Citi Hedge Fund Spinoff A Management Give-Away

Dec 21 2012 | 11:08am ET

Citigroup will literally give away most of its hedge fund unit, as it seeks to come into compliance with the Volcker rule.

The bank is giving a 75% stake in Citi Capital Advisors to the division's employees under a plan negotiated by former CEO Vikram Pandit in his final days at Citi. Those employees will not have to pay for it. Pandit, a former hedge fund manager, spent much of his tenure building Citi's alternative investments business, and CCA includes many of his former colleagues from Morgan Stanley and Old Lane Partners.

Citi will retain a 25% stake in CCA, which will manage up to $2.5 billion of the bank's capital, Bloomberg News reports. Citi will also pay CCA's executives to manage its money while it redeems much of it to comply with the Volcker rule, which strictly limits banks' hedge fund investments and bans banks from proprietary trading.

The new company will have about 10 hedge funds with $3.4 billion in assets, and could be worth up to $100 million, according to Grail Partners and SFC Associates.CCA chief Jonathan Dorfman and James O'Brien will continue to lead the spun-off unit, which does not yet have a new name, and will split 24% of the firm between them. The balance will go to other CCA portfolio managers and employees.


In Depth

Malik: The Science of Deal Sourcing 201

Aug 27 2015 | 5:35pm ET

Deal sourcing is understandably a hot topic among private equity firms because it...

Lifestyle

Rolling Art Advisors Marketing Collectible Car Fund As Uncorrelated Alternative

Aug 27 2015 | 6:47pm ET

A new fund is trying to provide investors with greater access to an emerging asset...

Guest Contributor

Agecroft Partners: Hedge Fund Industry Assets to increase $250B by Summer 2016

Aug 11 2015 | 11:29am ET

Assets will continue to flow into the hedge fund industry despite long-standing...

 

Editor's Note