Wachovia, Fifth Third had losses in Citi hedge fund
Tue May 20, 2008 1:31am EDT
NEW YORK (Reuters) – Wachovia Corp (WB.N: Quote, Profile, Research) said on Monday it has had significant losses from a Citigroup (C.N: Quote, Profile, Research) hedge fund, joining Fifth Third Bancorp (FITB.O: Quote, Profile, Research), which disclosed its loss in an April lawsuit.
Wachovia spokeswoman Christy Phillips-Brown said a $315 million write-down the bank disclosed earlier in May was related to investments in Citigroup’s Falcon Strategies hedge Fund. Wachovia, the fourth-largest U.S. bank, made the investments through its bank-owned life insurance portfolio.
Fifth Third said in a lawsuit filed on April 17 that it had invested $612 million in Falcon. The bank is looking to recover $323 million in damages from the two AEGON NV (AEGN.AS: Quote, Profile, Research) subsidiaries that had been managing its bank-owned life insurance portfolio.
Citigroup, Aegon and Fifth Third could not be immediately reached for comment.
An unidentified third bank also took a large loss in Falcon, the Wall Street Journal reported on Monday, citing sources familiar with the matter.
The Journal said the banks could ask Citigroup to give them some of their money back, because it has already agreed to do so for individual investors.
Falcon Strategies hedge fund is a fixed-income vehicle that has plunged more than 75 percent in value, according to the Journal.
Bank-owned life insurance can insure against the lives of employees and directors. Proceeds help offset the cost of providing employee benefits, and help banks manage risk.
(Reporting by Michael Erman; Editing by Anshuman Daga)