One of the US's biggest hedge funds, Citadel, has agreed to pump $2.5 billion into the troubled online brokerage ETrade in move that will help shore up its balance sheet.
The deal, if approved by regulators, will enable Chicago-based Citadel to amass a 20% shareholding in ETrade.
The online broker's share price has plummeted in recent weeks as it has struggled to get a grip on its stressed portfolio which includes a large chunk of mortgage-backed securities.
ETrade also announced its chief executive officer, Mitchell Caplan, had relinquished his post and had been replaced by an acting CEO, R Jarrett Lilien.
Like other financial firms in recent months, ETrade has been forced to write down the value of its portfolio of mortgage-backed securities. The value of these securities has been hit by a lingering housing slump and rising home foreclosures.
Although primarily known for being an online brokerage, ETrade holds a substantial amount of mortgage-backed securities. Under the terms of the deal, Citadel will take over ownership of some of ETrade's problem securities.
