Marathon Assembling ‘Shopping List’ of Bonds Hit by Brexit Vote

  • CEO Richards says vote impact will take months to materialize
  • ‘We have our sights set on several companies,’ he says

Marathon Asset Management is “putting together a shopping list” of European corporate bonds to snap up in the wake of the U.K.’s vote to leave the European Union, according to Chief Executive Officer Bruce Richards.

The co-founder of the $12.8 billion hedge-fund firm, which focuses on distressed-debt investing, expects that junk-rated bonds will fall 2.5 percent from current prices in the aftermath of the vote, which he says will reduce economic growth in the EU by one percentage point next year. European stock markets -- which lost 11 percent from the benchmark Stoxx 600 index since the vote -- will fall another 10 percent, while the S&P 500 Index of U.S. equities will drop another 5 percent, he said.

“You have to see the economic impact and we think that will take months -- not hours or days -- to materialize,” Richards said in a telephone interview. “We have our sights set on several companies we think that will be under pressure and at lower price points could make for an interesting opportunity.”

The U.K. will see its economy contract 0.5 percent next year as companies delay hiring and capital expenditure plans, consumers spend less due to a weaker pound, and a drop in real estate and the stock markets weaken sentiment, said Richards. He believes there’s an 80 percent chance that the June 23 vote holds and that the government will ultimately trigger the Brexit process by invoking Article 50 of the Lisbon Treaty.

S&P Global Ratings cut the U.K.’s top credit grade by two levels Monday to AA, citing the risk of a less predictable, stable, and effective policy framework in Britain.

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