Carlyle shutters fund of hedge funds

Carlyle Group’s investment solutions group, now comprised of AlpInvest and Metropolitan Real Estate, will focus mainly on secondaries, co-investments and managed accounts.

The Carlyle Group has closed down its fund of hedge funds business, Diversified Global Asset Management Corporation (DGAM), which was part of the firm’s Investment Solutions group, according to the firm.

AlpInvest and Metropolitan Real Estate are the two remaining businesses in the group, which is now focusing mainly on secondaries, co-investments and managed accounts in private equity and real estate.

Carlyle acquired DGAM about two years ago when the Investment Solutions was still headed by Jacques Chappuis. It reportedly paid an initial investment of $33 million for the unit.

“By refocusing the investment solutions segment, we are concentrating our efforts on areas where we see real momentum: private market secondaries, co-investment and managed account activities through AlpInvest and Metropolitan,” a Carlyle spokesman said in an email.

Metropolitan closed its first dedicated secondaries fund, Metropolitan Real Estate Partners Secondaries & Co-Investments Program, earlier this month on $550 million, after almost two years of fundraising and ahead of its $450 million target. And David Rubenstein, co-chief executive of Carlyle, noted in the firm’s fourth-quarter conference call earlier this month that AlpInvest’s sixth secondaries fund will hold a first close soon.

But investment solutions also encountered several hiccups recently. Chappuis, which was at Carlyle for less than three years, stepped down from his role at the end of last year and was replaced by Lauren Dillard, previously chief operating officer and chief financial officer of the group. At the beginning of the year, AlpInvest folded its plans to raise a dedicated energy and infrastructure secondaries fund with Justine Gordon leaving the firm as a result.

“Unfortunately, the challenging market environment made it difficult to scale in fund of hedge funds and liquid alternatives,” Carlyle’s spokesman said. “While we will have some modest wind-down costs over the next few quarters and a small goodwill charge in 2015, we believe with this change we will increase distributable earnings in our investment solutions segment in 2016.”

For 2015, the investment solutions group had a net economic gain of $5 million, down from $45 million in 2014.

Based in Toronto, DGAM was founded in 2004 by George Main, who served as its chief executive; Warren Wight, chief investment officer; as well as Graham Thouret and Jeff Lucassen.