Citigroup not Banking on Hedge Funds

Date: Monday, February 18, 2008
Author: Julie Scjderi, Hedgeco.net

HedgeCo.Net (West Palm Beach) - Citigroup has put a halt on investor withdrawls from CSO Partners, a hedge fund specializing in corporate debt.

The decision came about after investors tried to clear out 30% of the fund’s $500 million in total assets. After the fund’s dismal performance last year and the 11% loss in the fourth quarter, Citigroup was forced to put a $100 million shot of adrenaline into it.

The fund’s manager, John Pickett, was forced to leave after disputes with Citigroup regarding some indecision on his part to use half of the fund’s assets to buy leveraged loans tied to a German media company.

Citigroup’s problems don’t end with CSO. In addition to posting a record loss of $9.83 billion in the fourth quarter, other areas of their alternative investment wing havn’t fared well either. Falcon Plus Strategy, another hedge fund run by Citigroup, lost 52% last quarter.

Spokemen for Citigroup blamed Falcon’s performance on shaky, fixed income markets. The hedge fund bet on mortgage-backed and preferred securities, as well made trades involving the relative values of municipal bonds and U.S. Treasuries. Falcon Plus Strategy was started in September 2007.