Reuters- Citigroup Inc said it has provided a $500 million line of credit to support some fixed-income hedge funds, and as a result moved the funds’ $10 billion of assets and liabilities onto its balance sheet.
The Falcon funds are managed by the largest U.S. bank’s alternative investments unit. Citigroup said that by providing the credit facility on Feb. 20, it became the primary beneficiary of the funds, and thus must consolidate them onto its books.
On Feb. 15, the Wall Street Journal said Falcon Plus Strategies lost 52 percent in the fourth quarter, its first three months in existence, after making bad bets on mortgage-backed and preferred securities, and trades based on the relative values of municipal bonds and U.S. Treasuries.
Last week, Citigroup said it had suspended withdrawals from another fixed-income hedge fund, CSO Partners, following a 10 percent loss in November. The fund’s manager, John Pickett, resigned, a bank spokesman said at the time. It is not unusual for hedge fund managers to suspend withdrawals, to avoid a possible fire sale of assets to pay off departing investors.
