The attack in Sandy Hook, Conn., left 27 dead, 20 of them school children ages 6 and 7.
Cerberus, which manages $20 billion assets, bought the maker of the rifle used in the shooting, Bushmaster, in 2006 and combined this with additional purchases of gun makers to form a company called Freedom Group, The New York Times reported.
On Tuesday, Cerberus said it would sell Freedom Group. In a statement, the investment firm said, "It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level."
Freedom Group had net sales of $677.3 million in January through September of 2012, a 20 percent increase over the same period of 2011, The New York Times reported.
The California State Teachers' Retirement System had already said it was reconsidering its investment in Cerberus, given the firm's investment in Freedom Group, the Times reported.