Citigroup, Inc (NYSE: C) to Transfer Management of Private Equity Funds

Citigroup, Inc (NYSE: C) will transfer management of various in-house private equity funds to StepStone Group, LLC and sell its interest in the funds to Lexington Partners Inc. as part of an ongoing effort to shrink the New York-based banks assets.

La Jolla, CA-based StepStone will take over managing $4 billion in fund-of-funds and buyout co-investments previously operated by Citigroup, Inc (NYSE: C)’s private equity unit. Lexington, based in New York, will purchase Citigroup, Inc (NYSE: C)’s interests in the funds. The deal is expected to be finalized during the fourth quarter, but terms were not disclosed..

Citigroup, Inc (NYSE: C)’s “Citi Private Equity” division was formed in 2000 and had about $10 billion under its management at the end of 2009.

Citi CEO Vikram Pandit marked a number of the company’s businesses, including Citi Private Equity, for sale or shut down in early 2009.  “Citi will continue to pursue opportunities to divest non- core assets,” said the Citigroup in a statement.  The deal will reduce the size of Citigroup’s balance sheet by $1.1 billion.

According to a statement, a “significant number” of employees form Citi Private Equity will join either StepStone or Lexington. Others will remain with Citigroup.

Citigroup, Inc (NYSE: C) plants to retain management of employee investment funds which were managed by Citi Private Equity. The bank also will retain “certain proprietary interests” in the employee funds.