UPDATE 1-Citi's Falcon hedge fund head to leave

(Changes sourcing, adds Citi comment)

NEW YORK, May 21 (Reuters) - The head of Citigroup Inc's (C.N: Quote, Profile, Research, Stock Buzz) troubled Falcon Strategies hedge fund is leaving after spending nearly two decades at the company, according to an internal memo obtained by Reuters.

Reaz Islam is leaving Citi's alternative investments unit, according to the memo, dated Tuesday. Islam will, however, remain at the unit "for a transition period."

Falcon Strategies, a fixed-income hedge fund, lost more than 75 percent of its value, according to the Wall Street Journal, which first reported the news.

Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) and Fifth Third Bancorp (FITB.O: Quote, Profile, Research, Stock Buzz) have disclosed losses from investments in the fund.

"For most of the last 12 years, (Islam) was responsible for building a client franchise through the development and management of numerous innovative investment strategies as the leader of the Citi Fixed Income Alternatives team," the memo said.

"We thank Reaz for his leadership, contributions and professionalism, especially during the very difficult markets of the last nine months," it said.

Jon Diat, a spokesman for Citi's hedge fund businesses, confirmed the contents of the memo but declined further comment. (Reporting by Paritosh Bansal and Joseph Giannone; Editing by Gary Hill, Leslie Gevirtz)