CITIGROUP Inc's team that invests in distressed corporate bonds and loans is being broken up as its leaders leave to start a hedge fund later this year, said people familiar with the matter.

The new fund will be run by Jeff Jacob and John Humphrey, who set up Citigroup's global special situations group in 2004. Citigroup will invest in the venture, one of the people told Bloomberg News.

Jacob and Humphrey will depart in about two months with six or seven members of their team, which has about 20 people. The group's assets will remain at Citigroup, where some will be placed in a customer-trading group's inventory and some will go into a new principal-investing division, the person said.

"We have decided to restructure our Global Special Situations Group to maximize significant opportunities in the global distressed sector," Citigroup said.(Shanghai Daily)