For Louis Hanover and Bruce Richards, co-founders of New York–based Marathon Asset Management, the subprime market meltdown has been a little frustrating. To their credit, Marathon, which manages more than $10 billion in hedge funds and employs 165 people, escaped the carnage. Its flagship $3.1 billion Marathon Special Opportunity Fund, which invests in high-yield bonds, bank debt and other potentially distressed securities of companies in the midst of bankruptcies, restructurings or turnarounds, was up 6 percent in 2007. Even the $1.7 billion Marathon Structured Finance Fund, which specializes in asset-based lending — one of the hardest hit parts of the market — managed to stay in the black, up about 2 percent.
But as Hanover and Richards readily concede, they missed a golden opportunity to make considerably more money for their investors by aggressively shorting the subprime market as the crisis was unfolding. And when Marathon finally did start shorting subprime issues, they were too quick to cover their positions, spooked by the spikes in volatility.
“It was a disappointing year for us,” says Richards, who acknowledges that Marathon initially underestimated the degree and depth of the credit contagion. “But we lived to play another day.”
For Richards and Hanover, friends since they met in the fixed-income department at brokerage firm Smith Barney in the mid-’90s, investing truly is a marathon, which demands discipline and endurance. Richards and Hanover have largely run the race in silence. Last summer, however, they agreed to a series of interviews with Alpha, even as the firm was going through one of its toughest years.
Despite Marathon’s inability to take full advantage of the opportunities at the start, the subprime crisis could represent one of the next great legs of the race for Richards and Hanover. Late last July, they fired off a letter to existing and prospective investors to gauge interest in a new vulture fund that would buy up troubled subprime loans, asset-backed securities and collateralized debt obligations on the cheap. Andrew Rabinowitz, the firm’s president and CFO, worked long hours to get the fund up and running in just one month, about one third the time normally required to launch a new offering. When the Marathon Distressed Subprime Fund debuted on September 1, Hanover and Richards had exceeded their goal of raising $250 million to $300 million; by year-end the fund was managing more than $600 million.
“This is one of the most significant distressed opportunities the markets have ever seen,” says Richards, a former mortgage-backed-securities trader. “When markets are most distressed, we should be deploying capital.”
Marathon’s ability to sidestep market meltdowns and take advantage of potentially huge opportunities created by turmoil has defined the firm since Richards and Hanover launched their first fund in 1998 with just $17 million to invest in emerging markets and global credit. That year, in the wake of the Asian financial crisis, they managed to break even — a triumph of sorts as many emerging-markets hedge funds suffered huge losses and went out of business — setting themselves up to take advantage of the big run-up in emerging-markets debt in 1999, the year they launched the Special Opportunity Fund. Similarly, they started the Global Convertible Fund in 2001 to capitalize on the increased volatility in equities that year and complement the firm’s other strategies, acknowledging that convertible bonds represent an important part of many companies’ capital structures. Both funds were up more than 20 percent their first year.
“Marathon is very good at seeing opportunities when there are very significant dislocations out there,” says Mark Yusko, president and CIO of North Carolina–based Morgan Creek Capital Management, whose clients are invested in several Marathon funds. “They look at markets others are afraid of at a particular time or don’t understand. They seek out complex markets where larger teams can get an edge.”
Today, Marathon manages $10.7 billion in six hedge funds, as well as $3 billion in leveraged finance transactions such as collateralized debt obligations and collateralized loan obligations. Hanover, the chief investment officer, is also head portfolio manager of the Special Opportunity Fund. CEO Richards crafts the overall strategy, develops the business lines, new funds and investment strategies and is the public face of Marathon, meeting with current and prospective investors. He also sits on the investment committee with Hanover and global head of investment management Richard Ronzetti.
Outsize investment returns are not the objective at Marathon. Instead, Hanover and Richards seek to provide an attractive absolute and risk-adjusted rate of return for their more than 450 investors, almost all of which are institutions. Consistency is paramount. Marathon’s funds have delivered double-digit annual returns — typically in the 12 to 20 percent range — virtually every year of their existence.
“Looking out over a decade, we don’t think every strategy will provide great opportunities every year,” says Hanover, 42, who is known for being laid-back and able to ask probing questions without being threatening. “So we must have a full game.”
