Wednesday, 23 July 2014
Last updated 1 hour ago
Jul 31 2007 | 10:17am ET
It’s been a loser so far in the sub-prime realm this year, but Marathon Asset Management has a plan to turn its luck around.
The New York-based hedge fund has announced plans to launch a distressed mortgage fund, seeking to take advantage of the “fallout and carnage” wreaked by the sub-prime swoon, MarketWatch reports.
The Marathon Distressed Sub-Prime Fund is to begin taking commitments in August.
“The meltdown in the sub-prime mortgage market has been absolutely stunning, and given this significant opportunity, Marathon has decided to roll out this fund,” Marathon President Bruce Richards said in a letter to clients obtained by MarketWatch. The new fund, which features a defined investment period of roughly two years, “has been established to capitalize from the fallout and carnage in the sub-prime mortgage market with a core investment strategy to opportunistically purchase distressed mortgage-related securities and sub-prime assets,” he wrote.
Marathon’s structured Finance Fund’s sub-prime positions have fallen “significantly,” but Richards said the portfolio’s other holdings have more than made up for it. That fund is up year-to-date, and its investors will also be given a crack at the $9 billion firm’s new strategy.
The firm also bought $125 million in convertible trust preferred securities of sub-prime lender American Home Mortgage Investment Corp. The securities pay a 9.75% dividend, but the troubled lender, facing “significant” margin calls, has stopped paying some dividends. Marathon’s shares are convertible at an initial conversion price of $25.57 a share, closed yesterday at just $10.47.
The firm will share in 20% of the fund’s profits, but only after it has returned investors their principal.
Marathon’s move comes more than a week after Ellington Management’s Michael Vranos announced plans for a $750 million permanent capital fund to profit from the sub-prime slide.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…