People & markets: Citi to select alternatives head


Helen Avery
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Citigroup CEO Charles Prince said in March that he hoped that the vacant position of head of the group’s alternatives business (CAI) would be filled within weeks. It’s about time.

The position has been empty since the departure in March 2006 of Michael Carpenter, who is thought to be pursuing an individual venture.

In the interim, Citi’s chief administrative officer, Lewis Kaden, has taken on the role, but sources at the firm say morale is at an all-time low. "Why is it taking so long to fill this role? Employees are becoming frustrated by the seeming lack of dedication to replacing Carpenter," says a disgruntled employee. Other sources at the firm say that Prince has been interviewing for the position for some time and came close to filling it at the end of 2006, but it was decided the fit was not quite right. "It’s not through lack of trying that the position remains vacant," one source says, adding that there have been a handful of candidates. "It’s a very important business to the group and Chuck wants to appoint the right person to fill it."

Analysts say Prince’s dawdling approach to filling the position does not hint at a future sale of the business. CAI has almost $50 billion in assets under management in private equity, hedge funds, real estate and structured products, and more than 850 employees. Twenty-two percent of the business’s assets are proprietary capital.


"The business is actually doing well in spite of the lack of leadership. I’m not saying it is doing better than its peers, but performance is good," says an analyst. The fourth quarter of 2006 was a record one for CAI. Revenue was $1.3 billion, up 79% from the fourth quarter of 2005, and net income was up 56% at $549 million. The alternatives business is also the fastest-growing business line within Citi. "It’s not a primary driver of earnings to a significant degree but there is certainly a focus on developing the business, and I don’t think they would think about selling it off if the lack of a CEO at the helm is giving people that idea," says an analyst. Meredith Whitney, analyst at CIBC World Markets, says: "There is a strong demand for alternative investment products from the private banking clients at Citi. They won’t want to get out the alternatives business. Banks prefer to buy at the peak and sell at the trough anyway."

Prince says external and internal candidates are being considered to fill the position. Kaden, who into his 60s, is not being considered for the permanent position, say sources.