Citigroup is liquidating its Corporate Special Opportunities hedge fund after it lost 53 per cent of its value last month, marking the ninth time in recent months that the bank has had to close or rescue a fund in its alternative investment unit (CAI).

CSO, which managed almost $4.2bn at its peak, has a net asset value of about $58m and debt of about $880m, investors say. People familiar with the matter say investors are likely to receive no more than 10 cents on the dollar.

The fund faltered even though Citi supplied it with $450m in credit lines and equity infusions of about $320m. It also bought assets with a notional value of $1bn that it placed in the fund.

Investors in the fund - which invested mainly in debt backing European private equity deals - have not been allowed to withdraw their money for about a year as performance deteriorated. Losses for Citi could total hundreds of millions of dollars, according to people familiar with the matter.

Yesterday CAI already announced the unwinding of Falcon, a fixed income fund.