Investment banks and their in-house hedge funds were once thought capable of building a compatible, mutually beneficial relationship. It is now clear that they are unhappy bedfellows.
UBS had its reputation marred after its in-house hedge fund unit, Dillon Read Capital Management, was forced to wind down last year just 11 months after starting to trade, having incurred losses of $124 million.
Lehman Brothers has been forced to move $1 billion of assets from three troubled internal hedge funds onto its balance sheet. A better example still is Bear Stearns, which was brought down by its two in-house hedge funds.
Citi does not seem to learn, however. First, Tribeca, its initial multi-strategy fund, was...
