Citigroup buys Indian hedge fund: WSJ

[Andy Nguyen]

SAN FRANCISCO (MarketWatch) -- Citigroup Inc. is buying Old Lane LP, an Indian hedge fund opened just 13 months ago by Vikram Pandit and a cohort of Morgan Stanley colleagues, in a deal that could be worth $800 million and result in Pandit being hired to head Citigroup's alternative-investments division, putting him in the running to become chief executive of the world's biggest bank, according to a media report Friday..

The deal is likely to be unveiled ahead of Citigroup's annual meeting Tuesday, the Wall Street Journal reported in its online edition, citing unnamed people familiar with the negotiations. Although Citigroup could pay more than $800 million for Old Lane, it's possible that the announced price will be lower, with the total raised by future payments based on the fund's performance, The Journal said. Old Lane employs some 125 traders, bankers and strategists, The Journal said, adding that in the 12 months through February, Old Lane's investments have returned 6.9%, according to a person who has seen materials Old Lane sent to investors.

At Citigroup Alternative Investments, Mr. Pandit will inherit a business that has been leaderless since the departure last spring of Michael Carpenter, according to the report.

The unit, which runs private-equity and hedge funds, real-estate and structured products investment vehicles, is the smallest of Citigroup's four main business lines and provided about 6% of total profit last year, The Journal said.

Pandit didn't return calls seeking comment, the Journal said.

Two years ago, Mr. Pandit, who is 50 and was raised in Mumbai, India, left Morgan Stanley after being passed over for a promotion that could have positioned him to run the firm, The Journal said.

Pandit's ability to raise about $5 billion in a year's time and then sell the business at a huge profit speaks to his savvy, leadership abilities and credibility, say people who have worked with the former equities trader, according to the report.

Among Pandit's biggest fans is former U.S. Treasury Secretary Robert Rubin, who is chairman of Citigroup's executive committee, The Journal said. At a time of investor discontent with Citigroup's stock performance and leadership, Rubin is said to be as interested in Pandit's managerial skills as his technical market abilities, according to the report. The bank this week announced a plan to lay off some 17,000 workers amid pressure to boost revenue and reduce expenses.
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[alain]

Is this an Indian Hedge Fund or a Hedge Fund that is heavily invested in India?

 

[Andy Nguyen]

Is this an Indian Hedge Fund or a Hedge Fund that is heavily invested in India?

Old Lane is a NYC-based hedge fund that invests in areas ranging from energy to infrastructure projects in India. They were the second biggest hedge fund opening in 2006 after Convexity Capital Management.

I think the buzz about this hedge fund is because of Vikram. He's obviously a big name and should have run Morgan Stanley if things went his way. He raised $2B in a very short time.

Now, it's payback time for him. 800M payout for the fund and he is on his way to run Citigroups

 

[alain]

Old Lane is a NYC-based hedge fund that invests in areas ranging from energy to infrastructure projects in India. They were the second biggest hedge fund opening in 2006 after Convexity Capital Management.

I think the buzz about this hedge fund is because of Vikram. He's obviously a big name and should have run Morgan Stanley if things went his way. He raised $2B in a very short time.

Now, it's payback time for him. 800M payout for the fund and he is on his way to run Citigroups

I think that's what Citigroup is looking for. Having Vikram Pandit at hand to run Citigroup.

 

[Andy Nguyen]

I think that's what Citigroup is looking for. Having Vikram Pandit at hand to run Citigroup.

Yeah, it was pretty ugly when he left MS but it's all sweet now. Citigroups def needs Vikram now. He turned Morgan Staley's equity trading desk to #2 on Wall Street behind Goldman. I expect he will do some magic at Citigroups.
[daydream]Imagine if we can have him to lead our Quantnet Fundrasing effort. We probably will get at least $1M donation in a month. We can even buy our hosting service \\:D/[/daydream]

Some more info about this from Bloomberg Newsdesk
http://www.bloomberg.com/apps/news?pid=10000087&sid=aP5.NZJ8oCss&refer=top_world_news

 

[Andy Nguyen]

Another piece from NYTimes today, packed with info and tibits

<nyt_headline version="1.0" type=" "> To Snare a Coveted Banker, Citigroup May Buy a Hedge Fund </nyt_headline>
Published: April 13, 2007
<nyt_text></nyt_text>Citigroup bought a hedge fund today as part of a deal that would put a former top executive at Morgan Stanley, Vikram Pandit, at the head of its alternative investments group.
Citigroup, the financial services giant, said in a statement that it had reached an agreement to buy the fund, Old Lane Partners, and that Mr. Pandit would become chief executive of its Alternative Investments unit as well as a member of Citi's operating and management committee.

Financial terms were not disclosed in the announcement, but the deal is expected to cost $600 to $800 million.

The bank has spent months courting Mr. Pandit, who left Morgan Stanley in 2005 after he was blocked for a chance at running the investment bank.

According to those close to the deal, Citigroup bought Old Lane, the hedge fund that Mr. Pandit helped found a little more than a year ago, as a way to bring him aboard. The Citi unit has been absent a full-time leader for over a year and is seen as a crucial part of Citigroup's growth. The actual price for the fund will depend on performance, those involved said.
The appointment of a seasoned leader like Mr. Pandit would go a long way in helping the bank's chief executive, Charles O. Prince III, overcome Wall Street's perception that Citigroup has a leadership void as it undergoes a major overhaul. On Wednesday the company announced it would cut or move 26,500 jobs in a restructuring.

While Mr. Prince has dismissed the notion that he lacked a successor, Citigroup's senior management team is seen as being too young and inexperienced for the top job.

Although the recent hiring of Gary L. Crittenden as its new financial chief has bolstered the ranks, Mr. Crittenden has never run a big financial conglomerate.

Mr. Pandit replaces Michael A. Carpenter who left Citi last May after more than a decade in executive positions to start his own venture. John Havens of Old Lane will be president of the Alternative Investments unit, and other colleagues also will be given Citi titles.

For Citigroup, the purchase of Old Lane, which has a separate investment fund focused on real estate and infrastructure opportunities in India, may help fill other gaps.
Buying hedge funds is in vogue, especially for Wall Street banks who are seeking to capitalize on the meteoric growth in alternative investing. For the most part, the banks are seeking two things: access to the hedge funds for their private banking and high net worth clients, and income from the gush of fees thrown off by hedge funds that do well.

JPMorgan Chase blazed a path into hedge fund acquisitions in 2004, buying Highbridge Capital Management. At the time, rivals scoffed at the price and predicted the deal would fail. In fact, the fund has soared to assets of more than $17 billion this year from $6.6 billion.
Citigroup's purchase of Old Lane is particularly spectacular considering Old Lane's short and unimpressive track record.