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Citigroup / Pacific: partnering with Pacific

20th May 2005

Citigroup has launched a new joint venture in co-operation with Pacific Alternative Investment.

Citigroup Global Wealth Management and Pacific Alternative Investment Management have launched a new joint venture called Global Hedge Strategies. The new business will enable Citigroup to provide tailored hedge fund of fund portfolios to its ultra-high net worth clients, and represents a sensible response to the increasingly specialized nature of the ultra high net worth segment.

Pacific Alternative Investment Management specializes in the management of institutional fund of hedge funds and currently manages over $7 billion for clients including private and public pension plans, foundations, endowments and other financial institutions.

Pacific's new venture with Citigroup Global Wealth Management, which will operate under the name Global Hedge Strategies, will focus on the ultra high net worth (UHNW) segment, offering custom hedge fund of fund portfolio management services. The alliance brings Pacific's knowledge of providing specialist hedge fund management to institutions into the ultra-high net worth market, reflecting a key trend among very wealthy individuals who are increasingly looking to receive the same kind of bespoke wealth management service as institutional players.

Citigroup [C] is the world's leading financial services provider, with more than 560 private bankers and 12,000 financial consultants overseeing more than $1.2 trillion in assets under management. This makes the Pacific deal particularly significant, as it demonstrates that, when it comes to meeting the needs of UHNW clients, even a giant on the scale of Citigroup needs to bring in an outside provider to ensure the requisite service standards can be delivered.

Given the increasingly institutionalized nature of high net worth investors in recent years and the trend towards hedge fund investment, such a partnership makes sense for Citigroup. The joint venture enables the firm to expand its expertise in this investment area without dedicating significant internal resources to building up in-house expertise. The tie-up also mitigates the risk of setting up an in-house operation which fails to provide the kind of quality that external providers can offer.

This agreement throws down a marker to other players in the wealth management arena by illustrating that, when dealing with the very rich, size is not everything. Allying with a specialist such as Pacific enables wealth managers to provide a tailored, credible proposition that meets the specific needs of this growing client base.

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