(Bloomberg) — 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.
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.
Aside from Tepper, the firm also has a minority investor, according to the SEC filing. While also described as a passive player, the investor — who isn’t named in the documents — will have the opportunity to make co-investments alongside the firm’s clients, provide services or financing to its portfolio companies and share in some of Andalusian’s profits, the filing shows.
Tepper has given few hints publicly that he or other members of his firm were branching into private equity. The firm quietly opened in 2020 and few knew about it until Andalusian filed earlier this year to be a registered money manager.
Andalusian’s equity investments will range from $100 million to $500 million, said the person familiar with the firm’s plans. In addition to investing in the sports industry — along with technology and media companies — the firm has an affiliate called Andalusian Sports Partners, according to the filing. This company will provide sports-related advisory services and management services to “certain sports-focused investment funds.”
Meanwhile, Tepper’s sports interests have expanded since he became an NFL owner. He has been planning a new Panthers stadium and in 2019 Tepper agreed to pay a record $325 million to bring a major league soccer franchise to Charlotte. He was also among investors who helped Epic Games Inc., the company behind the blockbuster Fortnite game, raise $1.78 billion.
As for Kaplan, he’s a veteran dealmaker who spent three decades at Merrill rising to become global head of mergers and acquisitions. In 2011, he joined Appaloosa as chief operating officer, leading the firm’s acquisitions and managing its investment banking relationships. He also worked on finding private deals for Tepper to personally invest in, said another person with knowledge of the firm’s operations.
Yet even as Kaplan builds his own firm, regulatory filings reveal an unusual arrangement in which he is working for another firm at the same time.
Kaplan serves as the head of business development for Accelerate Acquisition Corp., a blank check company that went public in March and that is run by Robert Nardelli, the former chief executive officer of Chrysler LLC and Home Depot Inc.
Accelerate has a partnership with Andalusian that calls for Kaplan to bring transactions to that firm even as he hunts for his own opportunities.
“We believe sellers of assets will look favorably on Andalusian’s involvement with us,” Accelerate said in offering documents filed with the SEC.
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