Citi Hedge Fund Investors Want Out

Date: Tuesday, May 6, 2008
Author: HFN Daily Report

Almost all of the outside investors in Citi's Old Lane Partners, the hedge fund firm it bought last year, gave notice that they want out, the bank said in a regulatory filing.

Last year, Citi paid $800 million for multi-strategy Old Lane in what many believed was a bid to get its founder Vikram Pandit on board. The fund went into a steady decline after Citi acquired it. Pandit, however, ended up in the top slot at Citi when former Chief Executive Officer Chuck Prince was forced to resign over billions in writedowns.

Citi said that Old Lane was responsible for $202 million of its $5.1 billion first quarter loss this year.

Citi said it was currently evaluating alternatives for restructuring Old Lane.

It appears to be a theme with Citi; that is, getting into hedge fund products just as things are going bad. The bank has made up to a $1 billion commitment to shore up muni arb funds and funds that held asset-backed securities, exactly the kind of strategies that have been hit worst by the credit crunch.