Citigroup (C) Liquidates Fund That Fell 53% In Only A Month

The Financial Times reported that Citigroup (NYSE: C) liquidated a hedge fund that fell an astonishing 53% in a month. Citigroup is liquidating its Corporate Special Opportunities hedge fund after it lost 53% of its value last month, marking the ninth time in recent months that the bank has had to close or rescue a fund in its alternative investment unit.

The Corporate Special Opportunities fund managed almost $4.2 billion at its peak, has a net asset value of about $58 million and debt of about $880 million, FT said. People familiar with the matter told the FT that investors in the fund are likely to receive no more than 10 cents on the dollar.

This Citi fund failed even though Citi supplied it with $450 million in credit lines and equity infusions of about $320 million. Citi also bought assets with a notional value of $1 billion that it placed in the fund.

The fund mainly invested in debt backing European private equity deals. The sad thing about this situation is investors have not been allowed to withdraw their money for about a year as performance deteriorated. The losses from this fund could end up costing Citigroup hundreds of millions of dollars.

Citigroup Inc. (Citigroup) is a diversified global financial services holding company whose businesses provide a range of financial services to consumer and corporate customers.
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