When will C get it together? Please discuss. — http://www.domainb.com/companies/companies_c/Citigroup/20080612_vikram_pandit.html Citigroup to shut down Vikram Pandit’s hedge fund Old Lane Partners news 12 June 2008 In a move somewhat embarrassing to current Citigroup CEO Vikram Pandit, the financial institution has decided to close down a hedge fund that he had co-founded and was heading when Citigroup acquired it. Citigroup announced today that it would shut down operations in hedge fund Old Lane Partners and expects to take a charge in the second quarter related to the closure. The move comes only 11 months after the New York-based bank acquired the fund for $800 million in July 2007. At that point of time, Pandit had reaped a personal windfall of $165 million. Before the sub-prime crisis hit the markets, many large banks and brokerages saw hedge funds as a lucrative new business. However, as the situation deteriorated, Citigroup was forced to choose between additional fund infusions or shutting it down. That created an awkward situation for the new CEO. Pandit removed himself from the deliberations to avoid the perception of a conflict of interest, it added. Citigroup officials had considered a plan to replenish Old Lane with anywhere from $1 billion to $3 billion of the bank’s own capital, but later decided against it as Citi’s resources were already strained without having to bear this additional pressure. Then, Old Lane CEO Guru Ramakrishnan had reportedly said in a memo that the fund had secured a “substantial” amount of fresh capital. The fund, which has had sluggish returns as global markets skidded due to the credit crisis, will allow investors to cash in their holdings by 31 July. Citigroup said that some of the fund’s investments, including equities and fixed-income products, would be integrated into the bank’s securities and banking division. Citigroup said integrating Old Lane would increase its assets by $9 billion. All former Old Lane partners, including Pandit, will be required to maintain their investments in the funds. At the time of its purchase by Citigroup, Old Lane had amassed about $4.5 billion in assets. Charles Prince, then Citigroup’s CEO, touted the deal as “a unique opportunity to continue our growth in the highly competitive alternative investment area.” Citigroup is not the first major financial institution to take such a step. Bear Stearns Co, Goldman Sachs Groups Inc and UBS AG also have stumbled badly in hedge funds during the credit crunch piling up billions of dollars in losses for themselves or their clients. The problems suggest that hedge funds, typically known for their independence and entrepreneurial spirit, may have trouble thriving within huge financial institutions, a financial journal opined. In order to cope with the sub-prime crisis, the bank has raised over $40 billion of new capital and cut its dividend over 40 per cent. The company scaled down operations in Japan and shut down consumer finance dealings in the country. (See: Citigroup shuts down consumer finance operations in Japan) In early May, Citigroup announced its plan to sell around $400 billion in assets as part of regrouping from the mortgage and credit-market related losses. The company expects that the sale will pare its assets from $2.2 trillion to $1.8 trillion. (See: Citigroup to sell off $400 billion of assets over next three years: CEO Vikram Pandit) The company also said that it would unload some non-core businesses, along with assets in the consumer banking and securities segments. The company in May had further said that it was targeting 9 per cent revenue growth and would cut jobs. Since last year, over 13,200 Citigroup employees have been let go.(See: Citigroup stake sale fetches $4.5 billion; exceeds target by 50 per cent) For the recently closed first quarter, Citigroup reported a loss of more than $5 billion, hurt by heavy write-downs and credit costs on sub-prime related exposures. Meanwhile, some investors have been pushing for a breakup of the bank, saying its mammoth structure is the reason for difficulty in governing it.(See: Citi’s troubles and the future of banking)
Only the rare quality CEO can preside over a shrinking empire. For some reason I don’t think Pandit is the guy who can put his ego aside and do what needs to be done.
He lacks the quality, or perception from other people, of a strong leader to turn the tide, IMO. and now with this shameful Old Lane and the OL CEO who reports to Vikram directly bypassing 2 management levels, Vikram really has lost some credibility even before he started. but then, can’t read a book by its cover.
numi - whats your take? werent you in ER at C?