Monday, 28 July 2014
Last updated 8 hours ago
Jun 12 2008 | 2:00am ET
Citigroup is closing Old Lane Partners, the hedge fund founded by CEO Vikram Pandit, after almost all of its outside investors elected to withdraw their money.
The troubled Wall Street giant, which paid more than $800 million for Old Lane less than a year ago, had considered a billion-dollar infusion to keep the hedge fund afloat. But Citi decided against pouring as much as $3 billion into Old Lane because its resources have been dangerously strained by almost $15 billion in losses over the past two quarters, The Wall Street Journal reports.
Instead, Citi will shutter the hedge fund and buy its remaining assets, another black eye for the bank and Pandit, who founded Old Lane in 2006 and was named CEO of Citi in December. The bank will liquidate most of Old Lane’s portfolios, while others will be transferred to Citi’s investment banking division or run as small, narrowly-focused funds within Citi Alternative Investments. The closure of Old Lane is expected to lead to a second-quarter charge for Citigroup, on top of the $202 million write-down it took in the first quarter.
The Journal reports that many of Old Lane’s approximately 130 employees will be given new roles within Citigroup, while others will be laid off. The future of Old Lane co-founder Guru Ramakrishnan, a close colleague of Pandit’s from their Morgan Stanley days and the current CEO of Old Lane, is unclear.
Old Lane managed about $4.5 billion when Citi acquired it in July 2007. But the departures of Pandit and other top Old Lane executives to new jobs within Citi—Old Lane co-founder John Havens now heads Citi’s institutional clients group—triggered early withdrawal provisions, with “substantially all” of Old Lane’s outside investors took advantage of. Following the redemptions, Old Lane was managing less than $2 billion, all of it belonging to Citi and Old Lane’s founders and employees.
Pandit, who recused himself from the decision about what to do with Old Lane, has about $100 million—of the $165 million he pocketed in the firm’s sale to Citi—in the fund, which will be moved to other Citi investment vehicles.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…