Hedge fund manager David Tepper, best known for his stock-picking prowess, is devoting a piece of his personal fortune to private investing.
Tepper—worth about $14.5 billion—has become the founding investor for a private equity firm that plans to invest in growth companies, special situations, and the media and sports sectors, according to regulatory filings and a person familiar with the matter.
The firm, Andalusian Private Capital, was co-founded by one of Tepper’s most trusted executives—Jeffrey Kaplan, a former Merrill Lynch mergers head who helped his one-time boss make the record-setting $2.3 billion acquisition of the National Football League’s Carolina Panthers.
Andalusian, with about $800 million in assets, will invest on behalf of Tepper and more than 10 family offices who are banding together to do their own transactions rather than committing capital to private equity firms. Family offices have been adopting this approach because they believe big buyout firms are increasingly prioritizing asset growth over returns, according to Elizabeth Weymouth, the founder of Grafine Partners.
“They really want to get closer to the source of alpha rather than being walled off from the action in a traditional private equity fund,” said Weymouth, who was speaking in general terms, based on her firm’s specialty of investing in individual buyouts on behalf of wealthy investors, endowments and sovereign wealth funds. “These investors want more control, they want more flexibility in holding periods, and they want superior returns.”
A spokesman for Tepper’s hedge fund firm, Appaloosa Management, declined to comment. Tepper didn’t return calls or emails.
Tepper has backed other Appaloosa executives and portfolio managers who have gone on to form their own fund companies, including Eric Cole, Matthew Knauer and Drew Casino. His arrangement with Kaplan is no different, the person familiar with Tepper’s thinking said.
Passive Role
While Tepper won’t be involved day-to-day in Andalusian, it bears his imprimatur. The firm is located in the same Short Hills, New Jersey, office building that has housed Appaloosa for decades and also uses an equine-related name—a practice that Tepper, 63, adopted in founding his own firm and several of its main funds, including Palomino and Azteca Partners.
Tepper was listed as a co-founder of Andalusian, along with Kaplan and Vice Chairman Nicholas Savasta, in an April filing with the U.S. Securities and Exchange Commission. Earlier this month, the firm revised the filing to say that Kaplan and Savasta launched the company last year “with its founding investor, David Tepper.”
Tepper will have a strictly passive role, said the person, who asked not to be identified discussing private matters.