Investors Lose Big with Citigroup Hedge Funds

New York, NYWhen Citigroup's investors learned that they were getting only a little of their hedge fund investments back, much less than they were promised, they were understandably stunned and angry. Some have agreed to a settlement recently offered by the company but others are considering a lawsuit, alleging they were misled about the stability of certain Citigroup hedge funds.

At issue are two Citigroup funds: the Falcon Strategies fund and ASTA/MAT. Both hedge funds suffered massive losses in a very short time, even though investors say they were told that Falcon would not suffer any more than five percent a year, and that would be in a worst case scenario. Investors also say they were told both funds were stable and carried very little risk, which is why they agreed to the investment in the first place.

However, by March 31, 2008, Falcon was worth only 25 percent of its initial value, while ASTA/MAT was at only 10 percent of its initial value by February 29, 2008. Investors could do nothing but watch the value of their investment plummet. Of course, despite massive losses, investors were told for a long time that the funds would still rebound and they would get all of the money promised to them. This did not happen.

In fact, the situation with the Falcon Strategies hedge funds was bad enough that investors, who had hundreds of thousands of dollars in the funds, were barred from selling their investment.

Part of the problem is that the Falcon Strategies funds were marketed as safe investments for conservative investors. In fact, some investors say that they would never have invested in the funds if they had known there was a risk involved. They say they only invest in very safe funds and are very upset that they were not adequately warned about the risk or notified that there was a problem with the fund when its value started to drop.

In addition to individual investors, three banks have also seen massive losses. Those include Wachovia and Fifth Third, both of whom sank a lot of money into the Falcon funds.

Citigroup has had other problems with its hedge funds. Recently, the company put capital into another hedge fund that was affected by a purchase of corporate loans. The company also announced that it is closing a hedge fund, Old Lane Partners, by July 31, 2008.

The situation for Citigroup employees is not much better. The company recently announced it will cut 10 percent of the jobs in its investment banking division. That works out to approximately 6,500 jobs. Citigroup has had $15 billion in losses over the past two quarters.

People who invested with Citigroup's Falcon and ASTA/MAT hedge funds believed they were investing in a safe, stable fund. They invested a lot of money, fully believing that any losses, if they did occur, would be minimal. Investors believed this because they were told by financial advisors and hedge fund managers that the investments were safe. Obviously, they were not and now it is the investors who are out a lot of money. Even the proposed settlement by Citigroup does not cover all the investors' losses.

If you lost money in Citigroup's hedge funds, you may be eligible to join a lawsuit. Contact a lawyer to discuss your legal options.