The FT reports that Citigroup's Corporate Special Opportunities fund has informed believers in the unbridled genius that is Citi Alternative Investments that for every dollar they put in, 3 cents are coming out. And that they should count their blessings it wasn't worse.
According to Citi, "Every fund that invested in bank loans in Europe and used leverage did not survive. At least we are giving investors cash."
Without Citi's support, the hedge fund, which invested in corporate debt, would have had negative equity, according to a person with direct knowledge of the matter.
Some debt funds have told investors who want to withdraw their money that they will receive slices of debt in the hedge fund portfolio rather than cash. While such actions are allowed under fund documents, few investors have the capability to deal with such securities.