Bruce Richards' Wall Street Week Interview on Credit, Greece & More

Anthony Scaramucci and Gary Kaminsky's Wall Street Week has continued its streak of impressive guests and this week interviewed Bruce Richards of Marathon Asset Management.

Marathon focuses on global credit and manages around $12.5 billion. He thinks US equity markets are looking at 3-5% returns going forward given the vast run up over the past few years.  Overall, he says "it's a difficult time to invest."

However, he sees some opportunities in Europe as quantitative easing is just getting started over there and economies are growing and banks are well healed.

He also sees some good plays in emerging markets in debt in Brazil, Argentina, Mexico and others.  Additionally, he's involved in Puerto Rico via playing the Puerto Rico Electric Power Authority (PREPA).

Richards also talked about position sizing, noting that 5% is their max, as they favor diversification and typically build 1-2% position sizes.

Embedded below is the Wall Street Week video with Bruce Richards:




And in this web extra video clip, they sit down with Bruce Richards again to give an updated look at Greece given all the activity there:



For more great interviews, head to Carl Icahn on Wall Street Week as well as Jim Chanos on Wall Street Week.

Bloomberg Markets 50 Summit: Hedge Fund Panel Featuring Marcy Lasry, Glenn Dubin & Bruce Richards

We wanted to post up the video from one specific panel at the Bloomberg Markets 50 Summit in New York that featured Marcy Lasry of Avenue Capital, Glenn Dubin of Highbridge Capital, and Bruce Richards of Marathon Asset Management.

Their panel talked about hedge fund strategies and their various outlooks.  Bloomberg's Stephanie Ruhle moderated the discussion and here are some of the highlights.


Marc Lasry's Comments

Lasry noted how banks don't really have trading groups as much, so hedge funds aren't dealing with the banks as much and people "come to you" now and bypassing banks.  They've got one of the largest distressed funds in Europe and lots of banks have approached them about their portfolios.

Lasry argued that smaller hedge funds have to "be up double" what a big fund is to essentially justify all the risks an investor takes on investing in a smaller fund.

"At the end of the day, all you want to be focused on is the net (return).  The reason there's a discussion on a fees is people believe that net returns have come down, and that's because of the risk-free rate."


Glenn Dubin's Comments

Asked if he would started a hedge fund again today given regulatory requirements and the landscape, Dubin said setting up a hedge fund today is much more challenging than it once was. 

He echoed Lasry's comments that banks getting out of various business has led to new opportunities for many hedge funds. 

He also said there's no question the larger funds have a competitive advantage over smaller funds when it comes to accessing dealflow.  He also notes they have an advantage in hiring and the ability to retain top talent as it's a very competitive industry now.

"Fees are an odd issue in our industry."  He feels it's a binary outcome: either you decide to invest in a manager (and the market has set the fees), or you don't.  "To negotiate with a manager is a ridiculous discussion to have."

Dubin thinks the best opportunity now is to step in to provide capital where banks used to, but no longer can due to requirements.


Bruce Richards' Thoughts

Regarding hedge fund fees, he says large institutions want discounts available for big capital allocations to funds and Marathon reduces their fees for these big tickets or longer lock-ups.

"As a global institution, you search  the world for the best risk/reward to make absolute returns." 

Richards also recently spoke at the Alpha Hedge West conference and we've got coverage of his talk there via that link.

Embedded below is the video from the Bloomberg Markets 50 Summit:



For more coverage of the various conferences lately, head to:

- Notes from the Value Investing Congress (Ubben, Roepers, McGuire & more)

- Notes from the Alpha Hedge West Conference (Bass, Burbank, Richards & more)

Alpha Hedge West Conference Notes 2013

We're posting up notes from the 2013 Alpha Hedge West Conference that just took place in San Francisco.  There were numerous panels discussing various topics and summaries are available by clicking each link below:


Notes From the Alpha Hedge West Conference

- Macro Discussion: John Burbank & Kyle Bass on China, Europe, Japan, Argentina & More

- Navigating the Macro & Interest Rate Environment:  Bruce Richards (Marathon Asset)

