The private-equity giant Carlyle Group agreed to acquire a majority stake in a Claren Road Asset Management, a $4.5 billion long-short hedge fund.
Carlyle, with roughly $98 billion under management, would get a 55% stake in Claren in exchange for an undisclosed amount of cash, an ownership interest in Carlyle and performance-based contingency payments.
Claren Road founders will reinvest substantially all of the initial cash proceeds from the transaction back into Claren Road funds.
The transaction also allows Citigroup, which seeded Claren Road in 2006, and the Goldman Sachs Petershill Fund, which bought a minority stake in Claren Road in 2008, to exit their investments.
Claren Road was established in 2005 by four former senior members of Citigroup's credit trading department: Brian Riano, John Eckerson, Sean Fahey and Albert Marino.
They will continue to manage the day-to-day operations, including all investment decisions, and, together with Carlyle, affect broader strategic decisions.
"This new partnership is an important addition to our expanding stable of credit product offerings," Mitch Petrick, managing director and head of Carlyle's $14.7 billion global credit alternatives business, said in a press release Monday.
Claren Road has a track record of "consistent, low-volatility, uncorrelated performance across varying market conditions during the last five years," Petrick said. He said its investment strategy is "consistent with Carlyle's views on the optimal strategy to exploit investment opportunities in credit over the long term,"
Riano, a Claren Road co-founder and its chief executive, said in the press release that the partnership should benefit the firm by allowing it to access Carlyle's global network and industry expertise as well as its strong regulatory, compliance, legal and investor services capabilities.