Carlyle to shut DGAM hedge fund-of-funds unit

Feb 22 (Reuters) - Alternative asset manager Carlyle Group
LP CG.O said on Monday it would shut its hedge fund-of-funds
manager Diversified Global Asset Management Corp (DGAM), two
years after it added the unit to its investment platform.
Toronto-based DGAM, which manages funds that invest in other
hedge funds, had more than $6 billion in managed and advised
assets as of April 30, 2015.
"Unfortunately, the challenging market environment made it
difficult to scale in fund-of-hedge funds and liquid
alternatives," Chris Ullman, Carlyle's head of global
communications, said in an emailed statement.
Carlyle in December replaced Jacques Chappuis as head of
investment solutions - the business which includes DGAM along
with buyout and real estate fund-of funds.
The business's distributable earnings, a measure of cash
profit, tumbled roughly 70 percent in 2015, while overall
distributable earnings fell 5.2 percent to $922.5 million.
It has been a difficult year for the U.S. leveraged buyout
sector as the market for high-yield bonds and loans, the
lifeblood of buyout deals, has almost ground to a halt, due to
banks struggling to sell them.
Banks also are lending fewer of the riskiest junk-rated
loans that fund buyouts, further tightening financing
conditions.
The closing of DGAM "over the next several quarters" would
mean Carlyle would incur modest wind-down costs over the next
few quarters and a small goodwill charge in 2015, Ullman said.
But, closing DGAM would increase Carlyle's distributable
earnings in its investment solutions segment in 2016, Ullman
added.
The closing of DGAM will leave Carlyle with two
fund-of-funds managers - Metropolitan Real Estate Equity
Management, a manager of indirect investments in global real
estate, and AlpInvest Partners, which advises clients to invest
in third-party private equity funds.