Fidelity shutters fledgling $500m buyout unit

The private equity unit’s employees will all be let go except for its head Rob Ketterson, who will continue to run Fidelity Ventures.

Fidelity has shut down its $500 million buyout shop, Fidelity Equity Partners, because of lack of debt financing in the market for investments.

The buyout shop, founded in 2007, employs 14 people and is funded with about $500 million from mutual fund giant Fidelity and Fidelity employees. The employees will be let go, except for the buyout shop’s chief, Rob Ketterson, who also runs Fidelity Ventures, a role he will continue to fill.

Fidelity Ventures will not be affected by the closure of the buyout shop, a Fidelity spokesman said.
“This is a reflection of the state of the economy; we felt this asset class was not one we wanted to pursue,” the spokesman said. “Debt financing is hard to find.” Fidelity Ventures is moving forward and is actively looking for deals, the spokesman said.

Fidelity will retain ownership stakes in the firm’s portfolio companies, which include Asset Control, a data management software company and Production Control Services, which supplies systems to improve production efficiency of gas and oil wells.

The firm, which has offices in Boston and London, also made a £33 million secondary buyout last summer of Picsolve International, a photographic systems provider for amusement parks, and paid $37 million for a minority stake in Complinet, a London-based provider of online regulatory solutions for financial firms in March 2008.

Fidelity declined to comment about how much of the fund was spent and what will happen to any remaining capital in the fund.

Earlier this month, Fidelity Investments, one of the world’s largest retail fund management groups, entered an agreement with Kohlberg Kravis Roberts to give its retail and institutional clients access to initial public offerings of KKR portfolio companies.

Fidelity customers will have exclusive access to shares allocated to KKR in all US-based public offerings for which KKR Capital Markets – a division of the buyout firm – is acting as underwriter.