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Citi sees growth as hedge fund institutional advisor

Tuesday, March 23, 2010
Opalesque Industry Update - Citi’s global prime finance chief Nick Roe has announced that Citigroup Inc., would double the size of its team advising pension and government-backed funds to expand its hedge fund consultancy services, various media reports said.

Roe told Bloomberg.com that Citi aims to build a 60-person consulting team within 18 to 24 months with Asia getting the biggest number of advisors as the bank, which is still 27%-owned by the U.S. government, expands its consultancy services to the region.

“We see it as one of the major growth areas for us. The pension funds, the institutional asset market are going directly to hedge funds. It was the reverse of what the investor profile was two years ago,” Roe told Bloomberg.com.

The report also cited a Morgan Stanley study released in November last year which showed that pension, sovereign wealth funds and foundations overtook endowments and funds-of-funds targeting wealthy individuals as the largest source of capital for hedge funds.

Indeed, another study made by Preqin showed that sovereign wealth funds (SWF) and institutions have shifted their focus from fund of funds to direct investing into hedge funds. Preqin said that SWF activity in alternative asset classes is considerable, with 55% of these investors known to invest in private equity, 51% in real estate, 47% in infrastructure and 37% in hedge funds.

The trend can also be noted in recent activity by the Ohio School Employees Retirement System, Columbus which announced on Monday it has committed at least $160m to alternative investments, including $30m each to hedge funds BlueCrest International Ltd., Eminence Fund Ltd., Level Global Overseas Ltd., and New York European Opportunities Unit Trust, reported PIonline.com. The system also committed up to $40m to Monomoy Capital Partners II LP, a U.S. middle-market buyout fund. The commitments by the $9.4bn pension fund were approved at a March 18 board meeting, spokesman Tim Barbour said.

Last week, the Illinois Student Assistance Commission, Chicago allocated a total of $135n to three hedge fund managers, its first move in the area. The three are among 13 hedge fund firms approved to run assets of the $982m College Illinois! Prepaid Tuition Program fund.

Also last week, the $129bn New York State Common Retirement Fund launched an initial $200m emerging manager program for hedge funds and plans to develop an emerging manager program for real estate in the near future. The initiatives follow the fund's recently announced plans to allocate up to $450m more under its emerging manager private equity program.

New Jersey's $67bn pension fund announced plans to increase its hedge fund investments to protect against losses in the stock market, according to a memo prepared for a meeting later this week of the State Investment Council. -PD-

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