26/07/2011 Author: Will Wainewright

Citi Private Bank builds out hedge fund platform

Citi Private Bank is continuing to add funds to its hedge fund platforms after doubling numbers on its $5.25bn offering and launching a new direct investment vehicle.

Funds on the platform have increased from 18 to around 42, with another two set to join in August. The hedge fund division was rescued from the assets put up for sale after Citigroup was bailed out in 2008.

HedgeForum Direct opened last month and will provide the bank’s clients a route straight into hedge funds, complementing its existing feeder platform HedgeForum.

Frank Frecentese, Citi Private Bank’s head of hedge funds, would not disclose current areas of interest but said the overall strategy was to offer “high quality active management” across all strategies and geographies. “This involves getting the most alpha you can get per unit of cost you take on for accessing that alpha,” he said.

“We found a lot of clients didn’t need or want feeder funds so we launched a direct investment platform where clients could go directly into hedge funds,” he added.

Several private banks are currently building out their hedge fund platforms, aiming to attract investors still looking for structured investment routes after being put off funds of hedge funds (FoHF) after 2008.

“A lot of hedge funds relied on investments from FoHFs and have come to private banks in order to diversify away from that,” said Frecentese. Citi stopped offering FoHFs after the financial crisis.

Pascal Botteron, global head of hedge funds at Deutsche Bank, added: “We have decreased our marketing activity for our open architecture FoHF offering in Europe & Asia as demand for them from our private clients has dropped massively.”