In addition to its New York headquarters, Marathon has full offices in London and Singapore and satellite operations in Hong Kong, Los Angeles, Mumbai, São Paulo and Washington. Hanover and Richards boast that the firm can invest in any part of the capital structure in any company in any industry in any region of the world. They make those investments through one or more of the three pillars of their alternative asset management operation — hedge funds, private equity and real estate. It’s not unusual for one of Marathon’s hedge funds to team up with the firm’s private equity or real estate group to do a deal.
In 2007, for example, the real estate group, headed by Jon Halpern, partnered with Marathon’s Singapore office to work on a management buyout of Executive Centre, which owns and operates 28 business centers in 15 cities across Asia. The company provides office space, furniture, equipment, receptionists and secretaries for fledgling enterprises. Marathon’s real estate group brought its expertise managing office buildings to the deal, while the Singapore team, led by Marathon’s head of Asia investments, Steve Kim, drew on its capital markets relationships to secure financing and conduct due diligence.
“I have operating experience in this industry, and Steve has local market expertise,” explains Halpern, who before joining Marathon in January 2004 was CEO of Dallas-based HQ Global Workplaces, which has 350 executive centers in 17 countries and was bought by the U.K.’s Regus Group, its biggest competitor.
It’s this cooperation — across asset classes and investment structures — that distinguishes Marathon from most alternative-investment firms. “Marathon is very innovative in the ways it identifies areas of opportunity,” says Bryan White, global head of BlackRock Alternative Advisors, which manages $71 billion in alternative-investment products. As CEO of Seattle-based fund-of-funds firm Quellos Group, which BlackRock bought last year, he was one of Marathon’s earliest investors.
Now, as Marathon celebrates its tenth anniversary, Hanover and Richards are undergoing an ambitious expansion. In addition to the new subprime fund, they are launching their first separate private equity fund, hoping to capitalize on the past year’s surge in distressed credits and the growing number of busted or overleveraged LBO deals. Until now the firm — which controls more than a dozen companies, including Marex Financial, the European operations of onetime commodities trading giant Refco, and Marix Servicing, a loan-servicing company — made its private equity investments through the Special Opportunity Fund. Marathon is also making its first major push into equities, turning its convertible fund into a multistrategy fund and renaming it Marathon Global Equities.
“This is the best time for distressed investors to invest in four or five years,” Richards asserts. “We want to buy when the investment community is most stressed.”
To help accommodate this expansion and address the acute overcrowding in its midtown Manhattan headquarters, Marathon plans to occupy two floors in the new Bank of America Tower near Times Square by Labor Day. The firm has committed to pay $10 million annually on a ten-year lease for 76,000 square feet of office space that will have the capacity to house 450 people, more than triple the 130 Marathon currently employs in New York. It is also spending $18 million to improve the infrastructure and technology for its new offices. But in keeping with their conservative nature, Hanover and Richards are subletting a quarter of the space for the first five years.
MARATHON’s ability to move quickly and decisively was critical when it came to Refco. The commodities broker had stunned the financial world on October 10, 2005 — just two months after going public — when it disclosed that its CEO, Phillip Bennett, had hidden from Refco’s auditors and investors more than $400 million of debt owed to it by a company he controlled. The next day Bennett was indicted on charges of engaging in a conspiracy that caused the commodities giant to sell $583 million in stock to the public based on “false and fraudulent” financial statements. A week later Refco filed for Chapter 7 bankruptcy protection, meaning that it would sell all of its assets.
After Hanover heard the news, he passionately made the case to his colleagues for Marathon to bid for Refco. Working closely with their adviser, New York–based Blackstone Group, he and Richards called on professionals from the firm’s New York, London and Singapore offices to help analyze the situation and line up financing. Richards estimates that Marathon devoted about 1,000 man-hours to its bid, which was made as part of a consortium that included Dubai Investment Group.
Five of the six groups that submitted offers for Refco were invited to an auction in New York on November 10. The others were Cerberus Capital Management, J.C. Flowers & Co., Interactive Brokers Group and Man Financial, a unit of London-based Man Group. Each was given the opportunity to present its proposal and meet with the court-appointed restructuring adviser, Greenhill & Co. The auction began at 10:00 a.m. Marathon, which had been offering a package worth about $250 million, dropped out at 4:30 the following morning. A few hours later Man won with its offer of $282 million in cash and roughly $41 million of assumed liabilities and other considerations.
“Lou exercised a good deal of discipline in that situation,” says Blackstone senior partner Art Newman, who worked with Marathon on this and other deals. “Marathon didn’t get carried away with the moment in the Refco bidding. I saw that as a sign of a smart investor.”
