Citi Raising Only Outside Money For New CLO Fund

Jul 10 2012 | 11:56am ET

Citigroup hopes to raise as much as $75 million for a new collateralized loan obligation hedge fund—without contributing a dime itself.

Citi's hedge fund unit, Citi Capital Advisors, plans to launch a fund that will invest in the riskier portions of CLOs. The fund will be managed by former Lehman Brothers CLO trader Serhan Secmen.

But while more than a quarter of CCA funds' assets belong to Citi, the bank won't be an investor in Secmen's fund. The bank is trying to replace some of the $5 billion it has in CCA funds with outside capital to come into compliance with the new Volcker rule, which strictly limits the amount that banks can invest in hedge funds.

Citi plans to allow CCA employees to acquire pieces of the business. But Secmen's fund will give Citi a good idea of whether investors are willing to put their money up without the bank doing so.

CCA hopes to raise between $50 million and $75 million for the fund.


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