- Best Ideas Panel:  Kurt Billick (Bocage Capital), Peter Lupoff (Grayco Alternative), Worth Gibson (Forest Hill Capital), Paul Twitchell (Whitebox)

- State of the Hedge Fund Union: Jason Huemer (Visium), Bruce Richards (Marathon), Philip Weingord (Seer Capital) 

- Condition of the Consumer & Challenges for Investors as Economy Expands: Joseph Brusuelas, Senior Economist, Bloomberg & Kristin Bentz, PMG Venture Group 

- On Hedge Fund Seeding: Rachel Minard, Jeffrey Cozad, Basil Williams, Jonathan Miles

- Opportunistic Credit Roundtable: Emanuel Friedman (EJF Capital), Andrew Springer (Marathon Asset), Ronnie Jaber (Carlyle Group), Avery Kiser (Neuberger Berman Alt)

- The Role of Volatility: Michael Schmanske (Glenshaw Capital), Christopher Cole (Artemis Capital), Zem Sternberg (Lake Hill Capital), Joe Reynoso (Reynoso Asset)

- Structured Credit: Richard d'Albert, Christopher Hentemann, Amin Majidi, Rajesh Agarwal

- Dynamic Investment Panel:  John Claisse, Joy Xu, Andrew Karsh

- Next Generation of Hedge Fund Managers: Michael Sedoy, Neal Shah, Valtura Capital, Mike Keough, John Rende

- Venture Capital Panel: Where Are They Investing And Why? Pat Grady, Chris Schultz, Ron Suber, David Girouard

Bruce Richards on Navigating the Macro & Interest Rates: Alpha Hedge West Conference

Next up in our series of notes from the Alpha Hedge West Conference is a talk by Bruce Richards of Marathon Asset Management.  He focused on navigating the macro & interest rate environment.


Bruce Richards' Talk at Alpha Hedge West 

 If Yellen is nominated, she'll be a shoe-in.  Very Dove-ish.  QE is worth 150 BPS.  10 year was 4% 5 years ago.  Most of rate exposure likely is over.  Can get to 3.25% or 3.5%.  Thinks Fed won't sell Bond Portfolio.  They'll hold and let it roll off.  Maybe reverse repo.  

Where do you invest?  Invest in equity, deeply discounted assets.  Events and special situations.  Short duration, high yield.  

Avoid long dated fixed income, treasuries, agencies, high grade debt, leveraged fixed income, interest rate sensitive sectors.  If floating rate, still need credit story.  

Macro risk factors:  Interest rate risk, fiscal/ debt ceiling, Syria and Middle East, sluggish growth in emerging markets, US, Euro, China, Japan, Flow of Funds.  

Best Opportunities: Europe, Distressed Corporate, Special Situations / Distressed Bank Asset Sales (NPLs), US Special Situation and Distressed Credit Investments, Structured Credit, Liquid Seasoned Burned Out & Illiquid High Yield, Europe Debt Oppys today like RTC oppy back in 80's.  Will be available next few years.  

Bought a $1.2B pack from a UK bank made of German debt.  84 cents on dollar.  TXU may be biggest non-financial bankruptcy ever.  $48B.  Expect announcement later this year.  Emerging markets are overreacting.  They are at an interim low.  Good hedge funds managers make LIBOR plus 500 BPS.


Be sure to check out the rest of our summary of the Alpha Hedge West Conference.

State of the Hedge Fund Union Panel: Alpha Hedge West Conference

Next up in our series of notes from the Alpha Hedge West Conference is the State of the Hedge Fund Union with a talk featuring Jason Huemer (Visium), Bruce Richards (Marathon Asset), and Philip Weingord (Seer Capital).

Comments below: JH = Jason Huemer, BR = Bruce Richards, PW = Philip Weingord


State of the Hedge Fund Union 

Investors as shock absorbers.  Most investors want hurdle rate.  Funds haven't had "rogue" trader issues.  Big funds had inflows, small individual funds had outflows.  Cult of personality.

