talent by writing the biggest check, does not react well when forced to engage in healthy competition." 

Citadel is less vituperative. It accuses Shatz of “shamelessly violating” its employment agreements. And Citadel feels wronged after paying "tens of millions" to Shatz, only for him to allegedly misappropriate Citadel’s "highly confidential and proprietary information under false pretenses," and then (allegedly) hire his Citadel friend Joshua Lercher in violation of his contract.

Shatz and Marshall Wace deny all of this. Shatz says Citadel owes him "significant eight figure deferred compensation" and claims to have been "retaliated against by Citadel for complaining about potential securities violations." Citadel says it doesn't owe Shatz anything at all because of his unlawful conduct. 

Citadel now wants to see the messages between Shatz and Lercher to unearth the truth of the matter. It also wants information from Nicholas Nielsen, Marshall Wace's quant trading head who worked for Citadel in the past, and who it says recruited Shatz. But Marshall Wace says it's already provided 2,400 pages of documents in response to a former Citadel request and that it would be both "unduly burdensome" and a breach of privacy to ask Shatz and Lercher to dredge up personal messages. Marshall Wace says Nielsen has nothing to do with Citadel, other than working there 15 years ago. And so it goes on. 

Underpinning the entire dispute is the vicious competition for top hedge fund talent. Recruitment itself has become a top secret exercise. On one hand, Citadel insists Shatz stole its "confidential and proprietary hiring and recruiting information," including its recruiting lists, scorecards for evaluating candidates and confidential roadmaps for building a credit business. On the other, Marshall Wace says it can't possibly share critical messages between Shatz and Lercher with Citadel because doing so would give away its very own "sensitive personnel information" and might then enable Citadel to hire Lercher back again or maybe even "unfairly gain a competitive advantage in the marketplace for talent." Citadel says it has no interest in or need for this kind of information from Marshall Wace and that it simply wants materials showing whether Shatz breached his employment contract.

Either way, Marshall Wace doesn't appear to have any regrets about its self-described ability to "lure Shatz away from Citadel." And even though Citadel claims that Shatz "mislead Marshall Wace about his experience and qualifications," Marshall Wace seems to like him. Marshall Wace says that if Shatz and Lercher were simultaneously absent from its credit desk while testifying to the arbitration panel, it would cause all sorts of problems and require "advanced planning" to avoid trouble. Citadel might argue this is just an excuse.

The case is unpleasant. But maybe this is what happens when, as Marshall Wace says, two funds "recruit from the same small pool of highly accomplished financial professionals in the New York City market." 

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