Marathon New Fund to Target Assets Shunned by Banks

Marathon Asset Management LP is seeking to raise a $500 million fund to capitalize on a lending void left by banks primarily in the U.S., according to a person with knowledge of the matter.

The New York-based firm plans to use the money to originate loans and commercial mortgages, buy and lease commercial equipment including aircraft and invest in mortgage-related assets created before the 2008 financial crisis, said the person, who asked not to be identified because the information is private. The Structured Product Strategies Fund will have a five-year lifespan and plans to make an estimated two-thirds of the investments in the U.S.

Ryan FitzGibbon, a spokeswoman for Marathon at Prosek Partners, declined to comment on the new fund.

“Given the strong bid for financial assets in a low yield environment, originating and managing asset-based loans has become a core strategy for qualified managers,” Marathon’s Chief Operating Officer Andrew Rabinowitz wrote in an e-mail. “The shadow banking system is stepping up while banks have tightened their underwriting guidelines.”

Shadow banking, a term coined by Pacific Investment Management Co.’s Paul McCulley, describes financial networks outside of traditional banks. Marathon, which oversees $12.5 billion, is among a number of firms that have sought to fill the lending void and invest in distressed assets as banks have shrunk to meet tighter regulations and capital rules.

Treasury Program

In 2009, Marathon was one of nine firms chosen by the U.S. Treasury to organize a fund through the Public-Private Investment Program, a government-subsidized program to revive the mortgage-bond market. Marathon’s program earned the Treasury a 25 percent return, the highest among money managers chosen, from 2009 to its liquidation in June 2013.

The firm has also bought loan portfolios from European banks and in January started its second fund to purchase distressed assets from the region.

Bruce Richards and Louis Hanover, who founded Marathon in 1998, and Stuart Goldberg and Andrew Springer, partners and co-heads of the firm’s structured credit group, will serve on the new fund’s investment committee, the person said. As much as half the fund could be dedicated to residential and commercial mortgage-backed securities originated before the financial crisis, “legacy assets,” that trade for less than 50 cents on the dollar. Marathon had raised about $100 million for the new fund by its initial close in August, said the person.

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