West Palm Beach (HedgeCo.Net) – Only one month after Citigroup halted investor redemptions on their CSO hedge fund, they are jolting their Falcon Strategies funds with $500 million. As a result, the $10 billion in assets that the funds oversee will be consolidated and moved onto Citigroup’s balance sheets.

The pressure is now on CEO Vikram Pandit, who is trying to recover from a record $9.83 billion loss in the fourth quarter. His flagship hedge fund, Old Lane Partners, also suffered setbacks in January, dropping 1.8%.

The Falcon Strategies Funds includes five separate hedge funds. In addition to direct investments, each fund invests in second-tier limited liability investment vehicles. Their strategies include utilizing primarily high-grade municipal securities, corporate and financial securities, structured credit, ABS and residential and commercial MBS. The funds declined in value 30% last year alone.

Falcon Plus Strategy, the newest fund in Citigroup’s alternative investments unit that was launched last fall with assets of around $20 million, lost 52% its first quarter.

Spokemen for Citigroup blamed Falcon Plus’ performance on shaky, fixed income markets. The hedge fund bet on mortgage-backed and preferred securities, as well made trades involving the relative values of municipal bonds and U.S. Treasuries.

This is the second time this year that Citigroup has come to the rescue of their internal funds.  After they froze redemptions on CSO, they injected the fund with $100 million, in an effort to prevent liquidation.  

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net]

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