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UPDATE 2-Citadel to close Aptigon stock unit; Felder leaves -sources

Svea Herbst-Bayliss

(Adds background on move, details)

BOSTON, March 7 (Reuters) - Citadel, one of the world's biggest hedge funds, on Thursday told investors and employees that it plans to shut down its Aptigon Capital equities unit two years after launching it.

Citadel, which oversees $29 billion in assets, said it was parting ways with the unit's chief, Eric Felder.

Previously a senior managing director, Felder had been in charge at Aptigon for only a year, having been tapped to run the business after his predecessor, Richard Schimel, was fired.

Exactly a year ago, Citadel cut roughly one-third of Aptigon's staff, adding to uncertainty at the unit. Over the following months a number of employees, including a trader and portfolio manager, who had survived the layoffs, moved to other hedge funds.

A Citadel spokesman declined to comment.

Citadel said it plans to move Aptigon's best-performing equity portfolio managers and their teams to its other three equities businesses, Citadel Global Equities, Surveyor Capital and Ashler Capital.

Some people will lose their jobs but it was not immediately clear how many positions will be eliminated, the sources said.

Aptigon managed money for Citadel's main multi-strategy Kensington and Wellington funds, which returned 4.55 percent in the first two months of 2019 and were up 9.1 percent last year.

Two years ago Citadel hired Schimel, who had run hedge funds Diamondback Capital and Sterling Ridge, to run the new unit in a move that illustrated Citadel's commitment to a sector where it had been expanding dramatically.

At the time, Citadel spent millions of dollars to lure portfolio managers from prominent firms to Aptigon. The firm's founder, Ken Griffin, signed off on all of the hires, including about 17 portfolio managers who came from rival Visium Asset Management, which was shutting down.

By the time of last year's Aptigon firings, Citadel management was unhappy with performance. But some sources who worked at Aptigon said they had had little time to put money to work and described the layoffs as a surprise.

(Reporting by Svea Herbst-Bayliss Editing by Chizu Nomiyama and Dan Grebler)