Carlyle’s financial services head to lead Citi Alternatives

Ned Kelly will leave Carlyle to become president of Citi Alternative Investments, a division CEO Vikram Pandit has worked to build up since he took control of the bank in November.

Citi has hired away The Carlyle Group’s Ned Kelly to be president of its alternative investments group. Kelly was previously co-head of Carlyle’s Global Financial Services group.

Kelly joined Carlyle in June 2007 to launch the financial services group along with David Zweiner, formerly president of Hartford Financial Services Group’s property and casualty operations. The group focusses on making investments in the financial services sectors, including banking and insurance. A Carlyle spokesman said the remaining members of the team will step in to take over Kelly’s responsibilities.

“We’re disappointed Ned left,” the spokesman said, “but we have a good team in place, and at this point we’re weighing whether or not we need to replace him.”

Before coming to Carlyle, Kelly was a vice chairman in The PNC Financial Services Group following PNC’s acquisition of Mercantile Bankshares in March 2007. Kelly had been chairman, chief executive and president of Mercantile Bankshares since March 2001. Before, he was a managing director at JPMorgan Chase, where he was head of global financial institutions and co-head of investment banking client management. He began his career at law firm Davis Polk & Wardell, where he was a part of the financial institutions practice.

At Citi Kelly will report to John Havens, chief executive officer of Citi Alternative Investments. Havens was a colleague of Citi chief executive Vikram Pandit at Morgan Stanley; both men left in 2005 to form their own investment firm, Old Lane Partners. In July 2007 Citi acquired Old Lane for a rumoured $800 million. Old Lane added $4.5 billion in assets to Citi’s alternatives division.

Last October Citi combined its alternative investments and investment banking units into a single unit called Institutional Clients. Pandit was tapped to lead the combined unit, while Havens took the role of president and chief executive officer of the alternatives business.

When CEO Chuck Prince stepped down in November after the bank announced nearly $18 billion in write-downs, Pandit was tapped to replace him. Havens currently oversees the Institutional Clients group with Michael Klein and Jamie Forese, co-chief executives of the Markets & Banking Group.

Citi has been working to strengthen its alternatives offerings. The firm spun out its private equity division, now called Court Square Capital Partners, in late 2006, but soon after began to rebuild its private equity business with the acquisition of Old Lane. In December 2007, Citi acquired middle market buyout shop Metalmark Capital, itself a spinout from Morgan Stanley.

Kelly’s hire represents the latest step in the process. The addition of Kelly “will be of significant strategic importance as we continue to create one of the premier alternative investment firms in the world”, Havens said in an internal memo.