The problems at Citigroup (C) keep getting worse. BusinessWeek has learned that one of Citi's top brokers has bolted the bank to sign on with Credit Suisse (CS). Richard Zinman and his team of junior brokers officially left Citi on May 30, according to people familiar with the matter, in part because so many of Zinman's wealthy clients had lost millions from investing in a series of Citi-managed hedge funds.
Zinman perennially ranks as one of the nation's top brokers in terms of customer assets under management and servicing high-net-worth investors. Barron's magazine recently ranked Zinman as the nation's sixth-biggest broker in terms of assets under management, revenues generated, and customer satisfaction. Zinman's team at Citi managed $11.6 billion in assets, according to the report.
A Big Catch for Credit Suisse
Citi confirmed that Zinman had left the company, and a person who answered the telephone at Zinman's former office said that he could now be reached at Credit Suisse. A Credit Suisse spokesperson wasn't immediately available for comment. One of the former Citi brokers coming over with Zinman is Anthony Dertouzos, another top adviser. On May 30, Credit Suisse issued an internal memo heralding its big catch, saying it had reeled in a "top team from Citigroup Global Wealth Management."
Zinman's departure is a big blow to Citi's wealth management group, the one division of the bank that has been posting consistently strong profit numbers. In recent weeks, Citi executives have scrambled to keep Zinman, who sources say was ready to leave for Credit Suisse a week ago. Over the past two months, a number of "top Citi brokers have fled the firm" (BusinessWeek, 4/16/08).
Brokers at Citi have been angry over the woeful performance of several of the bank's hedge funds—most notably its Falcon Strategies funds and Asta/Mat municipal bond funds. Those series of hedge funds had raised nearly $5 billion in investor money, much of it coming from Citi's wealthiest brokerage customers. The funds have been big disasters, losing anywhere from 50% to 80% of their value. The collapse of the funds has sparked a number of lawsuits and investor arbitrations.
In the past week, Reaz Islam, the manager of the Citi hedge funds, which were marketed as low-risk investments, left the bank. Islam had been with Citi for nearly 18 years.