US private equity fund Lone Star lays off most of its Asia staff: Sources

HONG KONG (REUTERS) - Texas-based private equity firm Lone Star Funds has laid off most of its investment team in Asia outside Japan in a major retreat from the region, three people familiar with the situation told Reuters.

The firm let go of around 25 investment professionals in its mainland China, Hong Kong and India offices on July 8, effective immediately, said two of the sources, who declined to be named due to the sensitivity of the issue.

The people accounted for nearly 60 per cent of its total workforce in the offices affected, one of the sources said.

The retreat mainly resulted from the firm not finding much investment opportunity in Asia outside Japan, the sources said.

It comes at a time when private equity dry powder in the region was at a record high of US$384.9 billion (S$526 billion) last month (June), according to data provider Preqin, with global and local firms raising ever bigger funds. And it shows that some of them are struggling to put the funds to work due to increasing competition and regulatory uncertainty.

Lone Star, which mainly focuses on distressed opportunities, has retained a small number of people in asset management in its Asia offices who manage the firm's current portfolio, the sources said.

A full retreat would happen after the firm exits all its investments in the region, they said.

A Lone Star spokesman referred to the firm's announcement on July 8 about global business consolidation and reorganisation in Asia. Under the new structure, Mr Donald Quintin and Mr Andre Collin, who are in charge of the firm's opportunities funds and commercial real estate funds in Europe and the Americas, respectively, would assume responsibilities for Asia.

Lone Star said in that announcement it had made other changes to streamline Asia operations and realigned its staffing levels in the region, without mentioning details.

The spokesman declined to comment further.

Lone Star, first established in 1995, set up its Asia offices outside Japan only in recent years with its regional headquarters in Hong Kong, said one of the sources. It manages three types of funds - the commercial real estate fund, the opportunity fund and the United States residential mortgage fund.

It raised US$4.6 billion in the global Lone Star Real Estate Fund VI and US$8.1 billion in the Lone Star Fund XI in 2019. Most recently, it closed a US$759 million value-add fund in August last year, according to the firm's website.

In an internal e-mail dated July 9, which Reuters viewed, Lone Star president and chief legal officer Bill Young also announced the firm's former Asia president Tony Messina will take a new role as senior managing director, origination, on its commercial real estate platform.

Mr Young did not mention the layoffs or the reason behind the reshuffle in the e-mail.

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