Friday, May 11, 2012

Carlyle Group IPO & Structured Credit

The Carlyle Group never popped upwards in price post IPO, despite assurances from Carlyle co-founder that investors would be rewarded.  The post IPO penalty is fairly small thus far.  However, first quarter earnings are due next week and Carlyle's peers earnings revealed a rough PEU road.

Also, The Carlyle Group is a huge structured credit manager.  JP Morgan had such instruments blow up their first quarter, to the tune of $2 billion in trading losses on synthetic credit products, i.e. packaged bundles of derivatives.  JP Morgan's Jamie Dimon blamed the loss on "egregious" trading.

“There are many errors, sloppiness and bad judgment,” he said, as JPMorgan’s stock sank in after-hours trading. “These were egregious mistakes. They were self-inflicted.” He called himself and his colleagues “stupid.”  

In contrast The Carlyle Group sublty showcased Mitch Petrick, the 50-year-old head of Carlyle’s hedge-fund and structured-credit group, in their IPO sales efforts. Did Mitch avoid JP Morgan like errors?

"The portfolio has proven to be riskier, more volatile and less effective as an economic hedge than we thought.”--Jamie Dimon, JP Morgan CEO

Bloomberg highlighted Petrick, but failed to identify their sources

The people who spoke about Petrick’s career and personality asked not to be identified because they didn’t have his approval to speak publicly. 

This has the feel of regular insider political releases, the kind that say a senior White House staffer.  Carlyle knows that game, inside and out.

Update 5-12-12:  If reports are true, JP Morgan's structured credit problems came from being a mile deep in one hole.  It's unclear if this has any bearing on other.structured credit providers/holders.  Carlyle's first investor call on May 15 may shed light on the matter.