Citigroup Inc. is selling off some of its private equity businesses as it continues to get out of non-core niches, the U.S. banking giant said Tuesday.

Citi said that it has entered into a definitive agreement to transfer management of, and its proprietary interests in, its fund of funds, mezzanine funds, feeder funds and co-investment businesses to StepStone Group LLC and Lexington Partners for an undisclosed sum. The businesses, which include investments in private equity funds, co-investments in buy-outs and mezzanine investments in middle market companies, have invested approximately US$2 billion for Citi’s proprietary accounts and approximately US$8 billion for third-party clients. A significant number of the affected employees are expected to join StepStone and Lexington and some will remain at Citi.

StepStone, a provider of customized private equity investment management and advisory services, will provide ongoing management and advisory services for the funds. Lexington, a private equity sponsor, will acquire a portion of Citi’s proprietary capital investments in the various funds and provide oversight for the co-investment portion of the businesses. The transaction is expected to close early in the fourth quarter, subject to customary closing conditions.

Citi says the transaction is part of its strategy to reduce the assets and businesses within Citi Holdings, its portfolio of non-core operating businesses and assets, while working to generate long-term profitability and growth from the core businesses within Citicorp. Citi adds that it will continue to pursue opportunities to divest non-core assets.

Citi will retain its management of, and certain proprietary interests in, its employee funds. This transaction does not impact Citi Capital Advisors, which is part of Citicorp, Citi’s core business segment.

IE