Citigroup suspends hedge fund redemptions

by Gill Montia

Story link: Citigroup suspends hedge fund redemptions

Citigroup, the world’s largest bank, has suspended redemptions in CSO Partners, one of its London-based hedge funds.

In 2007 the fund, which specialises in corporate debt, lost 11%, prompting investors to sell 30% of its $500 million assets.

Last month, the bank injected $100 million into the fund in an attempt to stabilise it, and John Pickett, the fund’s manager has now resigned following accusations of ineptitude by investors.

While hedge funds form a small part of Citigroup’s business, the problems at CSO Partners are a further embarrassment to the bank, which has already lost billions of dollars in investments relating to sub-prime mortgages.

Citigroup and other investment banks began to take hedge fund investment seriously in the early part of this decade, at first buying stakes in existing funds and later starting their own.

The performance by CSO Partners and other Citigroup hedge funds contributed to an 89% decrease in the 2007 fourth-quarter net income of its Alternative-investment unit. This fell to $61 million, from $549 million in the same period of 2006.

The decision to suspend redemptions from CSO has been made to prevent the hedge fund from having to sell assets at huge discounts.