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2 Jun 2010

Citigroup Hedge Fund Investors Awarded 100% Return on Losses

HedgeCo News - Investors in Citigroup's fixed-income municipal arbitrage hedge fund have been awarded over $550,000 by the Financial Industry Regulatory Authority (FINRA).

The Wall Street Journal reports that the MAT 3 Municipal Arbitrage Fund was "a risky investment that not only exposed investors to a 100% or more loss of principal, but was 2.5 times more volatile than the S&P 500 and 7.8 times more volatile than a traditional portfolio of municipal bonds," according to lawyers.

FINRA said that the bank understated the hedge fund's risk to investors and awarded a 100% return on the investors' losses.

"We are disappointed and disagree with this decision as it is inconsistent with other panels, which have dismissed similar claims." Citigroup Spokesman Alex Samuelson said in an interview with WSJ. Citigroup also said the hedge funds were offered only to clients who knew about and could afford the risks.

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