Although Citi decided this month to restructure its global fixed-income sales business, creating three hedge fund dedicated coverage groups, rivals have been left surprised it had not done so sooner.
The increasing desire to sell securities to hedge funds, coupled with the wish by some alternative asset firms to raise their own money in the capital markets, means many of Citi’s rival banks have been quicker to capitalise on the need to service such clients.
For years, hedge funds have been buying all types of security – from sub-investment grade, asset-backed and hybrid capital bonds to interest rate and credit derivatives. However, it is only in the past year that hedge funds have sought their own longer term capital, particularly in the public securities markets.
The $500m (€370m) sale of five-year bonds last December by Chicago-based Citadel, led by Lehman Brothers and Goldman Sachs, was the first time a hedge fund sold a benchmark-sized bond publicly.
Since then, there have been few large capital markets financings by alternatives managers other than Fortress Investment’s blowout listing on the New York Stock Exchange in February. But plenty of candidates are being mooted by bankers.
