NEW YORK Feb 15 Citigroup Inc. (C.N) has
suspended investor withdrawals from a $500 million credit hedge
fund to give it a chance to "stabilize," a bank spokesman said
The London-based fund, called CSO Partners, was facing
investor redemptions after a 10 percent loss in November,
prompting its manager John Pickett to resign, according to
Citigroup spokesman Jon Diat.
The fund was up 27 percent since inception in August 2004
to Dec. 31, 2007.
"We have temporarily suspended redemptions of all shares of
CSO to stabilize the fund and allow time to address its funding
needs to meet anticipated obligations," said Diat in a
It is not unusual for hedge fund managers to suspend
redemptions on funds in distress. Investment documents
typically give the manager the right to put up temporary
"gates" barring investor exits so managers don't have to
undertake a fire sale of assets to pay exiting investors.
In addition to suspending investor exits, Citigroup told
investors it put $100 million into the fund in recent weeks and
is looking for other funding sources.
"If they are invested in illiquid assets, chances are they
cannot get out an equivalent amount of money investors are
demanding without materially damaging the portfolio," said
Ferenc Sanderson, senior hedge fund analyst for Lipper Inc., a
unit of Reuters Group Plc.
Sanderson said the fact that it is happening in a fund
managed by one of the world's largest banks means that "even
having a big name and a big brand doesn't leave investors
immune to potential issues when they try to redeem."
News of the fund was reported Friday by the Wall Street
Citigroup was trading down 34 cents, or 1.3 percent, to
$25.40 on the New York Stock Exchange.
(Reporting by Dane Hamilton, editing by Dave Zimmerman)