Citigroup Shuts Down Its $400 Million Proprietary Hedge Fund

(June 2, 2011) — In the midst of regulations aimed at thwarting proprietary trading, Citigroup has shut down a $400 million hedge fund that used the bank’s money to bet on stocks, and according to analysts, more hedge fund shutdowns may be on the way to satisfy regulatory requirements.

After naming fund manager Shakil Ahmed as the head of electronic market-making in April, Citi, the third-largest US bank by assets, closed the Quantitative Strategies fund, Bloomberg reported. The closure of the fund comes as Wall Street prepares to implement the Volcker Rule, a portion of the new financial regulatory law that outlaws banks from proprietary trading, or betting with their own capital.

Other banks including Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley have also been shutting down proprietary trading desks ahead of the Volcker Rule. Earlier this year, Goldman Sachs closed down a proprietary trading desk called Global Macro. Similarly, in January, Morgan Stanley said it would spin off a proprietary trading unit called Process Driven Trading into an independent firm. JPMorgan and Bank of America shuttered their proprietary trading desks in 2010.