Skip to main content

Citi Fund's Woes Hit Wachovia, Fifth Third

Citi's Falcon Strategies fund has lost 75% of its value, moving the bank to mull returning money to investors.



just keeps adding to its own pain.

The struggling New York banking titan is now dealing with losses in one of its hedge funds that has lost some 75% in value and has several large banks, including

Fifth Third Bancorp





, reeling from losses from investments in the fund, according to the

Wall Street Journal


Both Fifth Third and Wachovia, along with an unnamed third regional bank, had put more than $1.6 billion into Citi's Falcon Strategies hedge fund through their bank-owned insurance programs. The losses may pressure the struggling New York banking titan to give some of the money back to the three banks that have lost money, the



A spokesman for Citi's alternative investments arm declined to comment on the article.

Cramer: Wachovia's Golden Brand Is Dead

var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1544356376; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);

Wachovia was the most heavily exposed, with more than $1 billion invested, which represented 7% of the bank's $14.9 billion BOLI assets, according to the article.

Earlier this month, Wachovia said its first-quarter loss was 80% higher than what it originally reported in mid-April due to


related to its BOLI policies. Wachovia increased its loss to $708 million, or 36 cents a share, it said in a filing with the

Securities and Exchange Commission

on May 6.

Wachovia had concluded after a review that it would record valuation losses of $315 million on the related BOLI assets, it said.

Wachovia told


that the writedowns were related to losses in Citi's Falcon Strategies hedge fund. A request for comment was not immediately returned to


Fifth Third invested $612 million into Falcon -- approximately one-third of the Cincinnati-based bank's BOLI asset. Fifth Third has filed a lawsuit against one insurer and brokerage firm that arranged the investment for it.

A spokeswoman for Fifth Third was not immediately available.

Shares of Citi fell 2.5%, Wachovia fell 1.9%, while Fifth Third dropped 2.7% in recent trading.