NEW YORK (Bloomberg) — Citigroup Inc., the biggest US bank, yesterday agreed to buy Bisys Group Inc. for $1.47 billion, broadening the services it offers hedge funds and private-equity firms to include accounting and other administrative tasks.Bisys investors will receive $11.85 a share and a special dividend of 15 cents a share, New York-based Citigroup said in a statement. The deal values Bisys’s stock at 3.3 percent more than its closing price yesterday. Citigroup said it will sell the Roseland, New Jersey-based company’s retirement and insurance units to affiliates of buyout firm J.C. Flowers & Co., making the net cost of the deal $800 million.

Citigroup Chief Executive Officer Charles Prince has pursued more than $16 billion of acquisitions since April of last year, when US regulators lifted a 13-month ban on deals. Bisys, whose shares fell about 25 percent over the past year, may help Citigroup compete against rivals such as JPMorgan Chase & Co. in managing and serving so-called alternative funds, the fastest- growing segment of the money-management industry.

“It’s catch-up, and ‘How can we buy as much exposure as we can, right at a time when you have the alternative investment class exploding,”’ said William Smith, president of Smith Asset Management in New York, which owns about 50,000 Citigroup shares.

Hedge funds, which cater to institutional investors and wealthy people, attracted $60 billion of new money in the first quarter, almost doubling the 2006 growth rate. Fund managers are seeking more services as investors and lawmakers demand greater oversight of the private investment pools.

Bisys has a substantial Bermuda operation, having moved to the Island in 2002 when it bought the Hemisphere Group of Companies from troubled insurance group Mutual Risk Management for $110 million.

Citigroup also has a hedge fund administration presence on the Island, having bought the 0Forum Financial Group in November, 2003.

Citigroup’s shares rose five cents to $54.25 at 10:51 a.m. in New York Stock Exchange composite trading. Bisys stock rose 19 cents to $11.66.

Bisys serves 1,200 hedge funds, 400 private-equity funds and 80 mutual funds, handling administrative tasks including accounting, interactions with shareholders, legal compliance and assistance with regulators, according to the company’s 2006 annual report.

The sale concludes a nine-month auction that began in August when Bisys’s former chief executive officer, Russell Fradin, quit to take a job at another company. Bisys appointed Chairman Robert Casale to serve as interim CEO and said in a statement it hired Bear Stearns to help “explore strategic alternatives” to increase shareholder value.

Bisys “will extend our full-service client platform and reaffirm our focus on serving the needs of high-growth markets,” Michael Klein, co-president of Citigroup’s investment-banking division, said in the statement yesterday.

The business will become a part of Citigroup’s Global Transaction Services group, which provides cash management for banks and businesses and processes stock and bond trades. The unit contributed $1.65 billion of revenue in the first quarter, or 6.5 percent of the bank’s total.

Bisys, which hasn’t reported first-quarter earnings, had about $216.4 million of revenue during the first three months of this year, based on the average estimate of four analysts surveyed by Bloomberg.

Citigroup said it also plans to offer banking, trading and investment-banking services to Bisys’s hedge-fund and private- equity clients. Citigroup’s investment bankers advised Bisys on the transaction.

The deal is expected to close in the second half of this year and is subject to approval by Bisys shareholders and regulators in the US, Ireland and Bermuda, Citigroup said. The acquisition won’t affect earnings in the first year and will add to profit thereafter, the bank said.

In September, the company agreed to pay $21 million to settle allegations by the US Securities and Exchange Commission that it helped mutual funds use fee kickbacks to defraud investors.