Citi halts hedge fund withdrawals
More trouble for Citi (C). The bank stopped investors from pulling their money out of a hedge fund that specialized in corporate debt after the fund, CSO Partners, posted an 11 percent loss for 2007, The Wall Street Journal reports. The Journal reports Citi injected $100 million to stabilize the fund, which has about $500 million in assets but faced an attempt by investors to withdraw 30 percent of the fund’s money.
Citi isn’t the only financial titan with hedge fund problems, though. The Journal reports that investigators are probing whether former Bear Stearns (BSC) fund manager Ralph Cioffi misled investors on an April conference call that was held just months before the firm admitted that two in-house hedge funds had collapsed. On the April call, the Journal reports, Cioffi said he was “cautiously optimistic” about the funds, which made leveraged bet on subprime mortgage-backed securities - despite the fact that he had just pulled $2 million of his own money from the funds. Cioffi’s lawyer is considering making him available to prosecutors for informational interviews, the Journal adds. Perhaps he’ll tell investigators that he really needed to diversify his portfolio.
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