JC Flowers has had to write down the value of $6.5 billion in investments by 30 percent, for an unrealised loss of about $2 billion, according to a report in the Wall Street Journal.
JC Flowers closed its second fund on $7 billion in 2007, and has already invested about $6.5 billion. The firm closed its third fund on $2.5 billion last month.
The news follows the announcement of a $68 billion German government-led bailout of Hypo Real Estate; JC Flowers led an investors group that bought a 24 percent stake in Hypo for $1.7 billion in June, since which the company's stock has dropped more than 75 percent.
JC Flowers did not respond to a request for comment Monday.
JC Flowers' founder, Christopher Flowers, recently got approval from US federal regulators to buy First National Bank of Cainesville, a small Missouri bank, for $14 million. Flowers said he may use the bank as a platform for acquisitions of other troubled or failed depository institutions.
Other private equity firms have felt the pain of investment losses in the last few months. TPG, led by David Bonderman, saw its $1.3 billion investment in Washington Mutual wiped out after the bank was seized by federal authorities.