Another pair of Citigroup fixed-income executives is to set up its own hedge fund shop.

Jeff Jacob and John Humphrey, who run the global special situations group they established at Citi four years ago, will leave the firm in about two months. Citi is splitting up their proprietary-trading desk, which focuses on distressed corporate bonds and loans, and restructuring the group to focus on customer trading. The move is just one of a variety of risk-cutting moves by Citi, which has taken some $43 billion in writedowns and losses resulting from the credit crisis.

Jacob and Humphrey, who came to Citi in 2004 from Merrill Lynch, will launch their distressed-debt hedge fund early next year. The fund will be seeded by Citi, although the terms of that investment are still being negotiated, though all of its current assets will remain with Citi.

About six or seven members of the pair’s 20-strong team at Citi will join the new venture, according to published reports.

Citi is assuring the group’s customers that they will not be affected by the changes. As part of the restructuring, the group has been winding down some of its assets, though it denies that their has been a fire-sale.

Two former Citi fixed-income heads, Randy Barker and Geoff Coley, are also setting up a distressed-debt hedge fund.