A key objective of Citigroup’s $600 million acquisition of Old Lane, a hedge fund, was to lure its 50-year-old co-founder Vikram Pandit, according to Wall Street bankers.

Following the deal, Pandit will now head Citigroup’s $59 billion alternative investments group.

The profit-making unit, which runs hedge funds and real estate investment vehicles has been rudderless since with the departure of top executive Michael Carpenter last year.

Citigroup has been courting Pandit for months to fill up the key post which gives him a crack at the top job at the world’s biggest bank.

Gary Crittenden, who is Citigroup’s chief financial officer, is another possible contender for the job when Citi’s chief executive Charles Prince steps down.

Prince had recently quipped that the search for a new head of Citi’s alternative investments was an “opportunity to strengthen the bench of possible successors.”

While signalling last Friday that the Citigroup would buy Pandit’s hedge fund, Prince said; “This transaction is an investment as much as it is an acquisition. It is an investment in world-class talent at Old Lane; in a senior leadership team with a track record of building profitable businesses in institutional securities; and an investment in Vikram and John.” 

Pandit described the deal as “one that makes sense” and said “Citi’s network, financial depth, intellectual capital and infrastructure resources should allow us to continue to capture premium returns for our investors across all strategies. As part of Citigroup Alternative Investments, we look forward to leveraging those strengths, together with the tremendous platform we have already established at Old Lane, to deliver world class performance.”

The transaction, which is subject to customary regulatory reviews, is expected to close in the third quarter of this year.

Pandit who was born in Mumbai has been managing close to $5 billion for Old Lane clients, and his fund’s focus on India is alluring for Citigroup which sees India as a key driver for new business.

In November 2006, Old Lane closed a $500 million 10-year India-dedicated fund that invests in infrastructure, real estate and the corporate sector.

Old Lane generally puts down $5 million to $25 million for each new investment.

Pandit, a former head of Morgan Stanley’s institutional securities division, set up Old Lane with his old colleague John Havens, who had been Morgan Stanley’s head of equities.

Source : DNA India