Citi’s Private Equity Venture Ends in Disappointment and Legal Dispute

Citigroup Inc. once saw an opportunity to bridge the gap between its ultra-wealthy clients and private equity investments, launching an exclusive investment club in partnership with Silverfern Group, Bloomberg reports.

However, what began as a promising model ended in disappointed investors, underwhelming returns, and a legal battle over unpaid fees.

In 2012, Citi and Silverfern Group created the Silverfern Equity Club, designed to offer elite clients exclusive access to private equity deals. Citi provided access to its wealthy customers, while Silverfern managed the investments, with both parties sharing the fees.

The club targeted a select group of 39 ultra-high-net-worth individuals, securing $470 million in commitments from billionaire families, hedge fund managers, and tech entrepreneurs. At the time, Citi executives, including Jane Fraser, who led the bank’s private banking division, saw the partnership as a blueprint for future wealth management strategies.

Despite high expectations, issues emerged early in the partnership. While Citi’s clients expected flexibility to choose investments, Silverfern needed larger commitments to meet funding targets. Some wealthy clients made unexpectedly small investments, leading to frustration on Silverfern’s side.

In one email, Silverfern co-founder Clive Holmes expressed frustration that a client described as being “worth four times George Soros” only contributed $500,000 to a deal, exclaiming:

“My car cost more than this!”

Additionally, some of Silverfern’s investments, particularly in oil and gas, underperformed, further eroding confidence among Citi’s wealthy clients.

By 2016, Citi bankers had grown skeptical of Silverfern’s performance and the overall success of the club. That same year, Silverfern launched a new investment structure, which Citi distanced itself from, citing regulatory concerns. This move, according to Silverfern, discouraged investors from participating, accelerating the club’s decline.

In 2018, Silverfern stopped paying Citi its share of the fees, leading to a legal battle. Citi argued that the club’s failure was due to poor performance and dissatisfied clients, while Silverfern claimed Citi had actively undermined the partnership.

In February 2024, a New York judge ruled in Citi’s favor, ordering Silverfern to pay the bank $9 million in unpaid fees. Silverfern is appealing the decision.