NEW YORK (Reuters) - In a blow to Citigroup Inc (C.N) Chief Executive Vikram Pandit, the bank plans to close a hedge fund he co-founded and will buy what is left of its assets, The Wall Street Journal reported on Thursday.
Last month, Citi said it was looking at restructuring Old Lane. Nearly all investors unaffiliated with the fund had requested to redeem their money from the fund, Citi said in a regulatory filing at the time.
Citi bought Old Lane last year for more than $600 million, but the fund’s performance has since been disappointing. Citi wrote down $200 million of intangible assets linked to the acquisition in the first quarter.
“We are in the process of restructuring Old Lane,” Citigroup spokesman Jon Diat told the Journal. “Its business and its people continue to be valuable to us. We are confident that we can realize that value over time.”
Pandit personally reaped at least $165 million when Citigroup bought Old Lane, at which time it had amassed about $4.5 billion of assets.
A spokesman for Citigroup could not immediately be reached for comment on the newspaper report.
Citigroup officials had considered a plan to replenish Old Lane with anywhere from $1 billion to $3 billion of the bank’s own capital, according to the Journal.
It reported that Old Lane CEO Guru Ramakrishnan said in a memo last month that the fund had secured a “substantial” amount of fresh capital, according to people who saw the document.
Citigroup has reported losses of nearly $15 billion for the past two quarters, forcing it to cut jobs and sell businesses. It has raised about $39 billion in capital since last November.
The bank is expected to take a charge in the second quarter related to the closure of Old Lane, the Journal said, adding that in the first quarter it wrote down the value of Old Lane by $202 million to reflect investor departures from the hedge fund. (Reporting by Christopher Kaufman; Editing by Kim Coghill and Erica Billingham)