The Carlyle Group, the private equity firm, is shutting down its hedge fund business, after losses last year and a disappointing performance this year.

Carlyle-Blue Wave Partners Management lost 17 per cent in 2007, and rose 2 per cent so far this year. The fund has currently only $600m under management.

Blue Wave was Carlyleâ??s second venture in the hedge fund business. It had launched a fund that invested in a variety of hedge funds but sold that business to Afsaneh Beschloss.

Other private equity firms are more successfull in diversifying into other areas of alternative asset management. TPG-Axon founded by Texas Pacific Group in 2005 started with about $3bn and today has $16bn under management.