Will Citi sell its core hedge fund business?

According to the Wall Street Journal report, Citigroup is in talks with New York-based SkyBridge Capital to sell its $4 billion core hedge fund business.

At present, Citi is in the process of selling about $1 billion of hedge fund investments, $2.5 billion in hedge fund assets that it advises directly, and $500 million worth of investments in small hedge funds, which cited people familiar with the talks.

Last year Citi had plans to offload billions worth of non-core assets amidst the global financial crisis and the US government taking an ownership stake in the bank.

Last year, bank’s core fund-of-fund investments were up about 21% in 2009, slightly better than average returns of hedge funds worldwide.

The Citi team managing the $4 billion in assets is expected to keep their jobs. SkyBridge has historically taken a share of the fees the managers get.