Citi Shows the Love

What does Citibank plan to do with those buckets of cash it plans to save by shedding 17,000 jobs? A fair chunk of it apparently will go toward buying a two-year-old hedge fund to secure its founder.

Citi's finally confirmed its not-so-discreet courting of Vikram Pandit, who founded the hedge fund Old Lane Partners after leaving Morgan Stanley in 2005. While in the works, the deal had been thoroughly chewed over in the Wall Street Journal and the New York Times, which estimated the price at -- $600 million to $800 million or more.

While Citi which made it official in time for its annual shareholder meeting on Tuesday, the bank declined to disclose what it actually paid for Old Lane.

Pandit helped found Old Lane after he quit Morgan Stanley two years ago, when he was passed over to run the investment bank. Citi is motivated to pay top dollar for his management and investment experience because it urgently needs someone to head up its alternative investment group.

That unit, which runs private-equity and hedge funds, as well as real-estate and structured products investment vehicles, has been without a leader since Michael Carpenter quit last spring. Carpenter left to start an ''entrepreneurial venture'' like a private equity or hedge fund, Citigroup chief executive Charles Prince said in a memo at the time.

The Journal said Pandit also becomes a leading candidate to succeed Prince, an idea suggested by Prince's statement announcing the deal. In it, he was particularly generous in praising the leadership qualities of Pandit and one of his partners, John Havens, the former global head of equities at Morgan Stanley.

"This transaction is an investment as much as it is an acquisition," he said. "It is an investment in world-class talent at Old Lane; in a senior leadership team with a track record of building profitable businesses in institutional securities; and an investment in Vikram and John, each of whom has a clear record of achievement in cutting-edge financial services spanning more than 20 years, to lead CAI."

by Mark Stein

Photograph by Peter Morgan/Reuters