Citigroup Inc. announced Wednesday that it is selling three alternative investment units to Skybridge Capital LLC, a hedge-fund seeding firm.

The three business units—a fund of hedge funds, hedge fund seeding and hedge fund advisory businesses—are from Citi Alternative Investment LLC and collectively have $4.2 billion of assets under management. The price of the deal was not disclosed.

New York-based Skybridge said the acquisition will make it “one of the leading global alternative asset managers.” When the deal is completed later this year, it will have $5.6 billion in assets under management. Skybridge, which was founded in 2005, plans to use the acquisition to expand from its traditional hedge-fund seeding business, which invests in emerging hedge fund managers, into funds of hedge funds, which invest in single hedge-fund managers.

Raymond Nolte, who ran the three businesses for Citi [C], will join SkyBridge as a managing director and chief investment officer when the deal is completed. He will bring with him a team of 20 people from Citi.

The businesses being acquired are units of Citi Holdings, which is made up of Citi's noncore assets and businesses that company is trying to divest. Citi had managed hedge funds since 1994.