Independent- Citigroup is coming under pressure to bail out investors in one of its troubled hedge funds, in another embarrassment for a company already among the biggest losers from the credit crisis.
The company has begun quietly asking private clients to accept a $250m compensation package, in return for dropping legal claims against the company. Banks which have sunk an estimated $1.6bn into the fund are also examining their legal options.
The problems stem from Citigroup’s Falcon Strategies hedge fund, an investment vehicle that traded mortgage bonds, government debt and a range of credit derivatives, which began experiencing big losses when the credit markets ran into difficulties last summer. Thousands of Citigroup clients – advised to invest in the fund by brokers at its Smith Barney wealth management division – face being wiped out.