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Portfolio > Alternative Investments > Hedge Funds

Employees Buying Out Carlyle Hedge Fund Group

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WASHINGTON (–The hedge fund business at The Carlyle Group is set to grow and ultimately will be 100%-owned by employees, according to Afsaneh Mashayekhi Beschloss, chief executive and chief investment officer of Carlyle Asset Management Group.

A little more than two years since The Carlyle Group began to build up its hedge fund of funds capability by hiring Ms. Beschloss from The World Bank, employees have finalized plans to purchase the hedge fund business from Carlyle. But not all will be taking part, with Jimmie Liew and Jin Park, who joined the firm after working under Ms. Beschloss at the World Bank, not staying with the team.

Mr. Liew was part of the original five-member team that Ms. Beschloss built in February 2002 Previous HedgeWorld Story. A vice president on the research team at Carlyle, Mr. Liew likely will return to the HypoVeriensBank, where he worked as a consultant and developed the bank’s alternative risk management methodology.

While at Carlyle, Mr. Liew authored a paper, “Hedge Fund Index Investing Examined.” He concluded that only 30% of managers can demonstrate statistically significant skill and that if a fund of funds can construct a portfolio with 70% “good” hedge fund investments, the fund of funds managers can justify the incentive fees charged to investors Previous HedgeWorld Story.

Mr. Park’s plans remain unknown. Mr. Park joined the firm from The World Bank, where he was responsible for alternative liquid investments at the pension fund, only months after Ms. Beschloss did in 2001. At Carlyle, he was a managing director focused on investment opportunities within the United States and was working mainly in the fixed-income area. Ms. Beschloss said that fixed-income strategies account for less than 10% of the overall hedge fund portfolio at Carlyle.

Also leading the hedge fund team and participating in the buyout are: Robert A. Picard, managing director on the alternative marketable investments team; Sudhir Krishnamurthi, managing director for the research team; David G. Kupperman, vice president on the research team; Todd E. Kata, vice president on the alternative marketable investments team; and Matt Lusins, who also is part of the research team.

The deal is expected to close at the end of July, with Carlyle employees owning 60% of the business. Over the next two years, the Ms. Beschloss’s group plans to purchase the remaining 40%. Employee ownership is thought to aid in attracting and keeping dedicated senior professionals, according to Ms. Beschloss.

She plans on hiring additional senior employees shortly, recruiting individuals with long/short equity and quantitative analysis backgrounds.

Chris Ullman, spokesman for Carlyle, said, “The goal is to better align ownership and management.” As part of the deal, the group remains in its same offices, which are already separate from Carlyle’s main offices that house the firm’s private equity and real estate staff in Washington.

The hedge fund business totals US$600 million and is split between two funds of funds vehicles and other tailor-made hedge fund portfolios, Ms. Beschloss said.

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