Opinion

Felix Salmon

Citi should unilaterally adopt the Volcker rule

By Felix Salmon
February 1, 2010

What counts as a core Citicorp holding, and what counts as a Citi Holdings asset which should probably be sold? If you think there’s any kind of coherent philosophy determining such decisions, think again:

Citigroup Inc. plans to sell or split off its $10 billion Citi Private Equity unit…

Other money-management units marked for sale or closure include the Citi Property Investors real-estate unit, which oversees $12.5 billion; and the Hedge Fund Management Group, which allocates money to hedge funds on behalf of its own investors, the people said.

Citigroup plans to keep Metalmark Capital LLC, a buyout firm the bank agreed to buy for an undisclosed sum in December 2007…

The bank also is keeping another fund, Citi Venture Capital International, which focuses on China, India, Central and Eastern Europe and Latin America.

Essentially, all this boils down to “if you happen to be in Vikram’s good books this week, he’ll want to keep you, otherwise he’ll decide to sell you”. That’s not a strategy, it’s a monarchy.

Citigroup’s largest shareholder is the US government, which has made it abundantly clear that it wants all banks — not just Citi — to sell off all of their hedge-fund and private-equity operations. Pandit should get out in front of this rule, and put the entire Citi Capital Advisors operation, along with all the rest of his buy-side operations, on the block. It’s not like they ever moved the needle in any case.

Comments
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“Pandit should get out in front of this rule, and put the entire Citi Capital Advisors operation, along with all the rest of his buy-side operations, on the block.”

The Volcker Rule does not require the divestiture of all buy-side operations. It only requires the divestiture of internal hedge funds, PE funds, and prop trading desks. Asset management arms, internal money market funds, etc., are all left untouched by the Volcker Rule.

Posted by jhedges | Report as abusive
 

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