Lehman plans a private-equity IPO

Lehman Bros. Holdings Inc. plans a $500-million initial public offering of a private-equity fund next month, even after similar pools struggled to return investors’ money.

The fund, which New York-based Lehman plans to begin marketing June 6, will invest with outside private-equity managers, said two people with direct knowledge of the plans. Shares of Lehman Brothers Private Equity Partners will be listed on Euronext Amsterdam, said the people, who declined to be identified.

Lehman may need to convince buyers that its fund will beat the record of publicly traded buyout funds operated by Kohlberg Kravis Roberts & Co. and Leon Black’s Apollo Management. Shares of those funds have lagged behind global stocks. Investors are wary because the pools can take years to deliver returns and are difficult to monitor, said Francesco Fonzi at Credit Suisse Group.

At the end of trading Wednesday in Amsterdam, the share price of KKR Private Equity Investors was 6.4% below its May 2006 IPO price. The fund invests mostly in KKR’s buyouts.

AP Alternative Assets, New York-based Apollo’s publicly traded fund, was 3.5% above its August IPO price. It invests half its assets in private equity and the rest in stocks and bonds.

Both stocks have trailed the Morgan Stanley Capital International World index, which has gained 17% since May 2006.

Lehman’s plans differ from those of Blackstone Group, which is set to sell a stake in its management company through an IPO this year on the New York Stock Exchange.