Carlyle Might Be Getting Bargain on Vermillion, as Fund is Down 8% YTD

Carlyle Might Be Getting Bargain on Vermillion, as Fund is Down 8% YTD
By The Carlyle Group (annual report),User:Fairlyoddparents1234 (uploaded result) [Public domain], via Wikimedia Commons

Vermillion LLC, a New York based hedge fund, is down 7.95% YTD, following another plunge of 1.07% during the month of August, according to information obtained by ValueWalk. Notwithstanding, Carlyle Group LP (NASDAQ:CG), a private equity firm, based in Washington D.C., announced that it has acquired a 55% controlling stake in the commodities based hedge fund, for for a mix of cash, stock and performance-based payouts (the price has not been disclosed). Vermillion LLC was up 0.60% in 2011, and 10% in 2010. Total return since inception in 2005 is 60% cumulative, the sharpe ratio is 0.59. We have to assume Carlyle Group LP is getting a good deal on this purchase, due to recent performance of the hedge fund.

Vermillion Asset Management, which has $2.2 billion AUM, specializes in the commodities market, with a portfolio composed of Precious Metals, Energy, Agricultural products and Staple products.

Carlyle Might Be Getting Bargain on Vermillion, as Fund is Down 8% YTD

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Vermillion LLC manages its assets via two main vehicles; the offshore vehicle, through the Viridian Fund Ltd, and onshore vehicle, through the Viridian Fund LLC, albeit with a concentration on the developed countries. Viridian is a diversified commodities relative value fund and is market neutral, non directional, trading over 40 varied commodities across four sectors.

In its monthly commentary for August, Vermillion LLC, whose prime broker is JPMorgan Chase & Co. (NYSE:JPM), expressed that the commodities market had a good month, following the remarks made by Fed Chairman Ben Bernanke, which indicated that a third Quantitative easing was inevitable.

Most notably, the precious metals sector was the biggest beneficiary from Bernanke’s comments, while investments in energy commodities reacted positively to the geopolitical uncertainty in the middle east.

In the agricultural sector, the hedge fund reported good returns in Soybeans, following shortages of the commodity in South America, which put more pressure on the U.S. to cover the deficit, while global demand remained perched at the very top.

In the energy sector, gains from natural gas spreads were well wiped by volatility related losses for the commodity. Additionally, the month of august also recorded a decline in natural gas prices, after several months of rallying. Finally, the freight industry is becoming more attractive, following declines in prices of industrial metals and global trade activity, which provides a healthy forecast, through 2014.

At the time of this writing, Carlyle Group LP (NASDAQ:CG), stock was trading at $26.04 per share, up $0.38, or a 1.48% rise from yesterday’s close.



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