Carlyle Buys Commodities Hedge Fund Vermillion

Oct 3 2012 | 1:40pm ET

The Carlyle Group added commodities trading to its lineup with a deal for hedge fund Vermillion Asset Management.

Washington, D.C.-based Carlyle paid an undisclosed amount of cash and stock for 55% of New York-based Vermillion, which has about $2.2 billion in commodity fund assets under management. The firm, led by co-founders Drew Gilbert and Chris Nygaard, trades agricultural energy, metals and soft commodities.

Both Gilbert and Nygaard will remain with the hedge fund and will continue to lead its day-to-day operations. Vermillion will serve as Carlyle's exclusive commodities platform.

Under the deal, Carlyle will make performance-based contingent payments over the next five-plus years. At most, it will pay Vermillion's principals less than 0.5% of Carlyle shares outstanding, worth, at today's prices, about $37 million; the cash will be reinvested in Vermillion's funds.

"For many years, Carlyle has successfully invested in a variety of energy, agriculture and infrastructure companies," Carlyle's Mitch Petrick said. "Vermillion employs a liquid, relative-value, low-volatility approach to trading both physical commodities and their derivatives to produce positive, uncorrelated returns."

Drew and Nygaard set up Vermillion in 2005.

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