Carlyle's Claren Road Suffers Almost $1 Billion in Redemptions

  • Clients asked to withdraw about $3 billion since June
  • Hedge fund firm to start 2016 with $1.25 billion in assets

Claren Road Asset Management, the hedge fund manager majority owned by Carlyle Group LP, suffered $950 million in withdrawal requests in the fourth quarter, according to a person familiar with the matter, leaving assets 85 percent below their peak last year.

Claren Road will start January with $1.25 billion in assets, down from a high of $8.5 billion in September 2014, said the person, asking not to be identified because the information is private. The firm let clients wait until last week to put in their withdrawal notice in the hopes that fewer investors would decide to exit. The notice period is normally 45 days before the end of the quarter.

The credit-oriented fund has struggled over the past 15 months with poor performance and an investor exodus. Its main fund tumbled 10.1 percent in 2014, its first annual loss since it started a decade ago, and dropped another 5.2 percent in the first three quarters of this year. After receiving redemption requests of about $2 billion in the third quarter, the firm told clients it would delay paying two-thirds of the money back to minimize damage to continuing investors.

Redemption requests submitted in the fourth quarter will probably also face delayed repayment, the person said.

A spokesman for the firm declined to comment on the redemptions, which were reported yesterday by the Wall Street Journal.

Before last year, Claren Road had a history of avoiding large swings in its monthly and annual investment returns. The firm was founded in 2005 by former Citigroup Inc. credit traders Brian Riano, John Eckerson, Sean Fahey and Albert Marino.

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