Jan 18 (Reuters) - Jefferies Financial Group Inc (JEF.N) is abandoning an effort to raise a $1 billion fund to buy stakes in private equity fund managers, giving up on a niche and lucrative corner of asset management, people familiar with the matter said. It is a blow to Jefferies" Leucadia Asset Management division, which offers alternative investment products such as private equity. The asset management business reported a 52% drop in net revenues in the three months to the end of November to $43 million, citing lower investment returns. Leucadia Asset Management partnered in 2019 with Stonyrock Partners LP, a private equity firm founded by Blackstone Inc (BX.N) and Carlyle Group Inc (CG.O) veterans, to raise the fund to invest in private equity fund manager stakes. Dubbed Stonyrock Alt Fund I, the fund was seeking to raise $1 billion but had amassed only $38 million as of April 2021, according to a regulatory filing at the time. The sources requested anonymity because the matter is confidential. A Jefferies spokesperson declined to comment. Stonyrock executives did not immediately respond to requests for comment. Investors are becoming increasingly skeptical that there are enough attractive opportunities to acquire stakes in private equity firms to support the number of dedicated funds that have launched with a focus on this strategy. The market for private equity fund manager stakes is dominated by a few big firms including Blue Owl Capital Inc (OWL.N) through its Dyal franchise, Blackstone Inc (BX.N) and Petershill Partners, a unit of Goldman Sachs Group Inc (GS.N). A handful of other firms, including Investcorp, Bonaccord Capital and Hunter Point Capital, compete by snapping up the interests of mostly middle-market managers. Stonyrock and Jefferies made at least one investment together - the acquisition in 2019 of a stake in Oak Hill Capital, a Stamford, Connecticut-based private equity firm with about $9 billion in assets under management. Jefferies funded that investment through its balance sheet, one of the sources said. Capital that investors committed to Stonyrock Alt Fund I will be returned to them, the sources said. Stonyrock Partners was founded in 2018 by Craig Schortzmann, a former executive in Blackstone"s private equity fund manager stakes unit, and Sean Gallary, who ran a similar division for Carlyle Group (CG.O) for about a year, according to his LinkedIn page. Leucadia Asset Management was launched in 2013 and has $37 billion in assets under management, including in hedge funds and corporate credit.