Citi CEO to Shut Failing Hedge Fund He Founded

Tom Burroughes

13 June 2008

Citi chief executive officer Vikram Pandit plans to shut down Old Lane Partners, the hedge-fund group he co-founded and sold to the bank last year for more than $800 million, according to media reports.

Citi will purchase most of Old Lane's assets, and clients can start withdrawing their investments from 31 July, the New York-based bank said in a statement. The wind-down is at least the fourth failure for Citigroup's hedge-fund management unit this year.

The banking group has booked more than $40 billion of credit losses and write-downs since the sub-prime mortgage market collapsed last year. Mr Pandit, who took over as chief executive in December last year, outlined plans last month for the company to sell $400 billion of assets. More than a dozen hedge funds have closed, needed cash infusions or been liquidated this year. Peloton Partners folded in March after wrong-way bets on mortgage securities.

Taking on Old Lane's holdings will increase Citi's assets by about $9 billion in the second quarter, the company said. Citigroup's Tier 1 capital ratio, a key measure of its financial strength, would have dropped to 7.7 per cent from 7.74 per cent as of 31 March had those assets been included at the time, the bank said.