Pandit defends his Old Lane legacy
Old Lane is, to many outsiders, the biggest blot on Pandit’s career at Citi. After being forced out of Morgan Stanley in 2005 by its then chief executive, Philip Purcell, Pandit and a group of close colleagues, who included now-Citi senior executives such as John Havens and Brian Leach, joined the legion of former bankers who set up hedge funds. Old Lane began operations in March 2006.
Within 13 months, Citi had bought Old Lane for what seemed even then an inflated price of $800 million. By then it had $4.5 billion of assets under management. Pandit’s share of the sale was estimated to be around $165 million, of which he reinvested about $100 million into Citigroup stock.
But Old Lane, like many hedge funds, struggled in the downturn. By June 2008, Citi had taken the decision to shut down Old Lane, rather than injecting a $1 billion-plus sum of new capital, and took most of the hedge fund’s assets on to its balance sheet.
As Citi continued to struggle, Pandit was hammered by the media. His payout, and the demise of Old Lane, came to typify for many the worst excesses of executive compensation and the banking crisis took hold.