Citigroup has agreed to buy Old Lane, the hedge fund co-founded by Vikram Pandit, for a sum likely to exceed $600 million, according to reports.

The deal will bag the banking giant Mr Pandit, who could be a candidate to replace Charles Prince, the 57-year-old chief executive of Citigroup.

The Indian-born executive left Morgan Stanley 13 months ago after being passed over for a promotion that could have placed him in position to run the group in the future.

Since then Old Lane has raised more than $4 billion in assets under management.

The Wall Street Journal said that the acquisition was likely to unveiled before Citigroup’s annual meeting next week.

It added that Mr Pandit was likely to become chief executive of Citigroup’s alternative investments unit, the bank’s smallest division.

Mr Pandit was once considered a potential successor to Philip Purcell, the former Morgan Stanley chief executive, but he left the group as part of a wider exodus of senior staff.

He founded Old Lane with John Havens, a former global head of equities at Morgan Stanley.

Citigroup’s alternative investments unit has struggled and has been without a chief executive since the departure of Michael Carpenter 13 months ago.

Profits at the unit fell 11 per cent last year, or $1.28, on a 15 per cent fall in revenues to $2.9 billion (£1.5 billion).

Citigroup revealed this week that it intended to eliminate more than 17,000 jobs and relocate a further 9,500 from high-cost areas, such as New York and London, to Asia and Latin America in a cost-cutting exercise.

More than 8 per cent of Citigroup’s workers face redundancy, although the total number of positions to go will equal about 5 per cent of the global workforce of 327,000.

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