Citigroup: Is Old Lane Old News?

| About: Citigroup Inc. (C)

Now that it appears that Vik has nosed into the lead in the great Citigroup (NYSE:C) CEO race, what of Old Lane? When it came out that Citigroup was buying the new Old firm back in April, I had hypothesized that they were essentially paying an $800 million executive recruitment fee.

Sure, there was spin that Citigroup's alternatives business was going to broadly distribute the Old Lane product across its broker network, and use it as lever for growing its alternatives franchise. But I wasn't buying. Who would pay such a sum, call it 15-20% of assets, for a new hedge fund firm with just ok returns? No rational financial institution, IMHO. I know, I know, we are talking about Citigroup here. I felt that promises of an Old Lane product push was a bunch of smoke to get at Vik and John Havens, two quality managers with bulge bracket Wall Street cred.

Fast forward to yesterday. Was I right? Are quants grumpy? Has anybody heard of a sub-prime mortgage? Of course I was right. Citigroup looks to be getting their new CEO (Pandit), a top guy who may run investment banking or some other super senior job (Havens), Old Lane's performance is weak and the product isn't being pushed by anybody. Assets are reportedly around $4 billion, less than the $4.5 billion when the deal was announced. Ho hum.

Old Lane is truly old news. So what does the rich Old Lane price tag look like now? Just like I said nine months ago - the biggest headhunter fee on record. Vik did an amazing deal for which he should get the props - getting paid to find himself. Now if only I could do that deal...

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