GO
Loading...

Carlyle makes hedge fund push

David Rubinstein
Andrew Harrer | Bloomberg | Getty Images
David Rubinstein

The Carlyle Group is primarily known as a private equity firm, but its latest acquisition continues to diversify the business away from vanilla buyouts and other cash infusions into companies.

The $185 billion firm announced Wednesday it had agreed to buy Diversified Global Asset Management Corporation, a $6.7 billion Toronto-based firm that specializes in hedge fund investing through so-called funds of hedge funds. In other words, institutional investors like pensions and endowments pay DGAM to select third-party managers for them.

Carlyle will initially pay $33 million for DGAM and then up to $70 million more over the next seven years "subject to performance and service requirements," according to a filing with the Securities and Exchange Commission. The transaction is expected to close in February 2014.

DGAM has grown quickly: the firm's cash under management increased by $3.56 billion over the last five years, equivalent to an asset growth of 139.96 percent, according to InvestHedge.

Carlyle reported an 11 percent drop in third-quarter profit in early November but recently announced the final close of U.S. buyout fund Carlyle Partners VI. The fund raised $13 billion after beginning fundraising in late 2011 with a $10 billion target, according to the firm.

(Read more: Carlyle's Q3 profit falls 11 pct on fewer asset sales)

Carlyle, which is publicly traded, manages $62.2 billion in traditional corporate private equity, roughly one-third of its overall assets under management.

"We are focused on providing fund investors with a broad suite of investment options under one roof. With the DGAM partnership, Carlyle's Solutions platform is now positioned to offer investors the ability to allocate across alternatives in hedge funds, private equity and real estate," David Rubenstein, co-founder and co-chief executive officer of Carlyle, said in a statement.

While the DGAM purchase is Carlyle's first foray into funds of hedge funds, it already owns 55 percent interests in three regular hedge funds: credit specialist Claren Road Asset Management; emerging markets investor Emerging Sovereign Group; and commodities expert Vermillion Asset Management.

Carlyle also has funds of private equity funds through AlpInvest Partners and recently acquired fund of real estate funds Metropolitan Real Estate Equity Management.

Carlyle's shares were narrowly lower in Wednesday afternoon trade.

(Read more: Investors uncover a new market—and it's popping)

—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.

Symbol
Price
 
Change
%Change
CG
---

Featured

NetNet TV

Wall Street