Buyout Titan Weighs Hedge-Fund Revamp

Leveraged-buyout legend Thomas H. Lee, who barreled into hedge funds when the market was booming, is considering shrinking or even shutting down two funds that had $1.5 billion in assets after suffering losses of about 40% this year, people familiar with the situation said.

The 64-year-old Mr. Lee's battered hedge funds farmed out investor money to about 110 other funds, including SAC Capital Advisors and D.E. Shaw Group. While he designed the so-called funds-of-funds to have low volatility with steady, consistent returns, Mr. Lee borrowed heavily to multiply the size of his bets, piling up debt of as much as $3.2 billion, these people said.