Citigroup Bought by Hedge Funds Lone Pine, Moore

Citigroup CEO Vikram Pandit
Vikram Pandit, chief executive officer of Citigroup Inc. Photographer: Simon Dawson/Bloomberg

Citigroup Inc., the third-largest U.S. bank by assets, drew investments from hedge funds including Lone Pine Capital LLC and Moore Capital Management LLC in the fourth quarter as the U.S. government cut its stake.

Lone Pine, Stephen F. Mandel’s Greenwich, Connecticut-based hedge fund, bought 145.1 million shares in Citigroup valued at $686.5 million as of Dec. 31, making it Lone Pine’s largest holding, according to a filing yesterday with the U.S. Securities and Exchange Commission.

Mandel joins John Paulson, whose hedge fund told clients in January that it made more than $1 billion on its Citigroup investment over the prior 18 months. Appaloosa Management LP, Highfields Capital Management LP and Viking Global Investors LP, also reported buying shares during the quarter in the bank run by Chief Executive Officer Vikram Pandit.

“Banks have been a pretty profitable trading area for a lot of the hedge funds and they are doing it again with Citi,” said Michael Holland, who oversees more than $4 billion as chairman of New York-based Holland & Co. “Right now it looks like Pandit has been able to calm the seas and we may have a period where things are lined up for smooth sailing. Unless things change dramatically, it’s probably a chance for them to make some more money.”

Moore Capital, the $15 billion hedge fund run by Louis Moore Bacon in New York, bought 40.9 million Citigroup shares in the period worth about $194 million at Dec. 31, according to a filing.

Shares Climb

Appaloosa Management LP, David Tepper’s hedge fund, more than doubled its holdings in the New York-based bank. Appaloosa, based in Short Hills, New Jersey, purchased 66.3 million shares in the fourth quarter, boosting its stake to 117.5 million shares, according to a filing.

The U.S. Treasury Department sold the last of its stake in the New York-based bank in December, disposing of 2.4 billion shares. The government, which acquired the investment as part of a $45 billion bailout in 2008, made about $12 billion in profit from its holdings.

Citigroup shares rose 21 percent in the three-month period ending Dec. 31, and gained almost 43 percent in 2010. The Standard & Poor’s 500 Index rose about 13 percent last year. Citigroup was up 1 cent to $4.90 as of 11:48 a.m. today in New York Stock Exchange composite trading.

Highfields, the Boston-based hedge firm founded by Richard Grubman and Jonathon Jacobson, bought 22 million Citigroup shares worth $104 million at the end of December, according to a filing.

Paulson’s Stake

Viking, co-founded by Andreas Halvorsen, bought almost 54 million shares, pushing its holding to about 151 million shares. Eric Mindich’s Eton Park bought 20 million Citigroup shares, bringing its holdings to 80.5 million at the end of December, according to an SEC filing.

Tudor, the $11.5 billion hedge fund founded by Paul Tudor Jones out of Greenwich, Connecticut, bought 3.94 million shares of the bank valued at $18.7 million as of the end of December.

Officials at Lone Pine, Eton Park, Moore Capital and Tudor, declined to comment, while officials at Appaloosa, Viking and Highfields, didn’t immediately return calls.

Paulson, 55, who became a billionaire by betting against U.S. mortgage markets, cut about 10.5 million shares from his Citigroup holdings, according to an SEC filing. His $35.9 billion hedge fund, Paulson & Co., held about 413.5 million shares at the end of 2010, down from 424 million at the end of September.

‘Upside Potential’

“Citigroup demonstrates the upside potential of many of the restructuring investments we have added to our portfolio and our ability to generate above-average returns in large positions,” Paulson said in a January letter, a copy of which was obtained by Bloomberg News.

Money managers overseeing more than $100 million in equities must file a Form 13F with the Securities and Exchange Commission within 45 days of each quarter’s end to show U.S.- listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

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