Things are quickly going from bad, to worse for the Carlyle Group’s hedge fund business.
After shutting down two of its mutual funds earlier this year, the Financial Times reports that the much-lauded investment firm is now considering the suspension of its $4 billion credit fund, Claren Road.
The fund, which is managed by four ex-Citigroup traders Brian Riano, John Eckerson, Sean Fahey, and Albert Marino, apparently took a nasty hit on its Freddie Mac and Fannie Mae bets last year, while the group’s recent investments in Greece, mining, and energy also continue to cripple performance.
It’s currently down 5.6% for the year, following an over 10% drop in 2014, and clients have not been happy:
“Investors submitted redemption requests totalling $1.97bn, or 48 per cent of the fund’s assets of $4.1bn at the end of July, according to a filing with the Securities and Exchange Commission.”
Redemptions will take the fund’s AUM down to $2.1 billion next month – a massive sum by any measure – but a far cry from the $8.5 billion the fund managed last September, leading Carlyle to worry about its investment there:
“These redemptions, and any future reductions in assets managed by Claren Road, will result in lower management fees earned by Claren Road in subsequent periods and lower earnings contributions to the Partnership from Claren Road.
As a result of these events, on August 17, 2015, the Partnership concluded that the carrying value of its intangible assets associated with the acquisition of Claren Road is impaired. The estimated net impact to the Partnership’s third quarter financial results, including the expected reduction of related liabilities for contingent consideration associated with Claren Road of $41 million as of June 30, 2015, is between $100 million and $175 million.”
This won’t be the first time Carlyle wrote off one of its funds, back in June, the private equity firm also split from its commodity hedge fund, Vermillion.
Photo: World Economic Forum