However, the folks at Marathon knew all along that if Man won the bidding, it would wind up with redundant operations. Immediately after the auction Marathon struck a deal to buy Refco’s European operations, which then employed about 300 people and had 2,000 customer accounts. Richards and the rest of the Marathon team worked closely with Man and the U.K.’s Financial Services Authority to create a structure that would pass muster with the British regulators. Marathon agreed to take over the assets of U.K. electronic futures-trading firm Refco Trading Services and electronic exchange trading vendor EasyScreen, as well as put £100 million ($196 million) of regulatory capital into the business. Meanwhile, Marathon, which bought the Refco unit for the assumption of about $17 million in liabilities, had to keep the firm’s licenses and make sure its employees and clients didn’t bolt.
In late January 2006, Marathon took control and renamed the business Marex Financial. Today, Marex is a broker-dealer specializing in commodities, financial futures and options, and foreign exchange. It has roughly 400 employees and is run independently, headed by CEO Mark Slade, a former Refco managing director. The company has been profitable every quarter, says Richards.
“The aim is to grow that business organically and push it into new markets,” says Adam Phillips, Marathon’s head of European investment management. Phillips, Hanover, Rabinowitz and Richards all sit on the Marex board.
The Refco deal marked one of Marathon’s first forays into private equity. Hanover and Richards have earmarked about 20 percent of Marathon’s Special Opportunity Fund to private equity. Wray Thorn oversees the firm’s private equity group, which has 16 professionals and has made 14 investments. One of its earliest was Chicago-based Marathon Automotive Group, created in 2006 to buy up auto-parts suppliers. Marathon has already purchased three, including Contech, a manufacturer of aluminum and other lightweight metal castings used by auto- and truck makers, which had been part of SPX Corp. “It is a fundamentally good industry that needs capital to grow,” says Thorn, who was a director at San Francisco–based investment firm Fox Paine & Co. before joining Marathon in June 2005.
The Marathon Real Estate Opportunity Fund also crafts private-equity-like deals. In August 2006 the fund, which is managed by Halpern, an 18-year real estate industry veteran whose family has been in the business for four generations, teamed up with RexCorp Realty to buy more than $2 billion worth of properties from SL Green Realty after Green agreed to acquire Reckson Associates Realty for about $6 billion, including the assumption of $2 billion in debt. The Marathon-RexCorp joint venture now owns office properties in the New York tristate area and all of the former Reckson’s interests in its Australia-listed property trust.
“Marathon is not just a capital partner but a value-added partner,” says RexCorp CEO Scott Rechler. “They are one of the more sophisticated players.”
Deals are not done in a vacuum at Marathon. Richards and Hanover encourage the different groups within the firm to work together, as they did with the Refco acquisition. Richards likes to compare the concept to the overlapping circles in a Venn diagram.
In the U.S. the real estate and private equity groups teamed up two years ago to do a management buyout of Quick Park, which owned 30 parking garages in New York City. (The number is now 45.) The private equity team helped to underwrite and evaluate the business, while the real estate group contributed its knowledge of the New York real estate industry and its property management expertise. Halpern says Quick Park was an attractive target because of its affluent customer base, the shrinking supply of parking garages that has resulted from commercial development and New York City’s strong economy and commercial sector. The real estate fund’s return was in the high teens last year, following a 25.5 percent rise in 2006.
Halpern’s team is also working closely with the emerging-markets group, led by Scott Gordon, to take advantage of opportunities in Brazil, China and Eastern Europe, including Russia. The two groups recently coinvested in one of the leading development firms in Istanbul to build offices, retail space and multifamily homes in and around the city. “Real estate is less picked over in places like Poland, Turkey and Russia,” European investment head Phillips explains. “These markets have huge potential since they are underbrokered.”
AT FIRST GLANCE, Lou Hanover and Bruce Richards are an improbable pair. Richards wears expensive suits, dines with clients at upscale restaurants and relies on a small circle of top lieutenants. Hanover wears khakis to the office (jeans on Fridays), eats lunch at his desk and solicits input from a wide circle at Marathon before making a decision. They met in 1995 at Smith Barney in New York when Hanover was brought in to run the emerging-markets derivatives group. Richards had joined the firm, then part of Travelers Group, the previous year to head up global securitization, including mortgages, asset-backed securities, derivatives and commercial real estate.
