Carlyle To Buy Emerging Markets Hedge Fund

Jun 14 2011 | 1:37pm ET

The Carlyle Group will buy a majority stake in hedge fund Emerging Sovereign Group as it prepares for an initial public offering later this year or early next year.

The Washington, D.C.-based private equity giant has agreed to take a 55% stake in the New York-based emerging markets specialist, both companies said today. The deal for ESG follows Carlyle's December acquisition of a majority stake in Claren Road Asset Management.

ESG was founded in 2002 by former Morgan Stanley emerging-markets bond-trading chief Kevin Kenny, backed by Tiger Management. Tiger will retain its stake both in ESG and ESG's funds.

Kenny and ESG's other principals will split an undisclosed amount of cash and a stake in Carlyle. They have agreed to invest the bulk of the proceeds in ESG's funds, and could receive further payments depending on ESG's performance. The fund is up 6.9% this year and returned 8.5% last year.

The deal is expected to close before the end of the month.

ESG has about $1.6 billion in assets under management and employs 26. The firm features four strategies, among them macro and long/short equity.


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