Citi offloads private markets funds unit in iCapital deal

Citigroup is transferring a key part of its alternatives business to iCapital, the fintech platform known for powering access to private investments, as the Wall Street bank continues to streamline its wealth management operations.

The deal involves Citi Global Alternatives, a platform housing more than 180 feeder funds that span private equity, private credit, venture capital, real estate, infrastructure, and hedge funds.

Under the agreement announced Tuesday, iCapital will take over the day-to-day management and operations of the platform, while Citi will stay on as investment advisor, providing ongoing guidance to wealth clients.

Financial terms were not disclosed, and the transaction is expected to close by the end of the second quarter.

Citi has a decades-long history of providing private market access to wealthy clients through partnerships with alternative firms. It's encountered at least one speed bump on that front, with one joint venture it struck in 2012 ultimately leading to disappointed billionaire clients and a bitter legal battle.

Its new arrangement with iCapital underscores growing reliance on third-party fintech providers to manage the operational complexity of alternative investments, which have become a bigger focus for high-net-worth portfolios despite their liquidity constraints and visibility limitations.

Citi’s move follows similar arrangements by other major wealth managers, including UBS, Bank of America, and Wells Fargo, which have all transferred alternative investment operations to iCapital in recent years.

Twenty employees from Citi’s alternative investments unit are reportedly joining iCapital as part of the transition. The fintech firm will also offer a dedicated team to support Citi’s global sales and service initiatives for alternative products.

"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," said Lawrence Calcano, chairman and chief executive of iCapital, in an interview with Barron’s.

Citi Global Alternatives was previously part of Citi’s broader investment manager solutions business, overseen by longtime executive Daniel O’Donnell. He reports to Keith Glenfield, who leads the global investment solutions unit. Both are part of the revamped management structure under Andy Sieg, who joined Citi from Merrill Lynch in 2023 to lead its global wealth division.

"Working with iCapital allows us to simplify our operating model via the sale of the feeder fund platform," O’Donnell told Barron’s, adding that the bank expects to benefit from iCapital’s technology stack. Citi will retain distribution responsibilities and continue advising clients on how alternatives fit within diversified portfolios.

Feeder funds, which aggregate capital from individual investors into larger alternative vehicles, have become a favored access point for private markets. While the structure lowers barriers for individual investors, it often comes with trade-offs such as longer lock-up periods and limited visibility into underlying assets.

The agreement marks iCapital’s 14th acquisition of a legacy fund platform and its 23rd overall deal. The company, founded in 2013, has grown into a central player in the alternatives ecosystem, with a workforce of about 1,800 employees.

The divestment follows a broader corporate repositioning at Citi, which includes selling non-core operations to refocus on core client services and improve profitability. Last year, the firm exited its trust business in a deal with JTC, with Citi continuing to provide investment management services while JTC assumed administrative duties.

The Wall Street giant has made other moves to slim down its operations over the past few years, including shuttering its muni-debt trading business in December 2023 and exiting from the distressed debt space the same month. Last August, the firm announced it was selling its trust administration and fiduciary services business.