The Carlyle Group got its start in 1987 and has since morphed into a private equity powerhouse, with more than $75 billion in assets. According to the firm's website: "Carlyle's conservative investment philosophy and disciplined investment process has generated extraordinary returns for its investors."
Well, that doesn't appear to be the case with one of its affiliates, Carlyle Capital, which is traded in Amsterdam.
According to the Wall Street Journal [subscription required], the fund's creditors – including firms like Citigroup (NYSE: C) and Bear Stearns (NYSE: BSC) -- will likely be seizing assets for liquidation; there are $21.7 billion in mortgage securities. Simply put, the fund is near dead. In fact, it's the first time a Carlyle fund has plunged into insolvency.
Ironically enough, Carlyle prides itself on its due diligence and investment timing. But in the case of Carlyle Capital, the fund got its start in the middle of 2006, the top of the real estate frenzy.
Something else: Carlyle was not really using fundamental analysis in its strategies. Instead, the fund had a leverage ratio of 32 and was mostly engaging in arbitrage.
No doubt, it's hard to see how this fits into Carlyle's stated focus on conservative principles and investment discipline.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
3-13-2008 @ 1:10PM
Scott Cacciatore said...
Scott Cacciatore thinks Citibank and JPM and the rest of the financial industry will rally from their levels on March 13,2008.
So the bad news keeps on coming for the financial industry. It seems like the financial sector will keep selling off as news of companies like Carlye Capital folding, and credit worries, and bad mortgages, and even triple AAA credit borrowers defaulting on their loans comes rolling in everyday. However, I feel that we have reached a short term bottom. If you check two financials, JPM and Citibank (C) and go back 10 years on their charts you will see that each stock is about to hit a very strong support level. Citibanks support level is 20 and JPM's is 35. I do not believe that either stock will break down below their support levels making each stock a strong short term buy to bounce back and rally a little. yes they each might test their levels but i doubt strongly they will break down below. Combine this with the fact that the financial industry is way oversold and you have yourselves a very strong stock play for the short term.
Scott Cacciatore thinks Citibank and JPM and the rest of the financial industry will rally from their levels on March 13,2008.
3-13-2008 @ 8:28PM
Chuck said...
Am I the only one who is outraged by the irresponsible acts of the CITI board? Send the Bums packing!!