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Citi Plans To Restructure Old Lane
Hedge fund was acquired by Citi last year.
June 12, 2008
As investors continue to redeem shares, Citigroup is restructuring its hedge fund Old Lane Partners and its multi-strategy hedge fund in hopes of retaining talent and creating synergies among the company’s trading platforms.
The hedge fund, which was co-founded by Citi chief executive Vikram Pandit, was acquired by Citi less than a year ago for $800 million. Pandit made $165 million on the deal. A Citi spokesman did not return calls by press time.
In the first quarter of 2008, following the promotion of key Old Lane executives to other positions at Citi, Old Lane notified investors in its multi-strategy hedge fund that they would have the opportunity to redeem their investments in the fund, without restriction, effective July 31, 2008, a press release states.
As part of the plan, Old Lane strategies, convertible equities, credit fixed income and structured credits will be integrated into the proprietary activities of Citi’s securities and banking business. The three strategies will be managed from a single platform.
Old Lane will start a number of single-strategy funds with future offerings designed to meet client demands as part of the Citi Alternative Investments client platform.
Citi will purchase substantially all of the assets of the multi-strategy hedge fund.
“These steps will maximize the synergies and talent that are housed within Old Lane and are consistent with Citi’s continuing effort to optimize resources, both within the institutional clients group and across Citi,” said Ned Kelly, president and CEO of CAI. “As such, our hedge fund offerings are important to our success and we must focus our resources and shape our organization accordingly.”
“All investors in the fund--third parties, Old Lane employees, Citi senior management and Citi proprietary investments--will be treated consistently during the unwind process,” he added.
In February, Citigroup was having troubles with its hedge fund business, including the flagship hedge fund, which was losing investors. As the fund continued to struggle, Pandit was not part of discussions to close the fund or pour money into it.
Citi officials were considering a plan to pump $1 billion to $3 billion of the bank’s own capital into the fund, according to the Wall Street Journal. Last month, Old Lane CEO Guru Ramakrishnan assured trading partners and lenders in a memo that the fund had secured a “substantial ” amount of fresh capital, according to people who saw the document.
However, given the credit crisis, Citi decided that an infusion on money from the bank was not possible. In the first quarter 2008, Citigroup devalued Old Lane by $202 million.
Pandit previously worked for Morgan Stanley and left in 2005. He co-founded Old Lane with some of his former colleagues, including John Havens and Ramakrishnan. Then, after he sold Old Lane to Citi for about $800 million in July 2007, Pandit joined the bank as head of alternative investments. Not long after, he was CEO.
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