The beleaguered investment bank, Citi has decided to wind down its third-party private equity fund placement arm, Citi Alternatives Distribution Group (CADG), reports Reuters. CADG has raised over $45 billion for its clients in the last 5 years.
The report adds that the move was not expected as, in the beginning of the year, Citi was planning to expand its placement team.
The company has decided to focus on institutional fund raising for its internal funds. However, a small part of the CADG team will be retained to serve its existing third party clients. The group however, will no longer cater to the external funds. The team currently consists of over 50 people.
The group was founded 12 years back by Michael Klein, who quit the bank last year. Douglas Blagdon, a Citi executive based in New York, has been running the business for the past few years. The group’s clients include Charterhouse Development Capital, Platinum Equity Partners, CVC Asia-Pacific, Terra Firma Capital Partners, Lion Capital, 3i, Nordic Capital, Ripplewood Holdings and Gilde Buyout Funds.
According to Prequin, a London based private equity research firm, CADG is the third largest placement agent after MVision Private Equity Advisers and Credit Suisse Private Fund Group.
Though the use of placement agents has increased over the last few years with the growth of hedge funds and private equity funds, the placement agent business has been facing a slowdown since the last week when the New York state comptroller decided to put a ban on the placement agents for facilitating deals between investment firms and public pension funds in relation to the pension funds scandal