Craton focuses on socially responsible investing, providing growth capital to venture-backed companies within the sustainability, resource efficiency and carbon-reducing technology sectors. The firm typically invests in companies with low-capital requirement business models that generally operate independent of any tax credits and government subsidies. The acquisition by TCW is part of a wider initiative to build out the firm’s alternative offerings.
“I was not looking for a sustainability fund,” Jess Ravich, group managing director and head of alternative products at TCW told Private Equity International, adding that TCW considered more than 80 prospective alternative groups.
“When we looked at Craton in particular, they avoided most of the subsidy and tax credit deals, they did not become a zombie fund and they had a repeatable process. We saw this as something that our clients wanted and that this group could deliver.”
The acquisition of Craton comes as the firm targets $400 million for its Fund II. The firm has about $242 million in assets under management.
Craton was formerly Paladin Private Equity, an investment firm founded in the mid-1990s focused on small companies in need of growth capital primarily in the manufacturing sectors. In 2006, the firm shifted its mandate to focus on cleantech and environmental technology.
All employees of TCW/Craton will be relocated to TCW’s Los Angeles office. Craton managing partners Bob MacDonald and Tom Soto will become managing directors at TCW/Craton. All four of the former Craton partners will be on the six-person investment committee for TCW/Craton.
“Our game plan is to acquire teams that have been together, have [had] very low turnover in management, have at least a five-year or ten-year track record and [are] in the top quartile or hopefully the top decile of all their competitive funds for the life of their fund,” Ravich said.
In addition to private equity, TCW is also looking at hedge funds and direct lending strategies to help grow its alternatives programme.
Founded in 1971, The TCW Group has over $130 billion in assets under management across a variety of investment products, including equities, fixed income and alternatives. TCW manages investment portfolios for corporate and public pension plans, financial institutions, endowments and foundations and high net-worth individuals. The firm is backed by The Carlyle Group and TCW’s management team, which owns a 40 percent stake in the business.