Citi Pours $800 Million Into Own Hedge, Private Equity Funds

Nov 7 2011 | 3:04pm ET

Citigroup has poured some $800 million of its own money into its own alternative investment funds, despite impending federal regulations designed to minimize those investments.

Citi said it had invested most of the roughly $800 million in Citi Capital Advisors hedge and private equity funds in the third quarter. The bank did not indicate which CCA funds received the money, and said that some of the money went to "Citi-advised" funds overseen by the bank's Citi Holdings unit.

The investments boost CCA's assets to almost $19 billion, about $5 billion of which is Citi's money. All of the new investments are hard-to-value assets.

Citi was keen to note that, over the same period, it had sold off $1.1 billion in hedge fund and private equity assets, meaning that it continued to move towards compliance with the soon-to-be-enacted Volcker rule, which strictly limits banks' investments in hedge funds and private equity funds.

"The $800 million of purchases primarily relate to funding of previously committed investments in Citi’s private-equity and hedge funds, which are more than offset by divestitures and liquidations," Citi spokeswoman Danielle Romero-Apsilos said. "We continue to make significant progress toward meeting the requirements of the Volcker Funds portion of the new financial bill."

The Volcker rule will also limit how much of any given alternative investment fund a bank can own. Romero-Apsilos said that Citi is "committed to growing our Citi Capital Advisors business as an institutional alternative asset manager of third-party investor capital."

"Citi has a relatively low percentage of Tier 1 Capital deployed to hedge-fund and private-equity investments," Romero-Apsilos said.


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