Buyout firm Carlyle Group accepted $118 million from the biggest sovereign-wealth fund in Libya, demonstrating the North African nation’s success in courting asset managers and banks after persuading Western politicians that it had dropped ties to terrorism.
Carlyle, whose advisers have included former U.S. President George H.W. Bush and former Defense Secretary Frank Carlucci, received $75.5 million for its Carlyle-Partner V Fund, according to a document released today by Global Witness, a London-based advocacy group. The Carlyle-Mena Fund accepted $42.6 million, according to the Libyan Investment Authority filing, which Global Witness said it obtained from an undisclosed source.
Libya established the investment authority in the past decade to find outlets for its rapidly growing oil wealth. As part of his plan to open Libya’s economy, Muammar Qaddafi’s government organized meetings with former U.K. Prime Minister Tony Blair and Italian Prime Minister Silvio Berlusconi. The Carlyle allocations are among $13 billion of investments Libya made in private-equity firms, hedge funds, stocks and bonds, according to the document released today.
“The political establishment opened their arms to Qaddafi after 2006 and the financial establishment followed suit,” Robert Palmer, a policy adviser and investigator for Global Witness, said in an interview. “This is surprising, considering the very obvious risks of corruption in Libya and that state assets could have been diverted for his personal gain.”
Palmer declined to comment when asked who gave the Libya Investment Authority filing to Global Witness.
Carlyle spokesman Christopher Ullman declined to comment.
Hedge funds that accepted money from the Libyan Investment Authority include New York-based Och-Ziff Capital Management Group LLC (OZM), which received $300 million, and Millennium Global Investments Ltd., which got $301 million, according to the filing released by Global Witness.
Spokesmen for Och-Ziff and Millennium declined to comment.
The 19-page document outlines the Libyan Investment Authority’s holdings and investment performance through June 2010. The market value of the fund’s assets at the time was $53.3 billion, with $19.8 billion held as deposits, according to the filing.
The Libyan fund’s investments in equity derivatives with a book value of $1.25 billion plunged 98 percent to $19.9 million as of June 30, according to the report.
Private-equity firms including Carlyle have set up teams or raised funds targeting investments in the Middle East in North Africa as they seek to tap faster growth than in Western economies.
Carlyle Co-founder David Rubenstein said in a March 1 speech that his firm hadn’t invested in Libya. He didn’t say whether Carlyle had accepted investments from the nation.
Governments around the world froze assets tied to Qaddafi’s regime in February after violence erupted in the African nation. The U.S. and U.K. governments are now backing rebels trying to remove Qaddafi from power.
The Carlyle V fund, which targets buyouts in North America, amassed $13.7 billion in 2007. Carlyle raised $500 million for the Mena fund, which invests in the Middle East and North Africa, in 2009.
Investments such as the Carlyle allocation began flowing into and out of Libya after Qaddafi told Blair in 2004 that he would abandon efforts to develop nuclear weapons, destroy stockpiles of chemical weapons and renounce terrorism.
The U.S. Commerce Department in 2008 issued a 67-page document advising companies on how to do business in Libya. While there are “potentially rich trade and investment opportunities” in the nation, it also poses “great challenges to successfully operating,” the document said.
The Libyan Investment Authority filing shows HSBC Holdings Plc (HSBA) and Goldman Sachs Group Inc. (GS) held assets for Qaddafi’s government. HSBC held $292.7 million across 10 accounts and Goldman Sachs had almost $44 million in four accounts. The banks declined to comment.
About $3.9 billion was invested in structured products with hedge funds and investment banks, including more than $1 billion at Societe Generale (GLE) SA and $171.5 million at JPMorgan Chase & Co. (JPM), the document shows. Spokesmen for the banks declined to comment.
The Libyan fund’s investments were reported earlier today by the Financial Times and the BBC.
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