Bloomberg Hedge Fund Smmit 2012, sit down with the famous investor Marc Lasry, Chairman, CEO and Co-Founder, Avenue Capital Group. Marc Lasry who is supporter of President Barack Obama, suggested to White House officials, that they speak with the GOP and not just business leaders.
10:21: Marc Lasry says that it is obvious that taxes must go up. Some suggestions have been to give people tax credits to investment in the economy.
10:23: Marc Lasry thinks that a deal will get down later rather than earlier, but a deal will get done. Avenue Capital is now 25% cash, as opposed to 15% historic cash levels. Lasry is waiting for opportunities for people to panic and buy stocks on the cheap.
10:24: Lasry thinks that GDP could be closer to 3%, which is really good for credit investors. He says that there is approximately $1.5 trillion of distressed debt, and default rates are around one. There is a lot of opportunites across various industries.
10:26: Five years ago, the risk free rate was at about 5%, so it was much easier for pension funds to meet their annual returns of 8%. Lasry normally looks to make 3-4x that risk free rate. Today, pension funds need to generate 40 times the risk free rate. Pension funds want Avenue Capital to help produce those returns.
10:29: This means that one of the only ways to make money is by taking on a lot of leverage. If you do not produce returns today people move on. Lasry tells his investors that without using leverage, the best way to make money is in illiquid names.
10:32: In terms of Europe, the big money was in private equity and debt. The ECB has allowed banks to de-leverage at their own pace. Europe is taking much more time than the US did. The ECB has knocked down the NPL market because banks do not have that pressure.
10:33: Because of Basel III banks have been forced to sell some assets, sometimes at 10-15 cents on the dollar. Lasry has 90% of Avenue Capital’s money invested in senior secured debt, which gives him the luxury of waiting for the investment to play out.
10:34: This is a credit trade and it is deep bottom down. You need to really understand the legal system of different countries. It is really hard to invest in Italy, and Southern Europe’s legal system is not as strong. In Northern Europe, the legal system is stronger than in the US, and that is where he is investing mostly.