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Falcon Strategies (Citigroup) - Hedge Fund - Mortgage Backed Securities

2008-02-20

Count of distinct funds: 2
Capital base: ?
Loss: 52%

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stories: finalternatives.com, reuters.com

Citigroup has decided to bail out Falcon, extending a $500M credit line, and taking its ~$10B in assets and liabilities back onto their books.

It seems at least two funds were involved; Falcon Plus and a more recent, highly-levered fund (which is said to have lost more than 50% in its first three months of trading). There were likely more funds part of the group. Please let us know if you have additional details.

Original Writeup, 2008-02-15:

Further to an article on Citigroup's hedge fund CSO Partners, another Citigroup hedge fund called Falcon Plus Strategies lost 52 percent of its value in the fourth quarter. According to the article:

Falcon Plus Strategies, launched September 30, lost 52 percent in the fourth quarter, after betting on mortgage-backed and preferred securities and making trades based on the relative values of municipal bonds and U.S. Treasuries. Some collateralized debt obligations in the fund trade at 25 percent of their original worth, the newspaper said.

We are looking for further information on Falcon Plus Strategies. In particular, if you have any correspondence from Falcon Plus that you would be willing to share with us, please let us know.

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Important: This fund is on our list of hedge funds that have "imploded" (see also ailing lenders). However, please note that "imploded" is a somewhat subjective. The "imploded" list contains hedge funds (or other unregulated and autonomous speculative investment funds) which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.