June 4, 2007 / 4:37 PM / 11 years ago

Highbridge taps Kapnick to start private equity arm

NEW YORK, June 4 (Reuters) - Highbridge Capital Management, a hedge fund firm majority owned by JPMorgan Chase & Co. (JPM.N), hired former Goldman Sachs Group (GS.N) investment banking co-head Scott Kapnick to launch a private equity business, people familiar with the situation said.

Kapnick, who retired from Goldman last year after 21 years, will run a new principal strategies business and raise two $1 billion to $2 billion funds that will make corporate debt and private equity investments.

JPMorgan declined comment.

Highbridge is the latest hedge fund to expand into corporate buyouts, branching out from short-term trading strategies by targeting long-term equity investments and then operating businesses.

D.E. Shaw & Co. beefed up its private equity activities; while in February giant hedge fund manager SAC Capital Advisors LLC hired Peter Berger, a former member of Ripplewood Holdings, to launch a buyout business.

Highbridge has grown five-fold to $35 billion in assets under management since JPMorgan bought a majority stake in December 2004, using its global reach to help Highbridge become one of the world’s largest hedge fund managers.

Kapnick is expected to first raise a credit fund, one that will provide mezzanine financing for leveraged buyouts and buy the debt of distressed companies, starting as early as September. A private equity fund will follow and begin making investments early next year, a person familiar with Highbridge’s plans said.

JPMorgan Chase last year spun off most of its private equity business, which used bank and client money to pursue large-cap acquisitions, to address concerns about conflicts of interest. The bank kept One Equity Partners, which invests in middle market companies, and will not invest any of its own capital into the new Highbridge funds, the source said.

Kapnick was one of three co-heads of investment banking at Goldman and played a major role in helping it expand throughout Europe in the 1990s. Kapnick became a global co-head of investment banking in 2001 and joined the firm’s management committee the following year.

The New York-based banker was later named co-CEO of Goldman Sachs International, a job that required him to commute to London. Last year, as part of a broader shake up in investment bank leadership, Kapnick retained his co-head role but would remain based in New York.

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