Citigroup puts $800m in hedge funds

Citigroup Incorporated, the third-biggest United States lender, invested about $800m of shareholders money in its own private-equity and hedge funds during the third quarter as regulators seek to curtail the practice.Bloomberg Newsreported on Monday, that the bank invested the money in Citi-advised funds while selling $1.1bn of separate hedge-fund and private-equity assets, New York-based Citigroup said in a November 4 filing.Regulators are drafting the so-called Volcker rule, which aims to restrict banks that accept deposits from making bets with shareholder money.The proposed rule would prohibit the banks from owning more than three per cent of hedge funds and private-equity funds and also from investing more than three per cent of Tier one capital in the funds.The $800m of purchases primarily relate to funding of previously committed investments in Citis private-equity and hedge funds, which are more than offset by divestitures and liquidations, Danielle Romero-Apsilos, a Citigroup spokeswoman, said in an e-mailed statement.We continue to make significant progress toward meeting the requirements of the Volcker Funds portion of the new financial bill.The bank invested in funds managed by the Citi Capital Advisors unit, or CCA, which is run by former Morgan Stanley executives, Mr. Jonathan Dorfman and James OBrien.The division manages private-equity, venture-capital and hedge funds, according to its website. CCAs managers seek to gain from assets including European corporate debt, subprime mortgage bonds and Indian infrastructure while also betting on global trends and emerging-market bonds.CCA manages about $5bn of Citigroups money, a person familiar with the matter said in May. The division also handles money for external clients, a business that will be unaffected by the Volcker rule, which is named for former Federal Reserve Chairman, Mr. Paul Volcker.
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