DUBAI (Reuters) - Global credit markets are poised for a decade of dislocation with sovereign debt issues in the euro zone and United States providing attractive entry points to distressed debt investors, Todd Morley, co-founder and chairman of asset management firm G2 Investment Group said.
“Our general themes are that we are into probably decade of credit dislocation. The Euro zone and the United States are still playing themselves out and you have big credit dislocations, counting in the trillions,” Morley said in an interview with Reuters.
“Being in the middle of those flows is going to be very important.”
Morely’s comments echoes those of high-yield investor and chairman of Oaktree Capital, Howard Marks, who said earlier this month that investment opportunities for distressed debt players have picked up in the past three months.
G2, which has over 60 investment professionals, was formed in 2008 as a spin-out of Guggenheim Partners to invest in emerging markets and credit market opportunities. The firm has an investment partnership with the Forbes family, called Forbes Capital Group.
Morley, whose team also includes Maria Boyazny, former Siguler Guff managing director, said events in the Euro zone were unfolding quickly though it was too early to predict the full outcome of the crisis.
European Union leaders made some progress toward a strategy to fight the debt crisis on Sunday, though final decisions were deferred until a second summit on Wednesday.
“It’s a very slow process but the question is how far will it go, what other countries will be involved. Obviously Spain, Portugal and Italy are all in critical shape as well,” he said.
G2, which deploys its own capital along with third-party money, is also eyeing equity investment opportunities in emerging market countries, Morley said.
“As a very simple philosophy we believe that in no-growth, low growth countries such as the U.S., Euro zone, one ought to be higher on the capital stack and purchase debt and in high-growth countries, one ought to be purchasing equity.”
“It seems very simple but not everybody follows it.”
Morley is particularly bullish on Iraq, saying the country’s stock exchange is among the cheapest in the world.
Foreign investors are increasingly choosing Iraq’s stock market as a lucrative investment, with the expected listing of the country’s three main mobile phone firms and better regulation seen boosting appetite.
“One doesn’t need to be that clever just buying the stock market as they will be an outperformer. It’s up 30 percent already this year,” he said.
The firm has already made some investments in Iraq, including buying a stake in Northern Gulf Partners, an investment management and merchant banking company, Morley said.
G2 is also looking to boost its Middle Eastern investments, which are currently restricted to investments in financial services companies, Morley said. The firm wants to participate in the reinvestment of capital, which earlier went to the Western world but is now coming back to the region.
“We are already having that dialogue with a number of senior people in the region,” he said.
Reporting by Dinesh Nair, Editing by David Cowell