Citigroup Inc. is in talks to sell its $4bn hedge fund business to SkyBridge Capital LLC, a New York firm that invests in start-up fund managers.

An agreement is expected to be reached by the middle or end of next week. But no formal agreement has been negotiated yet and the talks could still fall apart.

Citi Alternative Investments has been managing funds-of-hedge-funds since 1994. The unit is led by Raymond Nolte and employs about 30 professionals.

The deal would not include Old Lane Funds, a hedge fund business launched by Vikram Pandit in 2006 and acquired by Citigroup in April 2007.