Marathon Runs At Sub-Prime Opportunity

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.


In Depth

'Smart Beta' Funds In Regulators' Sights, Hedgies May Be Next

Mar 26 2015 | 11:11am ET

Funds that mimic strategies used by active managers for a fraction of the cost could...

Lifestyle

Study: Both Marriage and Divorce Lead to Negative Hedge Fund Performance

Mar 25 2015 | 6:51pm ET

Trouble at home leads to trouble in the market for fund managers, according to researchers...

Guest Contributor

Concerned About Your HFT Exposure? Hedge It!

Mar 26 2015 | 1:06pm ET

High-frequency trading has been a persistent storyline for several years. The trading...

 

Sponsored Content

    Mar 9 2015 | 6:35am ET

    Kelly RodriquesKelly RodriquesAs more investors look to diversify, many are beginning to use retirement funds to invest in alternative assets such as private equity and real estate. Kelly Rodriques, CEO & President of PENSCO Trust Company, explains how companies can connect with those looking to use their retirement accounts in a different way. Read more…

Editor's Note