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The Carlyle Group LP (NASDAQ:CG) is set to acquire Diversified Global Asset Management Corporation, a Toronto-based investor in hedge funds.
Diversified Global Asset Management is a global manager of hedge funds with over $6.7 billion in managed and advised assets.
Move towards non-private equity business
The Carlyle Group LP (NASDAQ:CG)’s recent announcement is an effort to expand from private equity. The alternative asset manager is a private-equity powerhouse, though until recently it hadn’t developed a big presence in other businesses. However, some of its rivals such as Blackstone Group run large real estate operations.
In 2011, the Carlyle Group LP (NASDAQ:CG) started to focus on advising institutional investors on alternative investments encompassing everything from real estate to timber. Earlier this month, Carlyle also acquired Metropolitan Real Estate Equity Management, which invests in global real estate.
Despite hedge fund returns falling, Diversified Global Asset Management has been able to double assets under management to about $6.7 billion in the past three years. DGAM’s strength includes searching for funds with niche investment strategies, tailoring customized products for clients and embracing unconventional moves, such as investing in reinsurance and buying protection ahead of the 2008 market collapse.
Carlyle’s presence in hedge funds
Carlyle Group LP (NASDAQ:CG) already has presence in several hedge funds, though it hasn’t had a presence in the business of investing in groups hedge funds for clients. Other private equity firms also have moved into hedge fund business.
For instance, recently Kohlberg Kravis Roberts & Co announced its intention to acquire $8 billion New York Prisma Capital Partners, which invests its funds in hedge funds and overseas.
Diversified Global Asset Management Corporation would become Carlyle’s fund of hedge funds platform. Carlyle Group LP (NASDAQ:CG)’s co-founder and co-chief executive officer David M. Rubenstein indicated the alternative asset manager is focused on providing fund investors with a broad suite of investment options under one roof. He exuded confidence that the DGAM partnership would position Carlyle’s solutions platform to offer investors the ability to allocate across alternatives in hedge funds, private equity and real estate.
DGAM would become part of Carlyle Group LP (NASDAQ:CG)’s solutions platform which had assets under management of $48.4 billion as of September 30, 2013, and also includes AlpInvest, the private equity fund of funds operations, and Metropolitan Real Estate.
Equity for the proposed acquisition would come from Carlyle Group LP (NASDAQ:CG)’s balance sheet. The transaction is expected to close in February 2014.