Family office Karlin launches PE arm with $500m

The Los Angeles-based family office, with $2bn in assets under management, has launched Highview Capital with an evergreen pool of capital to invest in private equity with a long-term, flexible mandate.

Karlin Asset Management has launched a private equity arm, Highview Capital, with $500 million of its own money to invest long-term capital into mid-market companies undergoing transformation, turnaround or growth.

The Los Angeles-based family office, which was set up in 2005 by David Cohen to manage the money of former spinal surgeon and inventor Gary Michelson, has set aside $500 million of its own capital to establish Highview, which is also based in Los Angeles.

This is the latest addition to the $2 billion family office’s existing three investment verticals in real estate, credit and public equities. Karlin also has Karlin Ventures, an early-stage venture-capital firm that has invested in 42 companies and exited seven.

Cohen, who is currently Karlin’s chief executive and chief investment officer, co-founded Highview with Ryan McCarthy, a private equity professional who previously had co-founded and led Los Angeles-based Aurora Capital Group’s value-focused private equity fund Aurora Resurgence. At Aurora, McCarthy was responsible for sourcing, evaluating, managing and executing private equity investments, according to the Aurora website.

McCarthy said Karlin’s decision to enter the private equity space was aimed at setting up a long-term structure to capitalise on potential value-based opportunities that could arise in a few years as the market’s bull run tapers.

Highview will reinvest realised capital right away for the next deal in a similar fashion an evergreen fund would. This will allow the firm to have a flexible mandate to hold portfolio companies for longer than the typical private equity holding period of three to five years, and to avoid specific four- to five-year investment horizon employed by traditional private equity funds, he said.

“It gives us the differentiated edge in the sense that there are some businesses that don’t want a private equity buyer because they don’t want to get sold after just three to five years,” he said. “We can hold them for longer than that.”

Highview will target a deployment pace of $100 million to $150 million in capital per year, McCarthy noted. Highview targets companies with an enterprise value of between $50 million and $500 million, and will invest about $10 million to $100 million per deal, according to its website. It will invest in nine sectors, which include business services, chemicals, distribution and logistics, energy, healthcare, manufacturing, packaging, retail and consumer, and TMT.

Michelson developed implants, surgical procedures, and tools for spinal surgeries called Michelson Technology, whose patent he won from a legal dispute with Medtronic for $1.35 billion in 2005.

The firm has eight employees, including Cohen and McCarthy, as well as six people hired on Monday, he said. The new hires include two principals, two vice presidents, and two associates, with further expansion expected to come soon, according to McCarthy.

A Highview spokeswoman told PEI the fund has not made any investments so far.