Hedge fund plunges, hurting investors

Citigroup Inc.’s Falcon Strategies hedge fund plunged more than 75%, taking three banks with it.
MAY 20, 2008
Citigroup Inc.’s Falcon Strategies hedge fund plunged more than 75%, taking three banks with it. Wachovia Corp. of Charlotte, N.C., Fifth Third Bancorp of Cincinnati and another bank that was undisclosed suffered losses after All three banks were major investors in the fund and hoping to augment their business owned life insurance returns. Under this arrangement, life insurance is purchased by the business for employees and the business is the beneficiary. Wachovia had the most exposure, with more than $1 billion invested in the fund, while Fifth Third, which has brought suit against the managers of the fund, had $612 million invested. New York-based Citigroup was not named in the lawsuit. Fifth Third suffered losses of $177 million in the fourth quarter of 2007 and $152 million in the first quarter of 2008 in the company’s BOLI sector.

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