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Citigroup’s Hedge-Fund Returns Jump as Volcker Rule Looms

Citigroup Inc., which took a $45 billion U.S. bailout after losses on subprime home loans, is boosting profits from a hedge fund that bets the bank’s money on mortgage debt -- a practice regulators plan to restrict.

Citigroup’s Mortgage/Credit Opportunity Fund climbed 16 percent in the first four months of 2011, almost doubling its pace last year, according to internal reports obtained by Bloomberg News. About 90 percent of the $395 million invested in the fund is the bank’s own capital, said a person with direct knowledge of the matter.