Avenue Capital Group founder Marc Lasry and Bruce Grossman, his senior manager of investment, were on a private jet returning to New York from Harrisburg, Pa., in 2005 when they felt the plane’s cabin suddenly heat up.
Outside the window, smoke billowed from one of the engines. The two men looked at each other and remained wordless until the plane landed safely back in Harrisburg.
(Douglas Adesko/Bloomberg Markets) - Siblings Sonia Gardner and Marc Lasry at their New York office. They share control of Avenue Capital Group.
Grossman wanted to get home by car or train. Instead, he says, Lasry persuaded him to take another flight.
“He said, ‘If you don’t get on this plane right now, you’re going to have a much harder time getting on a plane,’ ” Grossman says. “One of his greatest strengths is that he believes things are going to work out.”
Lasry’s optimism carries over into his investing, where he specializes in picking up bankrupt or distressed assets that others shun and selling them at a profit. He started Avenue in 1995 with $7 million in capital; he now manages about $12 billion — about $9 billion in institutional money and $3 billion in hedge fund assets.
“The names in our portfolio will ultimately be worth a lot of money,” says Lasry, 52, a bankruptcy lawyer by training who shares control of Avenue with his sister Sonia Gardner. “I just need time. People have a natural aversion to investing in companies in bankruptcy.”
Down 10 percent
Things haven’t always worked out for Lasry. Last year, his hedge fund fell about 10 percent, twice the 4.9 percent average decline for the industry, according to the Bloomberg aggregate hedge fund index. Lasry saw some of his bets, including investments in a Greek casino company, lose money. He has also returned $9 billion to investors since late 2010, shrinking Avenue’s assets under management from more than $20 billion.
That hasn’t deterred Lasry, who says he sees the biggest opportunities in Europe, where he expects that the sovereign-debt crisis will cause an increase in distressed assets and defaulted loans. Avenue is raising a fund of more than $2.5 billion that will focus on Germany, the Nordic countries, Switzerland and Britain, where Lasry says the legal systems are more protective of creditors’ rights than those in southern Europe.
As of mid-January, he had raised $2.1 billion. An earlier European fund that invested more than $2.6 billion in pubs, casinos and other beaten-down assets has generated average annualized returns of 19.3 percent since it began in May 2008, ranking it in the top 25 percent of its peers, according to research group Preqin.
Avenue will have to compete against other distressed-asset investors for bargains in Europe. In 2011, private-equity firms raised 7.5 billion euros ($9.8 billion) on the continent — a record, according to Preqin. Oaktree Capital Management raised 3 billion euros last year, the biggest Europe fund on record, while Apollo Global Management raised 1.4 billion euros in 2010, Preqin says.
“Any type of turnaround or distressed strategy is the flavor of the years to come,” says Antoine Drean, chief executive and founder of global placement agent Triago in Paris, which helps firms raise money.
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