Carlyle to buy majority in credit hedge fund
Alternative asset manager the Carlyle Group will buy a majority stake in long-short hedge fund Claren Road in order to expand its credit products, it has announced
The deal, which will see Carlyle gain a 55% majority stake in the hedge fund, is expected to close by year end.
Details have not yet been released, but cash, an ownership interest in Carlyle and performance-based contingent payments will make up the terms of the agreement reached with Claren Road.
The credit hedge fund’s founders will reinvest all the initial cash proceeds from the transaction back into its own funds, it has said.
As part of the deal, Citigroup and the Goldman Sachs Petershill Fund, which bought a minority stake in the hedge fund in 2009, will shed their interests.
Claren Road was founded in 2005 by three former senior Citigroup credit traders, Brian Riano, John Eckerson and Sean Fahey. It has approximately $4.5bn of AUM.
Through the deal, it will gain access to Carlyle’s global network and industry expertise.
It will also make use of the Group’s regulatory, compliance, legal and investor services capabilities.
For Carlyle, the acquisition is a chance to exploit long term opportunities in the credit investment market, it has said.
Currently, the global alternatives manager’s credit business offers structured credit, mezzanine and distressed products. It has 34 funds with $14.7bn in assets, as of September 30 2010.