Citigroup announced Tuesday that it plans to divest its private equity fund of funds and co-investments businesses.

The New York-based company said it has entered into a definitive agreement to transfer the management and certain proprietary interests in its fund of funds, mezzanine funds, feeder funds and co-investment businesses to StepStone Group LLC and Lexington Partners.

StepStone, which provides customized private equity investment management and advisory services, will provide ongoing management and advisory services for the co-investment businesses’ $4 billion fund of funds, feeder and co-investment funds.

Lexington, which is a global private equity sponsor, will acquire a portion of Citi’s proprietary capital investments in the various funds and provide oversight for the co-investment portion of the businesses.

The price of the deal, which is expected to close early in the fourth quarter, was not disclosed.

The businesses, which include investments in private equity funds, co-investments in buy-outs and mezzanine investments in middle market companies, are managed by professionals who have invested approximately $2 billion on behalf of Citi’s proprietary accounts and approximately $8 billion for third-party clients.

According to a press release, most of the employees in the businesses are expected to join StepStone and Lexington and some will remain at Citi.

This transaction is part of Citi’s strategy to reduce its assets and businesses within Citi Holdings, its portfolio of non-core operating businesses and assets. Citi said that it plans to continue to divest non-core assets.

When this deal is completed, GAAP assets in Citi Holdings will be reduced by approximately $1.1 billion.

Citi will retain its management of, and certain proprietary interests in, its employee funds. This transaction does not impact Citi Capital Advisors, which is part of Citicorp, Citi’s core business segment.