Citi Blocks Hedge Fund Withdrawals

Move is latest black eye for bank's alternative investments
By Jim O'Neill,  Newser Staff
Posted Feb 15, 2008 1:35 PM CST
Citi Blocks Hedge Fund Withdrawals
A Citibank sign is shown on Tuesday, Nov. 27, 2007 in New York. The Abu Dhabi Investment Authority will invest $7.5 billion in Citigroup, offering the nation's largest bank needed capital to offset big losses from mortgages and other investments. (AP Photo/Mark Lennihan)   (Associated Press)

Still struggling with billions of dollars in subprime losses, Citigroup blocked nervous investors from bailing out of a hedge fund specializing in corporate debt, reports the Wall Street Journal. Investors tried to pull more than 30% of $500 million in assets from CSO Partners, which posted an 11% loss last year and was re-funded with $100 million from Citigroup last month.

Citigroup's alternative-investment products make up a relatively small $61.9 billion of Citi’s $2.4 trillion in assets, but they’ve performed poorly. Its Falcon Strategies hedge fund lost 52% in the fourth quarter and recorded a 30% loss for the year. The portfolio last year was under the guidance of Vikram Pandit, who became Citi’s CEO in December. (More Citigroup stories.)

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