Citi adds Metalmark to alternatives group

The world's largest bank, now led by a former Morgan Stanley pro, has again bolstered its alternatives platform by snapping up a Morgan Stanley spin-out.

Citi has absorbed yet another Morgan Stanley spin-out with an agreement to add middle-market buyout shop Metalmark Capital to its alternative investing platform. The firms have not disclosed details of the arrangement, which has been described only as a “strategic relationship” by Metalmark.

The arrangement enables Metalmark to “leverage Citi’s deal flow, institutional banking platform, capital base and world-class intellectual capital” as well as attract and retain top talent, the firm said in a statement.

The move comes little over a year after the world’s largest bank spun out an in-house buyout team now called Court Square Capital Partners, and just five months after Citi paid an estimated $800 million for another Morgan Stanley spin-out, Old Lane Partners. Some of the co-founders of Old Lane, a $4.5 billion hedge and private equity fund manager, now lead Citi: Vikram Pandit was today named as the bank's chief executive officer, and John Havens is president of Citi Alternative Investments, whose divisions include Citi Private Equity, Citi Venture Capital and Citi Venture Capital International.

Yesterday, Havens penned an internal memo announcing the Metalmark deal, noting that the firm employs 30 professionals based in New York, and manages several North American-focussed funds. Most of these funds were raised while the group was still captive at Morgan Stanley, and will continue to be managed by Metalmark from within Citi, according to a Metalmark statement. A spokeswoman for Morgan Stanley declined comment. Metalmark also manages Metalmark Capital Partners, a $1.2 billion fund currently two-thirds invested, that was established following the firm’s founding, according to a Citi spokesman. 

Metalmark, Havens said, “has built a cohesive culture of disciplined investing in high-end, middle-market control investments with a proven track record of success. The top-tier investment team also fills a product gap for CAI by being a developed market private equity investor that has a scalable client platform.”  

Metalmark chairman and chief executive Howard Hoffen has been named a managing director, will join CAI’s management committee, and will report directly to Havens, according to the memo. Havens noted Metalmark’s six other managing directors – Leigh Abramson, Kenneth Clifford, Michael Hoffman, Fazle Husain, Gregory Myers and Jeffrey Siegal – comprised the core investment team of Morgan Stanley Private Equity and Morgan Stanley Capital Partners, but did not indicate if the six would take on new roles within Citi.

A spokesman for the bank said Metalmark will remain a separate business in its private equity platform, not to be combined with any other groups.