Citigroup is adding Old Lane Partners to its string of hedge fund debacles.
Citigroup is adding Old Lane Partners to its string of hedge fund debacles. It plans to close down the hedge fund firm co-founded by the group’s now chief executive, Vikram Pandit, less than a year after its purchase for some USD800m. The firm, which runs a global multistrategy hedge fund and a private equity fund, had total assets under management and private equity commitments totalling some USD4.5bn at the time of the purchase, but this is now reported to have fallen to around USD1.5bn after "substantially all" outside investors withdrew their money in April.
Over the past year the funds have failed to produce decent returns. Old Lane’s hefty price tag raised eyebrows at the time and the premium paid was widely viewed as a recruitment fee for Morgan Stanley alumnus Pandit, who quickly moved up the ranks to become top boss.
Citi will buy what is left of the assets of Old Lane, which was established in 2006; the future of the firm’s current chief executive Guru Ramakrishnan and its 140 employees isn’t clear. The winding up of Old Lane is the latest alternative investment setback for Citi, which is being sued by investors in the Falcon Strategies hedge funds run by Citi Alternative Investments and has halted redemptions from CSO Partners, which invests in leveraged loans, after both strategies suffered heavy losses.
Geoff Grant, who founded the now-defunct Peloton Partners with Ron Beller in 2005, is working on plans for a new fund, LiquidMacro, to launch this September. The once high-flying Peloton was forced to liquidate two funds earlier this year after banks turned off the lending tap and demanded more collateral.
US private equity giant TPG has received a USD2.5bn investment from China’s State Administration of Foreign Exchange. The capital will go into a new TPG fund, which already has USD17bn in commitments
In April, US hedge funds suffered the biggest investor capital outflows in more than six years. Limited partners redeemed USD9.4bn from single managers, although they added USD3.5bn to funds of hedge funds, according to new data compiled by TrimTabs Investment Research and BarclayHedge. In March, hedge funds gained USD22bn.
BNP Paribas finally emerged as the purchaser of Bank of America’s prime brokerage business, which had been up for sale for nearly six months. BNP says the acquisition will help it boost its client base for equity derivatives and accelerate its expansion in the US market. The unit had some 500 hedge fund clients. The deal requires regulatory approval and will be completed later this year.
Blackstone Group has hired Laurence Tosi, who was previously chief operating officer of Merrill Lynch’s global markets and investment banking group, as its finance chief. Michael Puglisi, the current chief financial officer, will remain a senior managing director and will work closely with Tosi.
Some Bear Stearns alumni are on the move. Tudor Investment hired Bear veterans Gregory Hanley and Alan Mintz to build a new distressed debt trading operation that will eventually be spun off. Mitchell Sussman, Eric Friel and Howard Norowitz will accompany the duo to Tudor, which manages USD18bn.
Meanwhile A.J. Mediratta, who headed Bear’s international debt capital markets group, arrived at USD600m Greylock Capital as a senior managing director and member of the investment committee overseeing its flagship Global Opportunity Fund. Andrey Popel, Anthony Bitz and Wei Yeh Sun have also gone to New York-based Greylock.
New York state police is investigating whether Sam Israel, co-founder of the now-defunct Bayou Group, has committed suicide after he failed to appear to begin a 20-year prison sentence this week for defrauding investors of USD400m. A car registered to Israel was found abandoned at the Bear Mountain Bridge in New York with the phrase ‘suicide is painless’ written in dust on the vehicle. Sceptical defrauded investors and police investigators believe Israel may have tried to fake his own death to escape jail.