“We were like-minded guys when it came to taking risks and the markets,” says Hanover. “We gravitated to people with similar backgrounds.”
“They complement each other,” says Steven Black, who was vice chairman and head of Smith Barney’s capital markets group at the time and is now co-CEO of the investment bank at JPMorgan Chase & Co. “I’ve never seen the two have a cross word or an ego contest. They really enjoy working together. That may be the heart of their success.”
Their paths to Wall Street, however, were distinctly different. Richards was born in Brooklyn, where his father worked two jobs — construction during the day and driving a New York Daily News truck in the middle of the night. When Richards was seven, his family moved to Prince George’s County, Maryland, a working-class suburb of Washington. His father opened a hardware store, and his mother ran a decorating business next door. “They became big-time small-town merchants,” recalls Richards, who graduated from Tulane University with a BA in economics in 1982. He took a job as a trader’s assistant at PaineWebber, eventually becoming a trader. Two years later he joined Lehman Brothers as a senior trader, before moving to Donaldson, Lufkin & Jenrette, where he headed up mortgage-backed-securities trading, the collateralized mortgage obligation desk and asset-backeds.
Hanover grew up in Baltimore, the sixth of nine children; his father died from cancer in 1975, when Hanover was nine. A year later his mother was in a horrific car accident. She survived but, unable to raise her children, split up the family. Hanover, then ten, moved in with his aunt in Baltimore. (His mother never completely recovered and died 25 years after her accident.)
Hanover was the first in his immediate family to finish college. In 1986 he graduated from the University of Chicago after just three years with a BA in social sciences, with a concentration in economics. After graduation a friend helped him land a job trading Treasury bond options at the Chicago Board of Trade. He worked there on and off until he earned an MBA from the University of Chicago in 1989, after which he joined First Chicago Capital Markets’ arbitrage interest rate desk, primarily trading interest rate futures. In 1991 he moved to New York to join the equity derivatives group that former Kidder Peabody president Max Chapman Jr. was building at Nomura Securities International. In 1993 he jumped to Merrill Lynch & Co. as director of the firm’s global emerging-markets debt and foreign exchange derivatives trading group. Eighteen months later Martin Loat, his former boss at Merrill, recruited Hanover to join Smith Barney.
The differences between the easygoing Hanover and the hyperdemanding Richards were obvious to their bosses at Smith Barney. Richards’s personality led him to clash repeatedly with his staff, so Black asked him to attend a management training program at Wake Forest University. “We helped put controls around his intensity,” says Black. The program lasted for several weeks and included exercises in classroom settings with the CEOs and COOs of real-life companies.
“Bruce took feedback from Black, and it helped smooth the rough edges,” says Steven Bowman, who as co-head of bond sales and trading at Smith Barney was Richards’s direct boss and today runs Citigroup’s new hedge fund services unit. “He has not lost all of his aggressive attributes, but he has learned how to interact with people in a productive way.”
Richards concedes that he was a very demanding manager and gives a lot of credit to the Wake Forest program for enabling him to develop better management skills. He says the most important thing he learned was delegating responsibility. “There is a delicate balance between being decisive and delegating,” he adds.
When Travelers agreed to buy Salomon Brothers in September 1997, the firm wanted to shift Richards and Hanover into new jobs as it looked to combine some of the operations of Salomon and Smith Barney. They explored whether to stay and create their own business within Salomon Smith Barney but eventually decided to go out on their own. They opened Richards Hanover Asset Management on January 2, 1998. The new hedge fund managers rented on a monthly basis an office in midtown Manhattan that was large enough for six people and used folding tables in a conference room to create a makeshift trading desk.
Drawing on Hanover’s trading expertise, they decided to focus their first offering, Marathon Master Fund, on emerging markets and global debt, hoping to scoop up undervalued securities beaten down by the 1997 Asian currency crisis. Richards knocked on the doors of more than 200 institutions looking for investors but had a hard time convincing them of the wisdom of that strategy.
“With no track record, there was little to judge their skills,” recalls BlackRock’s White. “There were significant early questions about their ability to work together and operate in a business and share responsibility.”
Hanover and Richards began investing with just $17 million, of which about $10 million was their own money. They did well in the first few months, benefiting from a rebound in global markets as investors grew more confident that the Asian financial crisis was abating. But in August, Russia defaulted on its bonds and devalued the ruble, sending shock waves through markets around the world. Many hedge funds took it on the chin, most notably Long-Term Capital Management, which lost $4.6 billion and had to be bailed out by a consortium of banks. Emerging-markets funds were hit especially hard. According to Richards, a basket of 65 emerging-markets hedge funds that had been up as much as 11 percent earlier that summer finished the year down 38 percent.
