New York (HedgeCo.net) – $106.7 billion global hedge fund manager The Carlyle Group has agreed to purchase a 55% stake in $1.6 billion Emerging Sovereign Group (ESG), a New York-based emerging markets equities and macroeconomic strategies investment manager, in exchange for cash, an ownership interest in Carlyle and performance-based contingent payments.
“Emerging markets is a core competency of Carlyle’s corporate private equity and real assets franchise and a significant untapped opportunity for Carlyle’s global market strategies platform. ” Mitch Petrick, Managing Director and Head of Carlyle’s Global Market Strategies business, said, “ESG has a stable, proven team, and we believe the right strategies to capture a multi-decade trend of exceptional growth in emerging markets. With this strategic partnership, we expect to leverage Carlyle’s local presence, industry and operating knowledge, and senior advisor network in emerging markets with ESG’s public markets franchise to seek to generate superior returns.”
Kevin Kenny, Managing Partner and Founder of ESG, said, “We believe this partnership with Carlyle will strengthen our firm and benefit our investors. We are extremely fortunate to have benefitted from Tiger Management and Julian H. Robertson’s unwavering support and guidance since our inception and are particularly excited to have their continued sponsorship and participation going forward.”
The ESG principals will reinvest a majority of the initial cash proceeds from the transaction into the ESG funds. Terms of the transaction, which is expected to close by July 1, were not disclosed. The transaction has already received the requisite fund consents.
ESG was established in 2002 by Kevin Kenny with an initial investment from Julian H. Robertson through Tiger Management. Today, ESG has four emerging markets equities and macroeconomic strategies. Tiger Management will maintain a significant investment in the ESG funds and an ownership interest in ESG post-closing. Kevin Kenny will continue as Chief Investment Officer and manage the day-to-day operations, all investment decisions and portfolio construction.
Carlyle’s Global Market Strategies business comprises an array of long/short credit hedge funds, structured credit, mezzanine and distressed products – 39 funds with $20.6 billion in assets managed by 68 investment professionals in New York, Washington, DC, Los Angeles, Hong Kong and London as of December 31, 2010.
Gleacher & Company and Seward & Kissel served as financial and legal advisors to ESG, respectively. Simpson Thacher & Bartlett served as legal advisor to Carlyle.
“For nearly a decade, we’ve been privileged to work closely with Kevin Kenny and his team of talented emerging market specialists. The support that Emerging Sovereign Group has now earned from the distinguished Carlyle Group is testimony to the high regard in which Kevin and his associates are held. We are delighted with this formidable new association and proud to be a part of it.” Julian H. Robertson, Chairman and Chief Executive officer of Tiger Management LLC, said.
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