Home ListingFebruary 22, 2016

Carlyle To Close Hedge Fund-of-Funds Arm

Just two years after acquisition, Carlyle is shutting down Diversified Global Asset Management to better focus on private equity and real estate. <br />

Reported by Featured Author

Carlyle Group is winding down its hedge fund-of-funds subsidiary Diversified Global Asset Management (DGAM), the firm has confirmed.

The private equity firm said it struggled to grow the Toronto-based alternative manager since purchasing it two years ago. According to the manager’s website, it had $2.3 billion in managed and $4 billion in advised assets as of April 30, 2015.

“Unfortunately, the challenging market environment made it difficult to scale in fund-of-hedge funds and liquid alternatives,” said Carlyle’s spokesperson Chris Ullman.

The decision to shutter DGAM comes two months after management changes within Carlyle’s investment solutions business, the unit that housed DGAM. Carlyle still owns private equity fund-of-funds manager AlpInvest and Metropolitan Real Estate.

“By refocusing the investment solutions segment, we are concentrating our efforts on areas where we see real momentum: private market secondaries, co-investment, and managed account activities through AlpInvest and Metropolitan,” said Ullman.

Carlyle anticipated “modest” wind-down costs over the next few quarters related to DGAM’s closing, the spokesperson continued.

Carlyle’s 2014 acquisition of DGAM was part of the firm’s push to expand beyond private equity and into hedge funds. The firm also bought majority stakes in Claren Road Asset Management in 2010, and Vermillion Asset Management in 2012.

Claren Road has lost $7.3 billion in assets under management since a September 2014 peak of $8.5 billion, according to Bloomberg, while Vermillion stands recently accused of fraud after heavy losses.

Other private equity giants including KKR and Blackstone have also recently expanded into hedge funds. Blackstone owns stakes in Magnetar Capital, Senator Investment Group, and Solus Alternative Asset Management, while KKR agreed to buy a 25% stake in London-based Marshall Wace last September.