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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.

Carlyle Group to Launch Hedge Fund Business

Private equity firm Carlyle Group is launching a $1 billion hedge fund called Carlyle Multi Strategy Partners, the fund is said to have a wide-ranging investment strategy.

Last year, the $56 billion firm hired 2 new managers to head up a hedge fund business called Carlyle Blue Wave and has since put together a team of 55 for the unit. Carlyle, based in Washington, D.C., declined to comment on the timing of the hedge fund's launch.

There has been a global rush of investment dollars into lightly regulated private partnerships such as private-equity firms and hedge funds. Private-equity firms use client funds to buy companies, take them private, restructure them, and sell them again, typically three to five years later. Hedge funds, by contrast, use clients' money to invest in a variety of securities and investments, frequently trading very actively and quickly in public markets.

Carlyle Group has over 400 investment professionals operating out of offices in 18 countries to uncover opportunities in North America, Europe, Asia, Australia and Africa. Carlyle has investments in 48 funds, including buyouts, venture capital, real estate and leveraged finance, they are also reported to be considering investing in renewable energy infrastructure.