Carlyle, the multinational private equity, alternative asset management and financial services group, is deciding on whether to pull out of its hedge fund activities, as the firm battles with its offerings and the fact that one of its remaining vehicles has fallen by nearly 90 percent in the last two years, according to the Financial Times today.
A run of bad luck…
This month, Emerging Sovereign Group, one of the hedge funds majority owned by Carlyle, informed investors that Carlyle was selling its stake back to ESG’s partners.
Assets in another Carlyle hedge fund, Claren Road, have also reportedly fallen to less than $1 billion from $8.5 billion two years ago while Vermillion, a further Carlyle hedge fund, was reconfigured last year. Vermillion was dismantled and reshuffled after steep losses in 2014 helped shrink its flagship fund from almost $3 billion to less than $50 million.
We’ve been disappointed with kind of where we’ve been, but the broader piece of this business is still doing well.
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Vermillion was renamed Carlyle Commodity Management before being absorbed into the group’s other commodities business.
In addition, Carlyle closed its fund of funds business, Diversified Global Asset Management, in February and was followed by the head of its Global Market Strategies unit, Mitch Petrick, stepping down to set up his own investment management company.
Curt Buser, Carlyle’s CFO, commented: “We’ve been disappointed with kind of where we’ve been, but the broader piece of this business is still doing well. This is the business segment where our performance did not meet our or our investors’ expectations.”
He added: “Claren Road, Vermillion, and other commodities products have generated losses, and the unit will probably cause Carlyle to fall short of its profitability targets. We’re thinking through kind of what the next steps are there.”
Carlyle has experienced a run of bad luck with hedge funds. In 2008 it closed down Carlyle-Blue Wave Partners Management when it was just over a year old.
To add insult to injury, a former trader from Vermillion sued Carlyle earlier this year, alleging the private equity group and the hedge fund’s managers had fired him after he allegedly warned of an “Enron-like situation” in which Vermillion’s founders hid big losses from investors. Carlyle called the claims “baseless and frivolous”.