Three Banks Post Big Losses In Citi Hedge Fund

May 20 2008 | 11:49am ET

Another pair of banks posted big losses in a Citigroup hedge fund, bringing the total lost by banks to more than $1.6 billion.

Wachovia Corp. said yesterday that it took a $315 million write-down on its investments in the Falcon Strategies fund. The bank had more than $1 billion—or 7%—of its bank-owned employee life insurance portfolio in the Falcon fund.

That revelation comes on the heels of last month’s lawsuit by Cincinnati-based Fifth Third Bancorp, which showed a $612 million investment in Falcon, also from its employee life insurance assets. Fifth Third’s Falcon investment amounted to about one-third of its employee life portfolio; the firm is suing Transamerica Life Insurance Co. and Clark Consulting, the firms that arranged its Falcon investments, charging that they “utterly failed to properly manage and monitor” premiums invested in Falcon. Fifth Third is seeking $323 million in damages. Citi was not named as a defendant in the lawsuit.

A third, regional bank also had a “sizeable” investment in Falcon, The Wall Street Journal reports, although the newspaper did not offer any further details.

The Journal adds that the banks may press Citi to give some of their money back, after the banking giant last month agreed to spend $250 million to cover some of its retail investors’ losses in the Falcon funds.

The Falcon fund is down more than 75%, clobbered by the ongoing credit crisis.


In Depth

Bob Doll's Ten Market Predictions For 2016

Jan 7 2016 | 9:37pm ET

Well-known market strategist Robert Doll has published his annual list of ten predictions...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedge Fund Marketing - Making the Most of Your Salesperson

Jan 20 2016 | 8:11pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth takes a close...