NEW YORK (
is opting to bulk up its presence in alternative investments just as Washington is moving to pare it back.
The company's Citi Capital Advisors unit is apparently looking to raise $1.5 billion for private equity and $750 million for hedge funds this year, according to
report. The unit is also targeting raising another $1 billion for hedge funds in 2011, the report said.
The bold move comes with lawmakers in the process of putting together extensive financial reform legislation that's expected to include the so-called Volcker rule, which seeks to limit proprietary trading, private equity and hedge fund activities at the big banks.
Instead of taking a wait-and-see approach, or else divesting these assets ahead of the restrictions, as
Bank of America
did in April when it sold a $1.9 billion private equity portfolio to AXA Private Equity, Citigroup is instead ramping up a roadshow to woo limited partners.
Citigroup isn't entirely alone in this impulse to stay in alternative investment game.
recently announced a $4.7 billion raise for a new global real estate fund, which includes $400 million of its own money,
said, and it's expected that even if the Volcker Rule does become law, it will take several years for it to be fully implemented.
has shown no signs of looking to dismantle its considerable PE presence, which include massive buyout, secondary, and debt funds.
The decision shows Citigroup is still being aggressive in certain areas, moving before regulators can change the rules, and doing so even as it continues to work on divesting non-core or poor performing assets from its Citi Holdings' portfolio.
Shares were edging 2 cents higher to $3.98 on Friday, but they are down almost 20% since April 19 when the bank reported a
The performance marked its first quarterly earnings since the crisis began but the stock slumped in the wake of the news as the SEC's civil fraud charges against
fed investor worries about the impact of financial reform on the bottom line at big banks and Europe's debt problems tripped up U.S. equities in general.
Adding to the selling pressure is the U.S. Treasury's gradual exit of its bailout-related stake in the company. On May 26, the Treasury announced its sale of an initial 1.5 billion shares of Citigroup for a profit of $6.2 billion, and said it would continue to selling its remaining 6.2 billion shares in an "orderly fashion" with Morgan Stanley acting as its sales agent. The current trading plan will terminate on June 30 as Citigroup enters the blackout period ahead of its second-quarter report due on July 16.
Year-to-date, Citigroup shares are still up about 20%, but they are well off the near-term intraday surges above $5 that occurred as recently as April 21.
Wall Street's current average analysts' estimate is for the company to again be in the black for the three months ended this month with a profit of 6 cents a share on revenue of $22.39 billion.
--Written by Laurie Kulikowski in New York.