Citi's new hedge fund strategy?

November 17, 2009 | By Jim Kim

Claren Road's performance has been solid this year; the New York hedge fund is up 20 percent on a total return basis after gaining 10 percent in 2008, according to MarketWatch. So why did Citigroup exit the fund, redeeming its stake for $250 million?

Well, Citigroup, 34-percent owned by the government, has been restructuring as of late. That effort has touched its Citi Alternative Investments unit, which includes its hedge-fund operations. The new unit, which now goes by Citi Capital Advisors, has three segments: private equity; market Strategies--which includes funds focused on mortgages and corporate credit, emerging markets, equities, global macro and municipal debt; and infrastructure.

Still, it's unclear why it got out of Claren Road, which after all was formed by former Citigroup credit traders Brian Riano, John Eckerson and Sean Fahey. Citi was among the seed investors. Later, a Goldman Sachs private equity firm bought a stake.

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