CITIGROUP IS preparing to sell its private equity, real estate and hedge fund investment arms, which together manage about $20 billion of assets, as the bank presses ahead with plans to sell $900 billion of non-core assets to repay debt.
The talks come just weeks after US president Barack Obama announced plans to prevent banks from owning or investing in private equity or hedge funds under the Volcker Rule, which was inspired by Paul Volcker, former chairman of the Federal Reserve.
However, Citi said it had already designated Citi Private Equity, Citi Property Investors and Hedge Fund Management Group as non-core operations a year ago by moving them into Citi Holdings, its vehicle for assets due to be sold.
Banks across the world have been reconsidering whether to keep their in-house private equity arms, as pressure increases to put more regulatory capital against such investments and returns from private equity fall.
Mr Obama’s Volcker Rule is expected to prompt more banks to consider selling their private equity arms.
A person familiar with the Citi process said the two units could be acquired through management buy-outs, with the backing of one or more outside investors.
The US bank is close to completing the planned sale of Citi Property Investors, its real estate arm, which has about $12.5 billion of assets under management and has attracted interest from Apollo Management and Macquarie.
Citi Private Equity manages investments in other private equity funds, a portfolio of minority co-investment stakes in buyouts and mezzanine debt investments. Run by Todd Benson and Darren Friedman, it invests about $2 billion on behalf of Citi’s proprietary accounts and about $8 billion for the bank’s third-party clients. – (Copyright The Financial Times Limited 2010)
