Citi To Redeem $187 Million From SAC

Jan 24 2013 | 12:28pm ET

Citigroup is dropping SAC Capital Advisors from its hedge fund platform, a move that will cost the embattled hedge fund $187 million.

The word from Citi Private Bank comes as SAC braces for more than $1 billion in expected redemptions next month. The firm is facing legal and regulatory scrutiny for alleged insider-trading; a former portfolio manager, Mathew Martoma, has been charged with illegally earning the firm $276 million, and the Securities and Exchange Commission is preparing a lawsuit against SAC. Firm founder Steven Cohen is thought to be the ultimate target of the probe.

Citi said its decision "should not be construed as a statement on the merits of any outstanding legal proceedings or potential regulatory action."

In a statement to The Wall Street Journal, Citi added, "in the event these legal and regulatory matters are resolved favorably for Mr. Martoma and SAC, Citi Private Bank expects to reconsider admission of SAC's fund to its hedge fund platform."

Citi's decision to pull follows similar moves by fund of hedge funds Titan Advisors and Société Générale's Lyxor Asset Management. Morgan Stanley, which like Citi put SAC on watch last month, continues to monitor the firm.

The $187 billion Citi clients have with SAC represents nearly 10% of the assets invested with its HedgeForum platform.

SAC, which has denied any wrongdoing in the insider-trading investigation, is moving aggressively to limit redemptions and lure new investors, as well as to hold on to staff.

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