Jefferies’ banking record overshadowed by asset management
Its asset-management unit revenue slumped more than 50% in the fiscal third quarter.
Jefferies Financial Group's asset-management unit experienced a significant decline in revenue, plummeting over 50% in the fiscal third quarter, while its investment banking and equity trading divisions reported record quarters. Net revenue for the asset-management business amounted to US$85.6 million (S$109.4 million) in the three months ending August, down from nearly US$177 million in the same period a year earlier.
The asset-management unit's struggles are primarily attributed to losing bets on First Brands Group and Radiant World, which it was exposed to through Leucadia Asset Management's Point Bonita fund. Despite the decline, Jefferies' investment bank and equity-trading desks boasted robust performance, with revenue rising 17% to US$1.3 billion, driven by gains in advisory and underwriting services.
Analysts noted that the asset-management business faced challenges due to reduced investment returns and a lack of writedowns on its Radiant World investment, leaving bearish investors concerned about further declines. Jefferies CEO Richard Handler and President Brian Friedman expressed confidence in the long-term outlook, emphasizing ongoing efforts to reposition the asset-management business and reduce capital allocation to certain funds.
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