The move represents the US bank's attempt to muscle in on the market for providing financial services to private equity firms and hedge funds, in which Credit Suisse and JP Morgan have made significant inroads.
Under the terms of the deal Citigroup will retain Bisys alternative investment and fund services units and merge them into its global transaction services unit.
Meanwhile, Bisys' insurance and retirement services units will be sold to JC Flowers for $645 million, reducing the bank's outlay to $800 million.
Commenting on the deal, Neeraj Sahai, global head of securities and fund services told Reuters: "Hedge funds, alternative investments and private equity is one of the fastest-growing segments in the managed money industry."
Bisys provides accounting services and ensures compliance with regulations for 3,000 mutual funds and 1,600 alternative investment funds.
Last year the New Jersey-based firm's net income stood at Â£232.2 million.