(Bloomberg) -- Marathon Asset Management sees big gains in the travel and consumer sectors in the post-Covid economic recovery, according to co-founder and Chief Executive Officer Bruce Richards.
The distressed-debt investment firm bet on Hertz Global Holdings Inc. during the depths of the pandemic by buying the debt around 35 cents on the dollar last April, and has tripled its investment as the rental car company exits bankruptcy on Wednesday, he said.
“Love the company,” Richards said in a Bloomberg TV interview with Alix Steel and Guy Johnson. “The rental car business is at the center of this next generation of mobility.”
The Hertz investment is one part of a broader recovery trade. Others include owning 10% to 15% of Europcar Mobility Group's equity, buying 17 hotels in the U.K. and investing in container ships that transport goods across the world after avoiding them for many years, he said.
Marathon is focusing on rescue and recovery investments on the expectation that the default rate will be near 1% until the end of next year due to the amount of capital in the market.
The New York-based money manager with about $20 billion in assets and 150 employees globally has investments spread across corporate bonds and loans, structured credit, real estate and emerging markets. Richards and Chief Investment Officer Louis Hanover co-founded the firm in 1998, according to its website.
Despite the Hertz investment, Richards said Marathon hasn't shifted its investment strategy amid the rise of retail investors that have taken a shine to companies including the rental car firm. He said investors were smart to take Covid stimulus payments and invest in equities at a time when earnings were growing.
“The meme stock capital that came into AMC and how they capitalized off that really helped that company, so I don't begrudge that at all,” he said. “I applaud that because we all want to see it survive.”
Marathon sees a strong consumer for the foreseeable future, and has amassed a portfolio of 30,000 single-family residential mortgages bought mostly from banks. The firm will be announcing a joint venture with a mortgage originator and will be purchasing those mortgages, Richards said, declining to name the originator.
The biggest risk to the markets is that inflation -- which the Federal Reserve sees as transitory and the market is positioned for accordingly -- becomes permanent, he said.
“I believe there's only one dot that matters -- Jay Powell's dot,” Richards said. “His dot is a zero-rate move dot.”
“He'll talk to the market about being disciplined as it relates to inflation, but when push comes to shove he's the dove in the room,” Richards said.
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