Citigroup invested about $800mn of shareholder’s money in its own private-equity and hedge funds during the third quarter even as regulators seek to curtail the practice. The bank invested the money in “Citi-advised” funds while selling $1.1bn of separate hedge-fund and private-equity assets, the bank said in a Nov. 4 filing. This exemplifies the point of the Volcker rule, which aims to restrict banks that accept deposits from making bets with shareholder money. The proposed rule would prohibit the banks from owning more than 3% of hedge funds and private-equity funds and also from investing more than 3% of Tier 1 capital in the funds. The bank invested in funds managed by the Citi Capital Advisors unit, or CCA, which is run by former Morgan Stanley executives Jonathan Dorfman and James O’Brien.  CCA’s managers seek to gain from assets including European corporate debt, subprime mortgage bonds and Indian infrastructure while also betting on global trends and emerging-market bonds. CCA manages about $5bn of Citigroup’s money and oversees about $18.8bn in total. Citigroup classified the $800mn of investments as so-called Level 3 assets, according to the filing. These assets are difficult to value because market prices aren’t available and the bank has to rely on in-house models to calculate potential gains or losses. The bank had a net decrease in Level 3 investments of $1.3bn  for the quarter, the filing shows. For more information about the CCA, see Bloomberg's report: [Bloomberg, 11/7/11]