BR> Only need to get past cult of personality if you want to grow after founder passes.  Institutional key to growing.  Marathon manages over $11B in AUM.  Team of partners together over 18 years.  All that history makes for a strong team with collective wisdom.  

JH> Have tried to move from one star.  Investors looking for and want something beyond "one" guy.  Worked for Jamie Dimon and Steve Cohen.  They have 50 risk takers.  They have over $5B in AUM.  No one controls P&L.  5 years ago known only as health care...had to move model to multi-strategy.  It took 5 years of beating market by 1000 bps to convince people.

CH> Agrees with Joseph Brusuelas that we are in a structural break.  Means old trends + stats not reliable.

PW> Fed tightening will equal outflows from bond funds...probably for 2 years.  History says credit spreads normally come in during fed tightening.  Oppys are floating rate...swap fixed rate for floating rate.  Prefers stronger credit vs. High Yield Bonds.

JH> Has created alt mutual fund.  Brick Lake was early proponent of Alt Mutual Funds.  Log jam reason for delay.  So many funds did not want to move down value map... other folks missing tools to move up.  Sub-advisor in a couple mutual funds.  Big funds saw move from fees to like 50 BPS from 110 BPS.  Sees folks moving to multiple manager products and single manager products.  In time, 25% of fees from mutual funds will be Alt Mutual Funds.

BR> How do liquidity needs of Alt Funds impact types of strategies?  For example, can't offer liquidity in/out for say distressed debt funds.  Excited about JOBS Act.

PW> Closed end funds can address some issues of liquidity caused by open end Alt Mutual Funds.

CH> Regulation?

PW> Hedge funds least to blame for financial crisis.  If regulation increases confidence, then it is ok.  Increases some cost and takes time.  Form PF.  Lots of it is silly questions, not know what is meant by some questions.  Not al funds should have same questions.  Overall, ok.

BR> Been registered with SEC over a decade now.  Registered with numerous regulatory bodies.  Would prefer to have one strong regulator.  Look at JPM and recent announcement of hiring like 5,000 employees.  If there were consolidated regulation, it could be better and more efficient.

JH> Regulators have been unfair to hedge funds with high profile and heavy handed tactics.

PW> Market not overreacting to speculation of Bernanke replacement.

BR> If Yellen gets job, she'll be more Bernanke than Bernanke.

Be sure to check out the rest of our summary of the Alpha Hedge West Conference.

Delivering Alpha Less Than Zero Panel: Lasry, Richards & Fleming

Continuing coverage of CNBC and Institutional Investor's Delivering Alpha Conference, next up is the Less Than Zero Panel featuring Avenue Capital's Marc Lasry, Marathon Asset Management's Bruce Richards, and Morgan Stanley's Gregory Fleming in a talk on the hunt for yield.

If you missed previous posts from the conference, check out a summary of the best ideas panel as well as the global opportunities panel.


Marc Lasry (Avenue Capital):  He argued that 10 year Treasuries will be around 2.5% to 3% in 5 years.  He talked about investing in European debt, saying that you're getting (over)paid for the risk premium.  We've highlighted Lasry on European opportunities recently.  He said that he's buying bank debt in private markets (in Europe), saying that you want to be in regions where "everyone's nervous."  Lasry also argued that 10% plus annual returns are doable if there's a 7-year lockup.


Bruce Richards (Marathon Asset Management):  He said that government bonds = highest risk, lowest return.  He likes structured credit as he thinks the hunt for yield will get insane through 2014 as he made a Hunger Games reference.  He also says that everyone knows inflation is the way out for the US government.  Additionally, he argued he could make 12-14% in high yield.


Gregory Fleming (Morgan Stanley):  He highlighted the retail investor's demand for yield while still having major risk aversion.  It's difficult to combine the two, obviously.  Citing Jim Grant, he also called Treasuries "return free risk."


Sources: Notes from readers, II's blog, @iimag, @ldelevingne, @footnoted, @aarontask


For more from the Delivering Alpha Conference, head to a summary of the best ideas panel (including Leon Cooperman, Jim Chanos and more) as well as the global opportunities panel (featuring Richard Perry).