Posts Tagged ‘Citigroup what happens to Old Lane?’

February 24th, 2010

Citi’s Hedge Fund On Sale?

By now, I’m sure everybody has read about Wall Street Journal’s report on the potential sale of a hedge fund business by Citigroup to Skybridge Capital.


According to the WSJ article, last year Citi earmarked $715 billion in non core assets to be “sold, liquidated or wound down”. By end of last year, the amount to be sold had “shrunk” by 23%.


What immediately came to mind was whether Old Lane was on the chopping block as well. Old Lane is a hedge fund firm co-founded by Citigroup CEO Vikram Pandit and CEO-Institutional Clients Group John Havens. When it brought Vikram Pandit on board, Citigroup agreed to purchase purchase 100% of the outstanding partnership interests in Old Lane Partners L.P. At that time, a substantial portion of the purchase price had to be re invested in Old Lane until July 2011.


In 2008, Citigroup purchased all of the assets and redeemed all the interests of its investors including Mr.Pandit, Mr.Havens and Mr. Leach (Chief Risk Officer-Citigroup and investor in Old Lane). Of course, distributions made to these three individuals had to be kept invested in Citi’s Private Bank for the remainder of the period under July 2011.


What is striking is the difference between Mr. Leach and the other two investors in the circumstances which can trigger forfeiture of these funds. In case of Mr. Pandit and Mr. Haven, funds may be withdrawn earlier in the event that the executive dies or his employment with Citi terminates by reason of his disability or without cause or for good reason. However, in the case of Mr. Leach, these funds can be withdrawn upon termination of his employment with Citi for any reason. Any guesses as to why this difference in treatment?


Also, in case of Mr. Pandit and Mr. Havens a substantial portion is subject to forfeiture if the executive’s employment terminates with Citi for cause or reason before July 2011.


July 2011 may be some time away, but preparations might already be underway.


If you are interested, CNBC interviewed Skybridge partner about this potential deal here or you can watch this video.


A word of warning: The part about Citigroup selling its hedge fund comes at about 3.50 minutes into this 7 something minutes long video.


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