That summer Richards and Hanover changed the name of their firm to Marathon. They knew that at year-end their investors could redeem, potentially putting them out of business, and if they didn’t survive, it was best not to have their names on the door. The Marathon Master Fund, however, finished up slightly for the year, thanks to modest leverage and a good balance of shorts and longs.
“They had a difficult year,” White remembers. “There was some consternation about whether to continue with them.”
Investors who stuck by Marathon were rewarded in 1999. The Master Fund, which bought up distressed bonds and other assets early in the year as banks in Asia dumped them, was up 25.5 percent. In April 1999, Hanover and Richards launched the Special Opportunity Fund to buy distressed assets and beaten-up securities in Asia and elsewhere, including high-yield paper in the U.S., Europe and Latin America. Special Opportunity was up 83 percent that year.
By fall 2001, Marathon had a total of more than $400 million in the Master and Special Opportunity funds. That year Hanover and Richards launched the Global Convertible Fund to capitalize on the dramatic increase in equity market volatility, initially seeding the strategy from the Master Fund. In 2002 they launched the Structured Finance Fund to take advantage of troubles in the CDO, CLO and junk bond markets. The Structured Finance Fund, which was seeded by Special Opportunity, extends loans to corporations, using companies’ underlying assets as collateral. Eventually, the fund branched into buying actual equipment from companies and leasing it back to them.
Rabinowitz, who has a JD from Fordham University School of Law and is a CPA, joined Marathon in January 2002 to help oversee operations. He had worked for two pioneers among hedge fund service providers — Joel Press of accounting firm Ernst & Young and Paul Roth, co-founder of law firm Schulte Roth & Zabel. Rabinowitz is a man of many hats. He works with Richards and Hanover to set the strategic direction for the firm and has day-to-day responsibility for financial controls, operations, technology, compliance, legal matters and human resources. Rabinowitz is credited with creating tight internal controls that closely monitor costs and compliance. “We hold ourselves to a higher standard,” he explains. “Every dollar is accounted for.”
Richards says management expertise is a huge issue on Wall Street because the people who head up trading and sales are generally the biggest producers. They are also usually the most aggressive and driven. “When you are a trader, you are making all decisions when to buy, sell or hedge,” Richards explains. “When I became a manager, I still ran a trading book, but in addition to that I was setting strategic direction and working with teams of people and delegating, as opposed to making every decision.”
Even as Marathon has grown, Hanover and Richards have not forgotten their emerging-markets roots. In 2006 they hired Gordon, the former co-head of Bank of America’s international special situations group, to oversee emerging-markets investments and to run Marathon Master Fund. He says there are many opportunities for his group to work with Marathon’s private equity team on deals. A few years ago, for example, the Special Opportunity and Master funds worked together to help lead the restructuring of the debt of Globo Comunicações e Participações (Globopar), Brazil’s largest media company. Globopar eventually reduced its debt by more than $300 million. Marathon, which had bought some of the company’s debt for less than 20 cents on the dollar, received more than par when the restructuring was completed.
Given Marathon’s asset growth and performance, the decision to have Hanover oversee investing while Richards runs the business looks like a smart one. Despite their apparent differences, Richards and Hanover are very close and speak with one another throughout the day. They live less than a 20-minute drive apart in the suburbs north of Manhattan — Hanover in Greenwich, Connecticut, and Richards in Purchase, New York — and frequently socialize on weekends. Occasionally, they drive together to the office. It is not uncommon for both to be at work by 6:00 a.m. and stay well into the evening.
“It’s a 24-7 job,” acknowledges Rabinowitz, an observant Jew, before catching himself. “Actually, I work six days; I go to temple on Saturday.” For his part, global head of investment management Ronzetti refers to his work on some of the Asian restructurings as “my night job.”
SITTING IN HIS SPACIOUS OFFICE overlooking Fifth Avenue, Richards can watch as Marathon’s new home approaches completion several blocks away. The Bank of America Tower, he explains, will be one of the most ecologically friendly buildings in the world, with special insulated glass to maximize natural light and reduce energy use, as well as a system to capture and reuse rainwater. When the firm moves into the 54-story building sometime around Labor Day, it will more than double its office space, making it easier for its teams to work together to pounce on new opportunities.
