The Rohatyn Group, a New York-based asset management firm that invests in various emerging markets, agreed to merge with the London private equity arm of Citigroup Inc.

The transaction combines Rohatyn, which is known as TRG Management LP, with Citi Venture Capital International, a $4.3 billion private equity fund. The firm will continue to be headed by Nicholas Rohatyn (pictured), the son of famed banker Felix Rohatyn, a Lazard Frères veteran best known for helping to prevent the bankruptcy of New York City in the 1970s and who also served as United States Ambassador to France.

Terms of the deal were not disclosed.

Citi's transferring of the business management and fiduciary responsibilities to TRG, underscores the bank’s attempts to comply with new regulations that restrict banks' holdings of alternative investments. The Dodd-Frank financial reform law of 2010 is expected to be implemented in a few years and ultimately prohibits banks from investing in any fund they do not manage. Also, banks are divesting as a means of seeking more stable forms of revenue, such as management fees.

JPMorgan Chase & Co., for example, recently announced that its private equity unit, One Equity Partners, would be independent.

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