Citigroup stops withdrawals from hedge funds - papers 15 Feb

Citigroup had moved to stop investors withdrawing their money from one of its London-based hedge funds after panic selling which saw investors try to pull out more than 30% of the fund's $500m (£254.3m) assets, The Times reports.

The bank has suspended redemptions in CSO Partners, a fund run from a Berkeley Square address which specialised in corporate debt and which lost 11% last year, according to The Wall Street Journal.

Citigroup last month injected $100m into the fund to stabilise it. The funds long term manager, John Pickett, has also departed after a dispute with Citigroup executives and complaints from investors that he put too much money into a single investment that went bad.

NORTHERN ROCK’S LEADING shareholders are preparing to vote down a rescue proposal from Sir Richard Branson's Virgin Group despite the looming threat that the beleaguered mortgage bank will be nationalised if a deal fails, The Times reports.

It is understood that RAB Capital and SRM Global, the two hedge funds that are the Rock’s largest investors, will oppose the Virgin offer when it comes to a shareholder vote. Between them, the two firms hold a 19.68% stake in the bank.

“If it were a two-way competition between Virgin and nationalisation, we would vote for nationalisation,” said a source close to one of the leading shareholders yesterday.

ALISTAIR DARLING COULD SEE his budget deficit more than triple to an unprecedented £150bn if the economy grinds to a halt, new research has warned, The Telegraph reports.

The staggering scale of the impact on the national accounts if Britain suffers a major recession was laid bare by Capital Economics, which said the slowdown could leave a significant dent in the Government's books.

The warning will further embarrass the Chancellor and Prime Minister Gordon Brown, who have presided over a significant increase in government borrowing while almost all other major economies have cut back on their debt.

It comes a week after the Treasury broke its sustainable investment rule for the first time since it was introduced a decade ago, after Northern Rock's debts were included on the British national accounts.

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