Fund Managers

Carlyle buys into second hedge fund

The private equity firm continues to diversify its holdings, buying into a hedge fund group six months after its first foray acquisition in the space.

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The Carlyle Group has agreed to purchase a 55 percent stake in emerging markets equities firm Emerging Sovereign Group, which was formed in 2002 with the backing of high-profile hedge fund manager Julian Robertson.

It marks the second hedge fund purchase by Carlyle in the past six months; the firm took a majority stake in $4.5 billion credit hedge fund Claren Road Asset Management in December.

Terms of the transaction were not disclosed, though Robertson's investment firm, Tiger Management, will retain a minority stake in ESG, according to a statement from Carlyle. The transaction is expected to close 1 July.

ESG, which focuses on publicly held securities in emerging markets, currently controls $1.6 billion in assets. Carlyle's acquisition of the stake represents a new product in emerging markets for investors, a Carlyle spokesman said. Most of Carlyle's current investments in emerging markets focus on leveraged buyouts. 

In exchange for Carlyle’s majority stake, ESG managers will receive cash, an ownership interest in Carlyle and performance-based payments. ESG's chief investment officer Kevin Kinney will remain in his position and continue day-to-day management of the firm.

Carlyle managing director Mitch Petrick said in a statement that emerging markets, while a staple of the firm’s private equity and real assets franchise, remain an “untapped opportunity” for its global market strategies platform. Earlier this year, the firm followed up 2010 investments in Asia and Latin America by forming its first sub-Saharan private equity group.

The acquisition of a majority stake in ESG is one of several recent transactions Carlyle has been involved in amid rumours that the firm is considering going public. In January, Carlyle acquired Dutch fund of funds AlpInvest from Dutch pension funds PPMG and APG. The firm also acquired minority stakes in Australian online foreign exchange payments company OzForex in November as well as the North Carolina community banking merger between FNB United and Bank of Granite.

Carlyle has also expanded into real estate and infrastructure, having hired former Greenhill & Co Real Estate Capital Advisory group principal Alok Gaur and acquiring California water utility Park Water in December.