Institutional consultant Cliffwater is warning clients to pull their money from Claren Road Asset Management, Carlyle’s $4.9 billion hedge fund.
Cliffwater’s clients hold about $800 million, or 14%, of Claren Road’s funds, reports the Wall Street Journal. Claren, which mainly invests in corporate debt and credit derivatives, has suffered poor performance, losing about 4.9% in June, after being hit with a 10% loss last year. Assets under management have fallen from $8.5 billion in September to $4.9 billion. Writes the Wall Street Journal:
“We are disappointed in our recent performance, especially that we have not delivered the results which Claren Road clients deserve and we expect,” said Claren Road Chief Executive Brian Riano. “We have a strong core team and process and are committed to once again generating performance consistent with our long-term track record.”
It’s not totally clear why Cliffwater made the recommendation, and not all of its clients will necessarily follow it. Others may not be able to. Some investors locked up their funds for longer periods of time in exchange for lower fees. Cliffwater, which declined to comment, wouldn’t have made the reversal on its recommendation lightly, experts say. The process of explaining the switch and finding replacement manager is expensive.
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