Citadel Group Enters Investment Banking

Citadel Group

, the giant Chicago-based hedge fund, announced the launch of its investment banking division Friday.

The firm said in a press release it had hired three senior investment bankers from

Bank of America

(BAC) - Get Report

. The trio, led by Todd Kaplan, joined BofA as part of the bank's much-maligned acquisition of

Merrill Lynch

at the start of the year.

Citadel had already established businesses not traditionally associated with hedge funds, such as acting as an intermediary on securities trades.

Citadel's main asset management business lost 55% last year, but has rebounded this year and is up 11% through April 24, according to

The Wall Street Journal

. That 2009 performance handily beat the

S&P 500

index, which has lost ground during that time frame.

Citadel , whose plans to go public were cut short by the credit crisis, enters an investment banking business that has changed dramatically in the past year. Industry heavyweights

Goldman Sachs

(GS) - Get Report

and

Morgan Stanley

(MS) - Get Report

are now bank holding companies regulated by the

Federal Reserve

, while other established players like

Bear Stearns

,

Lehman Brothers

and Merrill went bankrupt or were acquired. Smaller players like

Lazard

(LAZ) - Get Report

,

Evercore Partners

(EVR) - Get Report

and

Greenhill & Co.

(GHL) - Get Report

are trying to fill the vacuum, with mixed results so far.