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Exclusive: Jefferies gives up on buyout fund manager investing business

by Mike Robinson

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© Reuters. FILE PHOTO – People walk past Jefferies Financial Group office in Manhattan, New York on December 8, 2021. REUTERS/Eduardo Munoz

By Chibuike Oguh

(Reuters] Jefferies Financial Group Inc. has abandoned its attempt to raise a $1B fund to acquire stakes of private equity fund manager’s, according to people who are familiar with the matter. It is giving up on a lucrative niche in asset management.

Jefferies Leucadia Asset Management division which offers private equity and alternative investment products, is affected. According to asset management, net revenue fell 52% to $43 Million in the three-months to November. This was due to lower investment returns.

Leucadia Asset Management partnered up with Stonyrock Partners LP (NYSE:) Inc. in 2019. Carlyle Group (NASDAQ:) Inc Veterans, raise funds to support private equity fund managers stakes

According to a regulatory filing, Stonyrock Alt Fund I was attempting to raise $1billion, but it had only amassed $38m as of April 20, 2021.

Sources requested anonymity due to the confidential nature of the matter. Jefferies spokespeople declined to comment. Stonyrock officials did not immediately reply to our requests for comment.

Investors have begun to doubt the attractiveness of acquiring stakes in private-equity firms. This is despite the fact that many dedicated funds are being launched that are focused on this strategy.

Blue Owl Capital Inc, Blackstone Inc, and Petershill Partners dominate the private equity market. Goldman Sachs Group Inc (NYSE:).

Some other firms like Investcorp and Bonaccord Capital are also competing to capture the interest of middle-market manager.

Jefferies and Stonyrock made at least one joint investment – Oak Hill Capital’s 2019 acquisition of a stake. Oak Hill Capital is a Stamford-based private equity company with approximately $9 billion under management. According to one source, Jefferies funded the purchase through its balance sheets.

According to sources, investors who have contributed capital to Stonyrock Alt Fund II will receive their money back.

Craig Schortzmann (an ex-executive in Blackstone’s stakes unit for private equity funds) and Sean Gallary (who ran a similar section for Carlyle Group over a period of about one year), founded Stonyrock Partners in 2018.

Leucadia Asset Management, which was established in 2013, has $37 billion of assets under management. This includes corporate credit and hedge funds.

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