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Hedgemedia’s AltInvestment Global News Round-Up: Citigroup halts redemptions from troubled corporate debt fund

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Citigroup suspended redemptions from its USD500m corporate debt-focused CSO Partners after a third of its investors sought their money back.

Citigroup suspended redemptions from its USD500m corporate debt-focused CSO Partners after a third of its investors sought their money back. The fund lost 11 per cent last year, and some of its woes have been linked to an investment in leveraged loans of some USD730m by the fund’s former manager John Pickett, which is reported to have exceeded the bank’s concentration limits.

Citigroup’s Falcon Plus Strategies, a new leveraged fund launched at the end of September, fell 52 per cent in its first quarter of trading. Falcon was diversified among bond-market strategies and supposedly shouldn’t have suffered such steep losses, but Citigroup says the fund suffered from volatile fixed-income markets.

Hedge fund manager Houston-based Saracen Energy has recorded heavy losses that have forced it to liquidate some of its positions in natural gas. Energy traders estimate that Saracen has taken losses of more than USD500m, well over a third of its estimated USD1.3bn in assets. Traders say Saracen, which also trades crude oil and power, had shorted spreads between March and April 2009 natural gas futures, betting they would narrow. Instead, they widened, resulting in huge losses.

Michael Lauer and four others associated with the now defunct Lancer Group have been indicted on charges of conspiracy and wire fraud, the US Justice Department said. They were charged with manipulating the closing market prices of thinly-traded shell company securities to falsely inflate the value of Lancer Group hedge funds that invested in them.

Lauer is also alleged to have created fake portfolios of the securities supposedly held by Lancer Group and obtained falsely inflated appraisals of the shell companies to cover up and perpetuate the scheme. If convicted, all five men could face up to 20 years for wire fraud, five years for conspiracy and fines of as much as USD500,000.

BlackRock has denied market speculation that it was in trouble over alleged losses from collateralised debt obligations and that it was the subject of a federal investigation. In a statement, the New York-based manager said it had no material exposure or losses related to either sub-prime assets or CDO investments, either in the US or in any offshore vehicles, and that it was not aware of any Justice Department investigation relating to BlackRock.

Institutional investors allocated a record USD66bn to hedge funds in 2007, but USD52bn of that is yet to be invested, according to a survey by Bank of New York and management consultants Casey, Quirk & Associates. Meanwhile, USD1.5bn of new searches were reported so far this year. The fourth quarter of 2007 saw a decline in hedge fund search and hire activity.

Juno Mother Earth Asset Management’s co-founder Joseph Di Virgilio has left to establish Vertus Capital Partners in New York. Di Virgilio will be investment chief at Vertus and will manage the Vertus Sustineo Fund, a global long/short equity hedge fund investing in alternative energy, water, food and agriculture. He helped establish Juno in mid-2006 and was responsible for 30 per cent of the firm’s assets devoted to equities. Craig and Dermot Coughlan are his partners in Vertus.

GLG Partners has hired Daniel Geber as a portfolio manager in its New York office. He joins from Epoch Investment Partners, where he managed the international small cap funds and its Asian portfolios. He has also worked at Trident Investment Management, Goldman Sachs and Omega Advisors. GLG runs USD24bn in assets.

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