Citi Restructures Hedge Fund

Citigroup announced its intention to restructure Old Lane and its multi strategy hedge fund, a decision reached in anticipation of redemptions by all unaffiliated, non Citi employee investors. The restructuring is designed to meet Citi's objective to retain talent and

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Citigroup announced its intention to restructure Old Lane and its multi-strategy hedge fund, a decision reached in anticipation of redemptions by all unaffiliated, non-Citi employee investors. The restructuring is designed to meet Citi’s objective to retain talent and create synergies among the company’s trading platforms.

In the first quarter of 2008, following the promotion of key Old Lane executives to other positions at Citi, Old Lane notified investors in its multi-strategy hedge fund that they would have the opportunity to redeem their investments in the fund, without restriction, effective 31 July 2008.

As part of the restructuring, certain Old Lane strategies, convertible equities, credit fixed income, and structured credits will be integrated into the proprietary activities of Citi’s Securities and Banking business. These three particular strategies complement the existing scale and expertise within Citi’s Securities and Banking franchise and will be managed from a single platform. Old Lane will establish a number of single-strategy funds with future offerings designed to meet client demand as part of the Citi Alternative Investments (CAI) client platform.

Citi will purchase substantially all of the assets of the multi-strategy hedge fund at fair value, subject to independent third party validation, which will enable Old Lane to facilitate client redemptions at 31 July.

“These steps will maximize the synergies and talent that are housed within Old Lane and are consistent with Citi’s continuing effort to optimise resources, both within the Institutional Clients Group (ICG) and across Citi. As such, our hedge fund offerings are important to our success and we must focus our resources and shape our organisation accordingly,” says Ned Kelly, president and CEO, CAI.

All former Old Lane individual partners, including Vikram Pandit and other senior Citi executives will, as contemplated by the original Old Lane transaction agreements, be required to maintain their investments in Old Lane funds or other designated CAI funds.

“All investors in the fund third parties, Old Lane employees, Citi senior management and Citi proprietary investments will be treated consistently during the unwind process,” adds Kelly.

The estimated second quarter 2008 financial impact from Old Lane’s restructuring is an increase in Citi’s GAAP assets of approximately $9 billion. In addition, on a pro forma basis, the Company’s 31 March 2008, Tier 1 capital ratio of 7.74% would have declined by approximately four basis points, to approximately 7.70%.

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