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Carlyle’s TCW Group shops for more ‘all-stars’ after buying Craton Equity Partners

  • TCW Group looking to add more top-quartile funds
  • Craton manages $242M as sustainability investor
  • Carlyle bought TCW Group in February from Societe Generale

With institutional investors issuing mandates for socially-responsible investing, the purchase of Los Angeles-based Craton Equity marks an expansion of TCW Group’s alternative asset management platform, said Jess Ravich, group managing director and head of alternative products at TCW Group.

“We want to add top tier managers,” Ravich told Buyouts. “We have an alternative platform, but we’re not going to home-grow a fund. We’re bringing over funds that are top quartile. We’re putting together an all-star team.”

Looking ahead, TCW Group plans to buy one more alternative vehicle this year and up to five per year for the foreseeable future, he said.

Founded in 2006 as an emerging manager, Craton Equity handles $242 million in assets and specializes in growth capital deals for venture-backed companies within the sustainability, resource efficiency and carbon-reducing technology industries.

Craton Equity targets companies with low-capital requirement business models that typically operate without tax credits or government subsidies. Portfolio companies include Petra Solar, creator of a pole-mounted solar panel system for utility companies; proprietary filter technology firm Rypos and Sungevity, a financier and designer of residential solar systems.

Ravich said TCW Group met with 80 funds before choosing Craton Equity.

“Between 2006 and 2008, there was a lot of money put into sustainability funds – over $20 billion,” Ravich said. “The valuations of the investments made by those funds were frothy, and a lot of the investments hit the wall in 2008. As a consequence, a lot of those funds didn’t survive. Craton succeeded and made it through. Fast forward to 2010 and you find that there has been less money invested in sustainability funds – less than $3 billion last year – yet the companies these funds can invest in are more mature and have survived the financial crisis. Therefore, the risk reward characteristics for sustainability funds are very positive.”  

Ravich joined TCW Group in late 2012 after serving as managing director and head of the capital markets group at Houlihan Lokey, an international investment bank. Carlyle Group bought a majority stake in TCW Group in a deal that closed in February. He worked on TCW Group’s purchase in December of the $2 billion AUM direct lending funds group of Regiment Capital Advisors LP, a Boston-based direct lender to middle-market clients.

Craton Equity managing partners Bob MacDonald and Tom Soto will become managing directors at TCW/Craton. Craton Equity executives Kevin Wall and David Asarnow are also moving over.

Ravich and David Wang, director of alternatives at TCW Group, will join the investment committee for TCW/Craton and all of the former Craton Equity partners will also serve on the new firm’s investment committee.

Craton Equity’s Soto said that becoming part of a large asset manager will provide the firm with “additional resources and puts us in an ideal position to help our limited partners participate in socially responsible investing,” according to a prepared statement.