NEW YORK (Reuters) - Bruce Richards, chairman and chief executive officer of Marathon Asset Management, said the positive effects of U.S. President-elect Donald Trump’s economic plans would delay the opportunity to buy cheap distressed assets in the United States.
“The distressed cycle has been pushed out,” Richards said on Monday at the Reuters Global Investment Outlook Summit in New York. Marathon is an approximately $13 billion hedge fund manager based in New York that focuses on credit investments globally.
Instead of the opportunity hitting in about a year, as many investors expected, Richards said the cycle of credit expansion and growth would be prolonged for an additional one or two years.
Richards said Trump’s plan for tax reform, especially the repatriation of corporate taxes from U.S. companies operating abroad, would provide a “massive stimulus.”
That, combined with Trump’s plans for infrastructure spending and decreased regulation of the financial sector, would help increase economic growth in the United States, Richards said.
Richards said Marathon’s largest exposure was the debt and equity of commodity-focused companies. Steel-related businesses, for example, could benefit from the Trump administration’s potential tariffs on foreign production.
“What sector are we incredibly bullish about? The whole steel complex,” Richards said. He did not specify Marathon’s holdings but generally noted how coal, iron ore and steel manufacturing companies could benefit and that Marathon had added to its holdings in the sector following the U.S. election.
Richards also noted a “major” investment opportunity around the rotation from high yield debt, so called junk bonds, to leveraged loans, given rising interest rates and the variable rates featured by leveraged loans.
“There’s going to be a major shift,” Richards said.
Richards also said that Europe faced greater economic problems than the U.S. He predicted that the U.K. would enter a period of flat economic growth or mild recession following “Brexit,” or its exit from the European Union. Brexit will eventually cause opportunities for distressed investment, according to Richards.
He said Italy’s upcoming referendum and national elections in France and Germany next year could cause additional problems for the continent.
“Change in the status quo for the current leadership,” Richards said, “will lead to greater uncertainty, which will lead to greater divisions, which will lead to greater economic uncertainty.”
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Reporting by Lawrence Delevingne and Jennifer Ablan; Editing by Lisa Von Ahn, Bernard Orr