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Carlyle Group buys 55% stake in Vermillion Asset Management

Wednesday, October 03, 2012
Opalesque Industry Update - Global alternative asset manager The Carlyle Group and Vermillion Asset Management (Vermillion) announced that the Carlyle publicly traded partnership has purchased, effective October 1, 2012, a 55% stake in Vermillion, a New York-based commodities investment manager with approximately $2.2 billion of assets under management as of September 30, 2012, which has become affiliated with Carlyle’s Global Market Strategies business.

Mitch Petrick, Carlyle Managing Director and Head of Global Market Strategies, said, “This is an important addition to Carlyle's GMS platform. For many years Carlyle has successfully invested in a variety of energy, agriculture and infrastructure companies. Vermillion employs a liquid, relative-value, low volatility approach to trading both physical commodities and their derivatives to produce positive, uncorrelated returns.” Drew Gilbert, Co-Managing Partner and Co-Founder of Vermillion, said, “Our team looks forward to leveraging Carlyle’s global network and deep knowledge of local markets to better exploit trading opportunities and inefficiencies in the global commodities markets.”

“Global, secular trends are fundamentally reshaping the supply and demand balance for many commodities worldwide. Our partnership with Carlyle will help us maximize these opportunities to deliver more alpha to our investors,” said Chris Nygaard, Co-Managing Partner and Co-Founder of Vermillion. “As we move forward, we are especially grateful to our employees, our many investors and their advisors for their support of this transaction.”

Vermillion was established in 2005 by Drew Gilbert and Chris Nygaard. Today, Vermillion manages three commodities-focused strategies, including relative value, enhanced index and long-biased physical commodities. Each strategy utilizes Vermillion’s ability to make and take physical delivery, unique among its peer group.

Vermillion will become Carlyle’s exclusive commodities trading platform and Gilbert and Nygaard will continue in their current roles as co-Chief Investment Officers, managing investments and the day-to-day operations of Vermillion.

The Vermillion ownership stake was acquired by Carlyle in exchange for cash, an ownership interest in Carlyle and performance-based contingent payments payable over five and a quarter years. If Vermillion achieves certain performance targets, Carlyle has agreed to issue to the Vermillion principals up to 1,439,788 Carlyle Holdings partnership units over a four and a quarter-year period. These units will be exchangeable one-for-one on a private placement basis for common units of The Carlyle Group L.P. subject to the terms of Carlyle’s exchange agreement. Vermillion’s principals reinvested cash proceeds from the transaction into Vermillion’s funds. The transaction received the requisite fund consents. Further terms of the transaction were not disclosed.

Carlyle’s Global Market Strategies business comprises an array of long/short credit hedge funds, emerging markets equities and macroeconomic strategy hedge funds, structured credit, middle-market credit, energy mezzanine and distressed products – 53 funds with $29 billion in assets managed by 100 investment professionals in New York, Washington, DC, Los Angeles, Houston, Hong Kong and London as of June 30, 2012.

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