January 19, 2019

Lasry Boldly Goes Where Few Men are Going: Europe

The Queen's Guard marching in England, a safer country to invest in than its neighbors for hedge funds like Avenue Capital

Distressed hedge fund manager, Marc Lasry, founder of Avenue Capital, is known for fishing in dangerous waters. Whether it’s debt of a company in bankruptcy or a falling country’s sovereign bonds, Lasry has made a fortune for his investors through his savvy investing.

Described as “adventurous” by fellow financiers, Lasry boldly goes where few men are going: Europe. The New York Times‘s Nelson D. Schwartz explains his seemingly scary strategy.

Mr. Lasry is betting on a long-term comeback for the Continent. This month, his hedge fund, Avenue Capital, finished raising nearly $3 billion for a fund that will invest in the debt of troubled European companies.

He has committed roughly $75 million of his own money to the new fund. That’s still a small part of his estimated $1.3 billion fortune, but Mr. Lasry is among a coterie of hedge fund and private equity managers who are gambling that the euro zone will stay intact and revive over the long run.

So far, Mr. Lasry has put 25 percent to 30 percent of the fund to work, deploying an additional 5 percent or so each month.

“We could invest the whole fund today but you want to average in,” said Mr. Furst. “There will be relief rallies, but when the fear comes back in, we buy.”

The two money managers are using the broader fears about Europe to load up on troubled debt of companies in healthier countries in the region. The biggest chunk of the new fund’s assets have been invested in Britain, followed by France, with purchases in Sweden and other northern European nations, as well.

“Bad things happen in Spain and Greece, and people want to sell bonds in a refiner that’s doing well,” added Mr. Furst. “The perceived risk is greater than the actual risk.”

After founding Avenue in 1995, Mr. Lasry initially concentrated on distressed debt of American companies. He invested in Asia after the financial crisis there in the late 1990s, earning big profits when it roared back. In all, Avenue has $13 billion under management.

As for Europe, he seems happy to wait out the waves of fear, like last week’s anxiety about Spain.

“Europe isn’t going away, and the companies aren’t going away,” Mr. Lasry said. “You can never time a bottom. What you can do is a time a cycle and five years from now, people will say, ‘Why didn’t I buy?’ ”

Avenue Capital isn’t the only high-risk investor jumping into Europe. Private Equity firms, Blackstone, KKR, and Apollo, are actively looking for good bets. These firms have the risk appetite for Europe. But Lasry is acting more like Warren Buffett – betting on an almost-sure thing in England and Sweden. Still, Lasry boldly goes where few men are going: Europe.

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