Carlyle Hedge Fund Chief—and Assets—Out

Mitch Petrick Carlyle Mitch Petrick, outgoing managing director, CarlyleThe Carlyle Group’s head of hedge funds and credit Mitch Petrick will step down following billions in product outflows, the firm announced late Friday.

Petrick intends to start his own investment management company, according to Carlyle.

He oversaw the global market strategies division, which grew in aggregate since his 2010 arrival. But more recently, its profits and performance have moved in the opposite direction.

Investors pulled a net $3.7 billion from Carlyle hedge funds in the last reported year (ending March 31), with another $1.5 billion in redemptions outstanding.

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Two of Carlyle’s largest hedge fund brands—Claren Road and Vermillion (now Carlyle Commodity Management)—lost the vast majority of their capital under Petrick’s tenure.

Credit-focused Claren Road dropped to $2.4 billion this March from $8.2 billion two years prior, according to firm regulatory filings.

Vermillion fared worse. The flagship fund reportedly dwindled to less than $50 million from the $2.2 billion in 2012, when Carlyle acquired it. Now rebranded, the commodities unit managed $1.1 billion as of March.

But global market strategies’ fee-earning assets have edged up under Petrick’s leadership, increasing 6% to $28.6 billion.

Firm co-chiefs William Conway and David Rubenstein praised the outgoing managing director for his “significant efforts” growing the division. “Carlyle intends to continue to invest in and build out the global market strategies platform.”

Petrick’s exit is part of a minor shakeup, shifting leadership of two divisions—credit/hedge funds and natural resources—to current executives.

Private equity Deputy CIO Kewson Lee will take over from Petrick as head of the $34 billion global market strategies division, Carlyle said.

Natural resources and energy have moved under President Glenn Youngkin’s mandate.

Following a string of high-profile hedge fund exits, the Kentucky Retirement Systems (KRS) investment committee recommended $300 million in allocations to its board of trustees Thursday.

The recommendations came at a time of upheaval for KRS, with its governance uncertain following the removal of board chair Thomas Elliot last month.

Kentucky Governor Matt Bevin issued an executive order ousting Elliot on April 20, citing concerns over fund performance and transparency. In his place, Bevin appointed dermatologist William Smith, who has since declined the position.

Executive Director William Thielen, who previously announced his intent to retire but stayed on due to a lack of replacement, said Thursday that he would officially step down on September 1.

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Thielen said he was “grateful to have served the KRS membership for over ten years and honored to have worked with very talented and dedicated KRS trustees and staff during this period.”

Amid this turbulence, the investment committee approved initial investments of $20 million to $30 million each in Anchorage Capital Partners, BlackRock’s Global Alpha Opportunities fund, and the Finisterre Global Opportunity fund. It also recommended an increased target allocation to Prisma, KKR’s hedge fund-of-funds arm.

As of March 2016, the $15 billion pension and insurance fund had $1.6 billion in “absolute return” strategies. The new investments will not affect KRS’s target hedge fund allocation of 10%, said CIO David Peden, but will replace investments in Pacific Alternative Asset Management Company and Blackstone Alternative Asset Management.

This recommitment to hedge funds comes weeks after the $55 billion New York City Employees’ Retirement Systems voted to do away with hedge funds altogether. The California Public Employees’ Retirement System famously made a similar move in 2014.

Insurance giants AIG and MetLife also recently announced decisions to slash their hedge fund portfolios.

However, research by data firm Preqin shows that public pension funds on average are increasing their allocations to hedge funds, growing their investments from 7.2% of their total portfolios in 2010 to 9.2% in 2016. KRS comes in slightly above average, with an allocation of 10.6% in March.

The fund’s absolute return portfolio returned 3.3% over the last three years and 4.1% over five years.