Friday, February 15, 2008
Citigroup Hedge Fund CSO Partners Bars Withdrawals
David Enrich, Wall Street Journal, reports that Citigroup Inc. has barred investors in one of its hedge funds from withdrawing their money, another black eye for the financial behemoth's troubled foray into new types of investments. Citigroup suspended redemptions in CSO Partners, a fund specializing in corporate debt, after investors tried to yank more than 30% of the fund's roughly $500 million in assets. To stabilize the fund, which had an 11% loss last year, Citigroup last month injected $100 million. The fund's longtime manager, John Pickett, has left, following a bitter dispute with Citigroup executives and complaints from investors.
More on this from Naked Capitalism. The fund's manager, John Pickett, made the mistake of placing a big order from a single leveraged loan deal right before the market turned sour. Worse, Pickett tried to back out of the buy, claiming the terms were changed on him, but was unsuccessful, leading to the fund's losses. But either way, it was a breach of basic investment protocol to place such a big wager on one transaction.
For the record, the CSO in CSO Partners stands for 'Corporate Special Opportunities'. As they say, when it rains in the Citi, it really pours. :-)
More on this from Naked Capitalism. The fund's manager, John Pickett, made the mistake of placing a big order from a single leveraged loan deal right before the market turned sour. Worse, Pickett tried to back out of the buy, claiming the terms were changed on him, but was unsuccessful, leading to the fund's losses. But either way, it was a breach of basic investment protocol to place such a big wager on one transaction.
For the record, the CSO in CSO Partners stands for 'Corporate Special Opportunities'. As they say, when it rains in the Citi, it really pours. :-)
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