Citigroup Mulls Private Equity Stake Sale As Volcker Looms


Citigroup Inc (NYSE:C) is reportedly considering selling its $1 billion stake in a private equity fund to conform with the Volcker Rule.

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Citigroup’s reported sale relates to its stake in funds managed by Citi Venture Capital International, a private-equity manager that Citigroup Inc (NYSE:C) sold to Rohatyn Group in December.

Volcker Rule caps

The Volcker Rule, a centerpiece of the 2010 Dodd-Frank financial-overhaul legislation, was approved by government agencies last month. The rule prohibits banks from owning more than 3% of a hedge fund or private equity portfolio.

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Last November, Goldman Sachs Group Inc (NYSE:GS)’s CEO Lloyd Blankfein announced that the firm would begin winding down hedge funds to comply with the Volcker Rule.

Citigroup and other banks shedding assets

Last year Citigroup Inc (NYSE:C) sold the Citi Venture Capital International private equity fund valued at $4.3 billion to the Rohatyn Group for an unknown price. Citigroup also sold its $1.9 billion EM hedge fund last year.


According to Sabrina Willmer and Kiel Porter of Bloomberg, Citigroup Inc (NYSE:C) sold its Metalmark Capital private-equity business last year and spun out its internal hedge fund unit, renamed Napier Park Global Capital, to conform to the Volcker Rule.

JPMorgan Chase & Co. (NYSE:JPM), too, sold One Equity Partners, its hedge fund operation with $4.5 billion AUM, to the fund management and Bank of America Corp (NYSE:BAC) sold funds in 2011 and 2010 worth $5 billion and $1.4 billion respectively.

Shayndi Raice of The Wall Street Journal points out that Citigroup Inc (NYSE:C) shed $8.5 billion in private-equity holdings last year alone.

Interestingly, Citigroup executives have acknowledged for some time that they will need to sell the stake or ask for an extension to comply with the Volcker rule.

Citing familiar sources, Sabrina Willmer and Kiel Porter of Bloomberg note the Rohatyn group, which is interviewing advisers to manage the sale process, is exploring a deal in response to increasing market demand to buy private equity holdings through the secondary market.  Rohatyn plans to give investors in two growth funds, established in 2005 and 2007, the option to exit their holdings before Citigroup Inc (NYSE:C) is able to sell.


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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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