Paradiso's team's return could position Smith Barney for big move to models. Citigroup's Global Wealth Management (GWM) division has agreed to buy Legg Mason Private Portfolio Group (LMPPG), manager of Legg Mason 's retail separately managed account (SMA) platform. Citi says the acquisition will give it "the technology and talent" to "improve operating efficiencies and increase customization of GWM client portfolios."

Terms of the deal -- in effect a partial buy-back -- weren't disclosed.

Baltimore-based Legg Mason inherited the biggest retail SMA program in the industry at the end of 2005 when it acquired Citi's asset-management business, since re-named ClearBridge Advisors. Early last spring, Legg Mason carved LMPPG out of ClearBridge to make its sub-advisory and overlay capabilities more readily available to other Legg Mason subsidiaries.

Overlay management is the process of aligning trading activity, managing cash flow and enhancing the overall tax efficiency of multiple-sleeve investment portfolios.

Maybe this, maybe that

LMPPG puts together and manages about $30 billion in multi-style, multi-class model-based accounts using strategies provided by ClearBridge as well as Legg Mason's Western Asset and Brandywine Global investment-management subsidiaries.

Now it seems that Citi's brokeage unit Smith Barney -- Legg Mason's biggest SMA-distribution partner and the biggest SMA distributor out there next to Merrill Lynch -- wants LMPPG's capabilities back in house.

This may come down to Citi's desire to bring overlay management -- much of which is dictated by client restrictions -- closer to the front office, says Alois Pirker, a senior analyst with Boston-based business consultancy Aite Group.

Or it could be a first move in a concerted shift at toward model-based portfolio management, and a chance to get an edge over its biggest rival.

Merrill said it planned "to transition to a model-based SMA platform about a year ago and is currently evaluating technology vendors for this platform," notes Pirker.

By acquiring LMPPG, which is run by Roger Paradiso, formerly a managing director with ClearBridge, and before that head of Citigroup Asset Management's multi-sleeve program -- may be able to position itself for broader adoption of model-based accounts before Merrill is.

Managers get lower fees from sponsors when they provide models instead of running live portfolios.

In any case the deal might not be good for Placemark Investments, the Wellesley, Mass.- and Dallas-based overlay manager that has been running UMAs for Smith Barney for the past several years.

Placemark declined to comment on Citi's plan to acquire LMPPG. Citi's GWM division includes Smith Barney, Citi Private Bank and Citi Investment Research. -FWR

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