Carlyle Teams With TCW In Renewed Liquid Alt Effort

Jul 23 2015 | 9:52am ET

Large alternative investment managers continue to develop liquid alternative strategies even as investor interest in them seems to be taking a breather. 

Carlyle Group, which has stumbled in earlier attempts to develop products that offer daily liquidity and low fees but pursue strategies previously reserved for investors in hedge funds, has filed regulatory paperwork for three new funds in conjunction with TCW Group. Earlier this year, Carlyle closed two liquid alt mutual funds when they were unable to attract enough assets. 

Carlyle is not alone in teaming with other managers when developing liquid alt products. Apollo Global Management has launched liquid alternative funds with Ivy Investment Management, while IndexIQ has partnered with Mainstay. However, like Carlyle, not all have met with success – KKR, for instance, closed two high-yield funds last year after accumulating only $33 million. Nonetheless, these firms view the liquid alt segment as one of the few remaining blue-water opportunities to attract new assets to alternative strategies, especially via individual defined contribution retirement accounts such as IRAs and 401Ks. 

TCW will be the adviser for the three new mutual funds. It will utilize Carlyle’s Liquid Markets Solutions team to make hedge fund-like investments within each fund’s mandate:

  • The new TCW/Carlyle Trend Following Fund will use quantitative computer models to identify and bet on price momentum.
  • The new TCW/Carlyle Liquid Tactical Fund will actively invest across a broad range of instruments.
  • The new TCW/Carlyle Absolute Return Fund will allocate capital across both the momentum and active tactical strategies with the goal of generating consistent returns in any market environment. 

Portfolio managers for the new funds are Carlyle managing directors Michael Beaton, George Main and Warren Wright. The three men were co-founders of Diversified Global Asset Management, which Carlyle bought in 2014. 

Founded in 1987 by David Rubenstein, William Conway and Daniel D'Aniello, Carlyle one of the leading global alternative asset managers in the world, with $193 billion of assets under management across 130 funds and 156 fund of funds vehicles as of March 31, 2015, and it owns minority and majority stakes in several investment management companies. 

TCW, meanwhile, has a broad range of products across fixed income, equities, emerging markets and alternative investments. The firm manages approximately $180 billion in client assets across brands MetWest, TCW and the recently-formed TCW Alternative Funds, which will be where the firm’s family of alternative mutual funds resides. 

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