Founders of Carlyle's Vermillion Asset Management Depart After Losses, Redemptions

Jul 31 2015 | 1:42pm ET

The founders of Carlyle’s Vermillion Asset Management hedge fund unit have left the firm amid steep losses and investor redemptions in its flagship commodities fund.

Chris Nygaard and Drew Gilbert, who founded Vermillion in 2005 and sold 55% of it to Carlyle in 2012, parted ways with Carlyle at the end of June, according to The Wall Street Journal

The firm’s Viridian commodity hedge fund, which trades oil, metals, and agricultural products, lost 23% in 2014, which touched off a wave of redemptions that brought assets in the fund from nearly $2 billion to under $50 million. 

It is the latest in a series of commodity-oriented hedge funds to crack under the unrelenting bear market in commodity and materials markets, including Armajaro’s $450 million commodity fund and four funds worth an aggregate $1 billion at Cargill’s Black River Asset Management.

The S&P GSCI commodity index, a popular reference for commodity prices, has lost more than 8% so far in 2015 and is at its lowest level since 2002.

“We are successfully repositioning our commodities business, particularly in commodities finance, to capture an enormous global opportunity,” Carlyle said in a statement to Bloomberg. 

The fund is not closing, but will reportedly de-emphasize investments in oil, natural gas, coal, iron and agriculture and will concentrate on metals and freight-rate strategies.

Carlyle is facing difficulties in its other hedge fund units, controlling stakes in which were bought by the private equity firm a few years ago in a bid to diversify assets. A leading global hedge fund consultant panned the company’s Claren Road Asset Management earlier this week, while its hedge funds in general were down 4.3% in the second quarter, according to the company. 

In addition to its funds, Vermillion has added new ventures focusing on commodity finance lending and index-related strategies to its lineup since the Carlyle acquisition. In total, the firm manages approximately $1.4 billion.


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