Tuesday, July 28, 2015

Will Carlyle's Bad Claren Road Bets Nix Founder's "Great Revolution"?

Bloomberg reported:

Carlyle Group co-founder David Rubenstein, 65, said the “great revolution” coming to the industry will be the ability to add non-accredited investors, or those with a net worth lower than $1 million or those earning less than $200,000 a year. Regulations of fund structures should change to allow such people to put some of their retirement savings in private equity vehicles, said Rubenstein.
Seeking Alpha may have thrown water on Rubenstein's vision with its summary of a WSJ report:

Influential hedge fund consultant Cliffwater LLC has advised clients invested in Carlyle Group's (NASDAQ:CG) Claren Road Asset Management to pull their money. The details of Cliffwater's about-face - the group was a strong proponent of Claren Road not long ago - aren't known, but Claren Road's flagship fund lost 4.9% in June, and shed 10% last year

Claren Road has $4.9B in AUM, and Cliffwater has clients with about $800M of that. As recently as September, Claren Road had $8.5B in AUM, but soured bets on Greece and the GSEs have stung results.

Cliffwater's call doesn't necessarily mean a rush of redemptions at Claren, as some clients could ignore it, and others have their own bureaucratic hoops to jump through before making a decision to pull money

Carlyle purchased a 55% stake in Claren Road in 2010, part of a move to diversify beyond LBOs. 
Carlyle already rolled up two mutual funds that failed to garner traction, i.e. investments.