Carlyle Buys Hedge-Fund Investor DGAM to Expand Beyond LBOsDevin Banerjee
Carlyle Group LP, the second-biggest manager of alternatives to stocks and bonds, agreed to buy Diversified Global Asset Management Co. to expand its hedge-fund business.
Carlyle will pay $25 million of stock and $8 million in cash from its balance sheet for 100 percent ownership of the firm, according to a regulatory filing today. The price may increase by as much as $70 million over seven years depending on performance. DGAM, which is based in Toronto and has more than $6.7 billion in managed and advised assets, will become part of Carlyle’s solutions business, which pools client money to invest in third-party funds.
Carlyle, like larger competitor Blackstone Group LP, has started new lines of business over the past decade to grow assets and reduce reliance on lumpy earnings tied to leveraged buyouts. The firm this year re-branded its funds-of-funds business and hired Morgan Stanley’s Jacques Chappuis to oversee the unit. It acquired the remaining 40 percent of Dutch investment manager AlpInvest Partners NV and bought Metropolitan Real Estate Equity Management LLC, a fund-of-funds investor in property.
“We are focused on providing fund investors with a broad suite of investment options under one roof,” Carlyle co-founder David Rubenstein said in the statement. “Carlyle’s solutions platform is now positioned to offer investors the ability to allocate across alternatives in hedge funds, private equity and real estate.”
Blackstone, based in New York, offers clients investments in hedge funds through its $53 billion Blackstone Alternative Asset Management business, which has grown from less than $10 billion in assets a decade ago. KKR & Co., the firm run by Henry Kravis and George Roberts, last year bought fund-of-hedge-funds manager Prisma Capital Partners LP and in January took a stake in hedge fund Nephila Capital Ltd. to expand its offerings.
DGAM co-founders George Main and Warren Wright will remain chief executive officer and chief investment officer, respectively, of the firm’s operations in Carlyle, according to the statement. Goldman Sachs Group Inc. advised DGAM on the deal, which is expected to close in February.