By Rebecca Ungarino

Citigroup is selling a unit that houses some 180 private-credit, private-equity, infrastructure, and other alternative-asset funds to the big privately held financial-tech company iCapital, the two firms said.

The deal comes as banks seek to bulk up expanded menus of pricey alternative investments for rich clients as those markets heat up, and as 12-year-old iCapital, led by a former Goldman Sachs partner, increasingly becomes core to that ecosystem.

As part of the sale, 20 Citi employees are set to join New York-based iCapital, which has some 1,800 employees. The firms declined to specify the deal's terms or the total assets that iCapital is set to acquire through the platform, called Citi Global Alternatives. iCapital will take over those funds' operations and management while Citi will remain the funds' investment advisor, originating and vetting investments for wealth management clients.

Lawrence Calcano, chairman and chief executive of iCapital, said in an interview with Barron's that, for its feeder funds, Citi was looking for "scale, a partner who will both automate and drive the cost down for their clients -- which we're focused on and committed to doing -- and making those products as attractive as possible to advisors and clients."

Feeder funds pull in capital from different investors, funneling that money to private-equity, hedge funds, and other types of investments. In recent years iCapital has acquired feeder funds from wealth management heavyweights Wells Fargo, Bank of America, and UBS, handling those platforms' operations. The deal with Citi marks iCapital's 14th back-book acquisition and its 23rd acquisition overall.

Fund managers in the alternative-asset space like feeder funds because they can draw in capital from wealthy individuals who might not be able to invest alone due to high investment minimums. Pooled with other people, though, they can get access.

Drawbacks to the popular structure include limitations that dog private markets broadly: agreements to lock up money for long stretches of time, even if investors want to pull their money sooner, and what can be limited visibility into the primary fund's underlying assets.

The group iCapital is acquiring is part of Citi's alternatives and investment manager solutions business, led by longtime Citi executive Daniel O'Donnell. He reports to Keith Glenfield, who heads up the investment solutions business globally. Glenfield was hired last year by Andy Sieg, the former head of Merrill Lynch who runs Citi's global wealth division and has made a series of hires and changes in an effort to improve the business.

"The business had to be more fit," Sieg said at an industry conference held by Bank of America in February, pointing to progress like revenue growth and lower expenses. "We had to get focused, no time for hobbies -- have the business emphasize investments as the key growth lever."

O'Donnell told Barron's that working with iCapital "allows us to simplify our operating model via the sale of the feeder fund platform," and benefit from iCapital's tech offerings. Citi is getting a dedicated sales and client service team at iCapital, too, the companies said. The deal is expected to close by the end of the second quarter. Citi advised itself on the deal, and iCapital didn't use outside financial advisors.

New York-based Citi has made other changes to its wealth business as it embarks on a wider turnaround and slimming down across the firm, led by Chief Executive Jane Fraser.

Last year it sold its trust business to JTC, Barron's reported, a firm based on the English Channel island of Jersey. Like Citi's deal with iCapital, Citi has continued to provide investment management services to clients while JTC handles more administrative functions.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com

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May 13, 2025 08:30 ET (12:30 GMT)

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