Carlyle profit slumps on commodities hedge fund losses

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Carlyle, the US buyout group, took a $175m charge related to its hedge fund business, leading to a drop in profits for the fourth quarter.

Economic net income, which includes both realised and unrealised investment gains, was $6.4m compared with $77.5m a year earlier, the company said.

Distributable earnings, the share of profits which it returns to shareholders, for Carlyle fell to $7m in the fourth quarter of last year compared to $145m for the same period a year earlier.

The charges derived from losses in Vermillion Asset Management, its commodities hedge fund business.

It also said the drop was due to the separation from Claren Road Asset Management, as well as the $36m realised giveback for two Legacy Energy funds.

During the fourth quarter, Carlyle agreed with Claren Road to transfer its ownership stake in Claren Road back to its founders. This transaction closed on January 31, 2017.

Carlyle incurred approximately $25m in charges to complete this transaction.

The US buyout group also completed the separation from Emerging Sovereign Group in the last quarter of 2016 and has eliminated all hedge fund assets under management from its metrics as of December 31st, 2016.

“Our core business performed well [last year], but obviously we are disappointed with the losses in our hedge fund business,” Carlyle co-CEO David M. Rubenstein said in the statement.

“We are focused on raising $100 billion in new capital over several years, scaling our global credit business, and performing well for our fund and unitholder investors.”

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