“Signing a ten-year lease is a big mental leap for us,” Richards confesses. “We were always very fiscally conservative. We chose the name Marathon because we felt we were in it for the long run. When we look at planning the company, we need physical plant to allow for growth.”
Richards says it’s no coincidence that Marathon is moving into new offices at the same time that it is expanding its equity strategy. In January the firm changed the name of the Marathon Global Convertible Fund to Marathon Global Equities Fund. Jamie Raboy, a former Salomon Smith Barney fixed-income trader who has been working at Marathon since day one, will co-manage the fund with Hanover. Global Equities will invest in markets around the world, initially focusing on four strategies: convertible arbitrage, long-short trading, merger arbitrage and event-driven, and volatility trading.
Under Hanover and Raboy, the Global Equities team will approach stock selection differently from the way most hedge funds and investments firms do. The equity analysts will sit near Marathon’s debt analysts and share research. “It’s a unique platform,” Raboy says. “Fixed-income and equities don’t normally talk to each other.”
For example, Raboy plans to identify investment opportunities the way the distressed group does, first screening for companies that are undervalued based on cash flow. He and his team will compare the companies it isolates to others in their industries and determine whether there is a catalyst to unlock the value.
Hanover and Richards are also trying to raise $1 billion for a separate private equity fund. Because the fund is in registration, no one at Marathon will discuss it. But having a dedicated private equity fund should enable the firm to invest more money in more deals than it currently does through the Special Opportunity Fund, where private equity is capped at 20 percent of assets.
Marathon is building its war chest to take advantage of the massive fallout from the current credit crisis. Although the 0.9 percent default rate in December for global speculative-grade debt is still near the all-time low, according to Moody’s Investors Service, the rating agency expects it to jump to 5.3 percent by the end of 2008. In this environment, Ronzetti explains, banks will continue to keep tight reins on leveraged lending. As a result, Marathon’s private equity team is eyeing LBOs that are having difficulty securing funding. “We will be a source of financing,” Ronzetti says.
Marathon’s distressed-debt team maintains a watch list of companies. Through its analysis, the team has identified 150 that it believes will be forced into bankruptcy or require restructuring in 2008. They cut across several industries, including homebuilding, financials, building materials, retail and consumer cyclicals.
Some of the most promising investments, says Richards, are in the market where the whole credit mess began — subprime mortgages. “For the mortgage market this is the biggest opportunity since the RTC,” he explains, referring to the Resolution Trust Corp., a federal government agency created in the late 1980s to unload at near-fire-sale prices assets previously used as collateral for loans extended by the then-collapsing savings and loan industry.
Although several Marathon funds are looking for ways to play the mortgage sector, the bulk of the firm’s investments will be made through its new subprime vehicle. Structured like a private equity fund — with a fixed life span — Marathon Distressed Subprime expects to have all its assets invested by the end of 2009 and has pledged to return all monies to investors by December 2014. Like some of Marathon’s other funds, Distressed Subprime charges a 2 percent management fee and a 20 percent performance fee, but the firm won’t take its incentive payment until after the fund is wound down and all the principal is returned to clients.
Despite their rush to get the Distressed Subprime Fund set up quickly last summer, Hanover and Richards have been patiently waiting for asset prices to sink to even more depressed levels before deploying the capital. The new fund didn’t make its first purchase until November, according to Wall Street sources, buying some asset-backed securities and CDOs being dumped by banks and other financial institutions looking to clean up their balance sheets before year-end. The firm is rumored to be actively buying ABS and CDO subprime assets in addition to making its first whole-loan investments, a package of $84 million of discounted subprime loans purchased in early January. When it came to evaluating the loans, Andrew Springer, a senior portfolio manager for the Marathon Structured Finance Fund, was able to turn for help to Phoenix-based Marix Servicing, a major servicer of residential mortgages that Marathon bought last year.
“Having a servicing company enables us to buy distressed mortgage assets from banks and then play an active role in the workout of those loans,” says Springer.
The Distressed Subprime Fund underscores the advantages of the Marathon model designed by Hanover and Richards over the past decade to shine during crises.
“They are the provider of liquidity when there is a liquidity crisis,” says Morgan Creek’s Yusko. “It’s an age-old recipe for winning. Most great fortunes have been made by people who controlled liquidity.”
