(Bloomberg) ? Billionaire Thomas H. Lee?s firm may delay raising a $7.5 billion buyout fund because of losses from the collapse of US futures broker Refco Inc., said a person familiar with his plans.

A fund managed by Thomas H. Lee Partners LP has been Refco?s biggest investor for more than a year and sustained losses of more than $275 million in the company?s bankruptcy this week. A New York court will hold a second day of hearings on selling Refco assets yesterday. The investment is Lee?s worst since his Boston-based firm lost about $400 million on Conseco Inc. after the US insurer filed for bankruptcy in 2002.

Lee, whose company was going to begin fund-raising by the end of the year, is considering whether to put that off, said the person, who declined to be identified. Lee, 61, doesn?t plan to be involved personally in raising money or managing the new fund, the person said.

?They have probably prudently put their fund-raising on hold,? said William Atwood, executive director of the $11 billion Illinois State Board of Investment in Chicago, which has $35 million invested with Lee?s firm.

The Lee fund invested $453 million in Refco in August 2004 and returned about $177 million to investors after selling part of its stake in the New York-based firm?s initial public offering in August.

Refco, the biggest independent US futures broker, collapsed within a week of announcing former chief executive Phillip R. Bennett had been placed on leave for covering up $430 million of uncollectible debts. Refco shares plunged 45 percent to $15.60 on October 10, the day of the announcement. Refco filed for bankruptcy protection on Oct. 17, and the stock closed at 84 cents yesterday, down 96 percent from the $22 IPO price.

?We?re paying a lot of money to general partners to do due diligence, and if this could have been avoided, then Tom Lee is in trouble,? Atwood said.

At the bankruptcy hearing, Refco?s lawyer J. Gregory Milmoe said the company wants to begin selling its assets right away. Refco had $4.1 billion in customer accounts from its regulated futures brokerage business as of October 18, Milmoe, of Skadden Arps Slate Meagher & Flom, told Judge Robert Drain. Refco this week agreed to sell its regulated futures trading units for $768 million to an investment group led by J.C. Flowers & Co. That sale is subject to court approval, even though those units weren?t part of the parent?s original bankruptcy filing.

Other potential buyers, including Volume Investment Group, representing the government of Dubai, and Interactive Brokers Group LLC, a Greenwich, Connecticut-based electronic brokerage, will be able to bid against Flowers for any or all of Refco?s units. Interactive Brokers has $2 billion of cash and ?significant liquidity? to finance a bid, Gary J. Mennitt, a lawyer for Interactive, said in an interview.

Refco?s bankruptcy filing means that all of its units, solvent or not, will be offered for auction under court supervision. Refco has had 30 inquiries, three of which it considered serious, the company?s lawyer Milmoe said. If another bidder wins the auction, Flowers is entitled to a breakup fee of 2.8 percent of the sale price.

A $7.5 billion Thomas Lee buyout fund would rank among the industry?s six biggest. This year, New York-based Blackstone Group received commitments for a $12.5 billion buyout fund; Apollo Management LP raised $10 billion; Goldman Sachs Group Inc. attracted $8.5 billion; Warburg Pincus LLC gathered $8 billion; and Carlyle Group amassed $7.85 billion. Thomas H. Lee Partners, started in 1974 by Lee, has raised five buyout funds since 1984. Four of the funds have had average annual returns of about 50 percent, Lee said in April.

?Managers who have never had a blow-up just haven?t been around long,? said Orin Kramer, chairman of New Jersey?s State Investment Council, the 10th-largest state pension fund with $70 billion under management. ?Tom Lee?s personal reputation will be just fine.?

Two years ago, Lee stepped back from running the firm on a day-to-day basis and appointed Scott M. Sperling, Anthony J. Dinovi and Scott A. Schoen to manage it. Schoen sits on Refco?s board and was involved in the decision to sell its regulated futures-trading units to the group led by Flowers.

In addition to Refco, investments by the $6.1 billion Thomas H. Lee Partners Equity Fund V, started in 2001, have included mattress maker Simmons Co.; Michael Foods Inc., a supplier of refrigerated foods; magazine publisher American Media; German television broadcaster ProSiebenSat1 Media AG; and textbook publisher Houghton Mifflin Co. The buyout firm has invested in financial services before, including stakes in Conseco, credit-card issuer Metris Cos., Endurance Specialty Insurance Ltd. and Homeside Lending Inc.

One of Lee?s most successful investments was its $135 million purchase of Snapple, a producer of iced teas and fruit drinks, in 1992. Snapple was sold two years later for $1.7 billion.

Lee?s firm bought a controlling stake in Refco when the New York-based company was closely held. It hired Credit Suisse First Boston, Goldman Sachs Group Inc. and Bank of America Corp. to manage the IPO. Refco executives shared more than $1 billion in cash in the year before the company?s IPO, the New York Times reported, citing the company?s share sale prospectus. Bennett and former Refco president Tone Grant may have shared $550 million after selling a stake to Thomas H. Lee in 2004, the report said. Bennett at the same time may have received another $507 million, according to the paper.