Pandit’s Work Cut Out For Him: CAI Profit Drops 37%

Apr 16 2007 | 8:59am ET

Vikram Pandit cannot work his magic soon enough at Citi Alternative Investments after Citigroup reported an increase in profits and its fastest-growing revenue in three years, no thanks to its alts unit.

Already the smallest of Citi’s four division, CAI posted the worst quarter of the four. Profit from alternative investments fell by 37% to $222 million, a decline blamed on lower revenue from hedge funds. Like that from alts, profit from consumer banking also fell, but only by 17% to $2.63 billion. Meanwhile, profit from investment banking rose almost 36% to $2.62 billion, and that from brokerage and private banking increased 56% to $488 million. All told, profit—excluding an $871 million charge attributed to the bank’s plan to cut 17,000 jobs—rose 4.3% in the first quarter to $5.88 billion.

Citigroup announced on Friday that it had hired Pandit, a former high-ranking Morgan Stanley executive, as the new CEO of CAI, buying his $4.5 billion India-focused hedge fund for as much as $800 million.

The firm’s recruitment of Pandit to head its alternative investments business has been followed by the expected departure of another high-profile hedge fund executive it recruited just 18 months ago.

Dean Barr, head of liquid alternative investments and, since the departure of Tanya Styblo Beder six months ago, the head of Citigroup’s in-house hedge fund Tribeca Global Management, is leaving the firm, the Financial Times reports. Barr, a former chief investment officer at Deutsche Asset Management, ran his own hedge fund, Thunder Bay Capital Management, before Citi came calling.

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