The market was awash with rumours last week that Citigroup was looking carefully at its asset management business. There were stories that the world's largest financial services company was considering a restructure, a spin-off or even an outright sale. The unit, which manages around $501bn in assets, could be worth as much as $10bn.
The New York Times reported late last week that Citigroup bosses were considering strategic options for the unit and could well decide to sell it off in order to invest the capital elsewhere in a bid to revive the flagging Citigroup share price.
As the newspaper points out, although Citigroup itself has not been specifically targeted by regulators over its mutual funds operations, the authorities have cracked down and some feel that red tape now makes it difficult for firms to run acceptably profitable investment management operations.
But Citigroup has reacted quickly to the rumours. Robert Willumstad, Citigroup's president and chief operating officer, sent a memo to staff on Friday, which said, in part, that 'we are committed to the asset management business, which we believe is an important part of our long-term strategy....Any rumours to the contrary are untrue'. The firm is also said to be introducing a new compensation plan in order to lock-in portfolio managers and other staff.
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