The Great Citigroup Hedge Fund Giveaway

Among Vikram Pandit's last jobs as Citigroup's CEO was deciding the fate of its hedge fund unit, which employs some colleagues from his days at Morgan Stanley and Old Lane Partners. Citi needs to get out of the business to comply with the Volcker rule's restrictions on banks' hedge fund investments and proprietary trading. Before he left in October, Pandit agreed to turn over a chunk of the hedge fund business to his former colleagues, according to people with knowledge of his plan who requested anonymity because the terms aren't public. While Citigroup is keeping a 25% stake, they say, managers at Citi Capital Advisors will pay nothing for the remaining 75% of the business as it becomes a new firm managing as much as $2.5 billion of the bank's money.