CalPERS reveals details of Carlyle-backed hedge fund

Recent disclosure of the US pension fund's $75 million allocation to a Carlyle-backed hedge fund has provided information as to the fund's structure and mandate.

The California Public Employees’ Retirement System recently revealed a $75 million (€54 million) commitment to The Carlyle Group’s $1 billion hedge fund, the Carlyle-Blue Wave vehicle that began trading internally this March.

The “Multi-Strategy Fund” seeks to generate a net return of 12 to 15 percent with annualised volatility of 5 to 8 percent. It will invest in a range of strategies, including taking long and short positions in global equities, merger arbitrage, volatility trading, capital structure arbitrage and convertible arbitrage. It is also mandated to pursue credit-oriented strategies, possibly including investments in asset-backed securities and high-yield bonds.

The fund's management company, Carlyle-Blue Wave Partners, is a partnership between Carlyle and Blue Wave founders, former Deutsche Bank senior executives Rick Goldsmith and Ralph Reynolds. Goldsmith was most recently chief executive of Deutsche Bank’s absolute return strategies hedge fund and Reynolds was global head of proprietary trading. Carlyle owns 25 percent of the hedge fund's management company, while Blue Wave owns 75 percent.

This June, when CalPERS commited to the fund, the pension giant raised the cap on its hedge fund allocation from $5 billion to $10 billion. Many other public pensions are considering similar moves, despite heavy losses suffered recently by hedge funds at Bear Stearns and Goldman Sachs, among others.