Institutions are prominent among the investors that will have collectively reduced hedge fund assets managed by Claren Road Asset Management by 75% in the year ending Sept. 30.
The Carlyle Group, which has owned a 55% stake in the firm since December 2010, said in an 8-K filing on Monday that investors had submitted requests to redeem a total of approximately $2 billion from Claren Road's two long/short credit hedge funds in the quarter ending Sept. 30.Claren Road's assets under management peaked at $8.5 billion as of Sept. 30, 2014, declined to $4.1 billion as July 31, and will fall to $2.1 billion as of Sept. 30, not including possible performance gains or losses.
Among funds that submitted requests for Claren Road's Sept. 30 redemption date is the Sacramento County (Calif.) Employees' Retirement System. The $7.7 billion fund is retrieving its $29 million investment in Claren Road Credit Partners because of performance concerns, said CEO Richard Stensrud in an e-mail. The hedge fund investment had been on the watchlist since March 2014.
The $2.5 billion Houston Municipal Employees Pension System also is redeeming its investment in Claren Road Credit Partners, Peter Koops, a spokesman, said in an e-mail. Mr. Koops did not provide the current size of the investment or a reason for the redemption, which was approved at the July 23 board meeting. The plan invested $5 million in the hedge fund in 2012.
One investor that did not wait for the third quarter to redeem its assets is the $26.2 billion Texas Employees Retirement System, Austin. The plan redeemed its $80 million Claren Road investment earlier this year, according to an Aug. 18 investment committee report. Mary Jane Wardlow, an ERS spokeswoman, did not provide information about the reasons for and timing of the withdrawal by press time.
Several institutions with larger investments in Claren Road Asset Management's hedge funds are keeping a close eye on the company.
The $45.8 billion Illinois Teachers' Retirement System, Springfield, for example, had $184.4 million invested in the firm's Credit Partners fund as of June 30 and “as you would expect, we have had heightened concerns over the Claren Road mandate,” said R. Stanley Rupnik, chief investment officer, in an e-mail.
The investment division of the $90 billion North Carolina Retirement Systems also is on heightened alert about the plan's $328 million investment in Claren Road funds. As of June 30, the Raleigh-based plan had $190 million in Claren Road Credit Opportunities and $138 million in Claren Road Credit Partners.
“Regarding recent developments with Claren Road, our department is aware and will continue to monitor the situation,” said Brad Young, a spokesman for Janet Cowell, North Carolina treasurer, who is sole trustee of the retirement system.
Albert L. Marino, chief operating officer of Claren Road, did not return a call seeking comment about the firm's high redemption rate and the performance of its hedge funds.
Randall Whitestone, a Carlyle Group spokesman, declined to comment on Claren Road.