Citigroup Expands its Hedge Fund Business

Citigroup has expanded its up and coming hedge fund servicing team by adding 13 new hires to its Global Prime Finance Group in London and New York.


The newcomers specialize in trading and risk and are led by John Nicholson, a former Barclays Capital executive who will become a managing director in Citi’s US trading team, and Eric Hughson, a former Commerzbank executive who will become a managing director in Citi’s European trading team.

BarCap is the big loser in this particular hiring spree: seven of Citi’s new employees are former Lehman Brothers employees who moved on to BarCap after the US bank’s demise. Citi has also picked up five new directors who formerly worked at Morgan Stanley, one of the sector leaders.

Prime brokers provide a variety of settlement, custody and financing services to hedge funds and other specialized investment or dealing operations. The sector has historically been led by Goldman Sachs and Morgan Stanley – in 2007 they shared more than half of the business – but their dominance has been under threat since the financial crisis.

Citi’s Prime Finance team ranked third for service last year in a closely watched survey by Global Custodian magazine, just behind Credit Suisse and Deutsche Bank, which each have more clients.

The magazine said that Morgan Stanley and Goldman, while still the biggest prime brokers, had suffered from complaints about their client services; both had also seen large numbers of clients reduce their balances.

Deutsche, Credit Suisse and Citi have also benefited from the demise of Lehman and Bear Stearns, which prompted many institutional clients to rethink their brokerage arrangements.

More change may be in the offing. A recent survey by Tabb Group found that close to 40 per cent of the hedge fund industry had considered changing their broker in 2009.

“These hires are key steps as we continue to expand our business, both through increasing the depth of our product and service offerings and our international footprint,” Nick Roe, Citigroup’s global head of prime finance, said in a statement. “Prime Finance continues to a key growth area for Citigroup.”

Mr Roe, who has headed the area since March 2008, said the hires came in response to growing client demand for global services including risk management.

“In a very short time, we have built a world-class Prime Finance business at Citigroup and these hires are evidence that the momentum remains strong,” he said.