Why 2008 was a good year

While many firms were happy to see the back of 2008, private equity consultant StepStone Group can look back with some fond memories.

Last year, it was hired by some limited partners of Lehman Brothers' private equity funds to advise them through the firm's bankruptcy. The choice was significant because other Lehman LPs chose traditional investment banks to guide them through the sales.

?Lehman LPs needed an adviser to assist them in the process of evaluating the financial aspects of the proposed sale of the Lehman Merchant Banking general partner. We were engaged to serve in this role,? says Monte Brem, co-founder and chief executive of StepStone.

According to a source with knowledge of the situation: ?Some of the other Lehman funds elected to use investment banks rather than specialists like StepStone. In this case, the Lehman LPs decided that it would be preferable to hire a financial adviser that had specific expertise with respect to the structuring and evaluation of private equity funds. Having a specialist adviser was a better fit for their needs.?

Lehman is spinning out its merchant banking buyout funds in a management buyout. As part of the deal, LPs in Lehman's most recent $3.3 billion buyout fund were given the ability to reduce unfunded commitments by up to 25%. The company also is selling its real estate and venture funds, and expects to close a deal on its venture funds in the first quarter.

The Lehman mandate was significant for the young StepStone outfit, which was founded in 2006 by Brem, Thomas Keck and Jose Fernandez after Brem left established advisory firm Pacific Corporate Group.

In its two years of existence, StepStone has honed a client list including the Kuwait Investment Authority, the George Kaiser Family Foundation, the Los Angeles Fire and Police Pensions and the State of Wisconsin Investment Board.

The firm is now making a big push into secondaries with its hiring last month of James Gamett as managing director and head of secondary investments, a newly created position.

?Currently, secondaries is a particularly attractive area. If you're trying to get exposure to private equity, you can buy in at a discount to what we think are long-term asset values,? says Brem.