06/17/2009

Fidelity Cutting Off Private Equity Unit

Fidelity Investments is shutting down its buyout division.

The move comes amid a shift in strategy at the mutual fund giant, which is apparently trying to shed some non-core businesses. It is aiming for the end of July to shutter the unit, known as Fidelity Equity Partners.

The group was established in early 2007. Its business consists of a single account that has used $500 million of in-house capital to invest in four mid-size portfolio companies in North America and Europe - positions that will now gradually unwind.

Although the investments apparently are performing well, Fidelity Equity hasn't seen much deal-making activity lately. In fact, the unit last added to its holdings in March 2008, when it bought regulatory-compliance software maker Complinet Group.

Fidelity Equity has 13 investment staffers, all but one of whom will leave with the group's shutdown. Those slated to go are partners Brooke Ablon, Ian Blasco and Gray Hall in Boston; partners Nick Martin and Sebastian McKinlay in London; and seven junior professionals.

Blasco was the latest partner to arrive, coming on board a year ago from Bain Capital to cover investments in technology, communications and business-service companies.

The only individual set to stay behind is Boston-based partner Rob Ketterson, who also serves as managing partner of Fidelity Equity affiliate Fidelity Ventures.

By keeping him in his Fidelity Ventures role, Fidelity is proving wrong some recent chatter that the company was scaling back the group's activities due to a general weakening of conditions in the venture capital sector. There is also talk that more hires are imminent for the unit. Fidelity Ventures pursues early-stage and growth-equity investments in technology companies in North America and Europe, using $1.5 billion of in-house money. Earlier this month, the shop made a follow-up investment in online European ticket exchange SeatWave.

All told, Fidelity's various units had $1.2 trillion under management as of Feb. 28.