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10 Apr 2007

Citigroup In Talks Over $600m Hedge Fund Buy Out

Citigroup has been in talks with year-old hedge fund Old Lane, with a plan to spend $600m on the acquisition of the hedge fund. At an estimated 45% gross margin on $150 million in revenue, the hedge fund could clear $67.5 million.

Ex-Morgan Stanley money manager, Vikram Pandit, founder of Old Lane Management has heavily invested in Indian securities, real estate and infrastructure projects.Citigroup would add about $4 billion in assets under management in the deal, and would make Pandit chief executive of its alternative investments unit.

Launched early last year, Old Lane has between $150 million and $160 million in revenue, based on a 2% management fee and 20% share of any profit formula. In its first full year of business the hedge fund returned around 10% to investors.

The alternative investments unit is the smallest of Citigroup's four main businesses, with about 875 employees. It has $49.2 billion of private equity, hedge fund, real estate and other assets, including $10.7 billion of Citigroup's own money.

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