Multi-billion Dollar Hedge Fund Manager Speaks at Smith

Bruce Richards knows a thing or two about making a hedge fund stand out from the crowd. Richards, co-managing partner and CEO of top-50 hedge fund Marathon Asset Management, spoke at the Robert H. Smith School of Business to an audience of students, faculty, staff and alumni eager to learn his tricks of the trade.

The program, “An Insider’s View of How to Manage a Multi-billion Dollar Hedge Fund,” was sponsored by the Center for Financial Policy, and took place on Monday, March 12, 2012, in Van Munching Hall.

Richards, who grew up in Greenbelt, Md., graduated from Tulane with a bachelor’s degree in economics in 1982. He got his first job as a trader’s assistant on Wall Street, gaining valuable experience as the debt securitization market was beginning to be established. After 15 years of working in debt securities, Richards co-founded Marathon Asset Management with Louis Hanover in 1998 with $17 million in start-up funds from a small group of investors.

Richards is now responsible for the general oversight of Marathon’s more than $10 billion in capital. Marathon focuses its efforts on non-investment grade debt, mainly structured, corporate junk and emerging markets. For example, Marathon invested in American Airlines during its recent bankruptcy and restructuring, and in Argentina’s default and debt restructuring in 2002.

“We see good opportunities in distressed and restructuring entities. If you buy at the fulcrum point or above, these investments can be very profitable,” Richards explained.

To up-and-comers, Richards indicated the importance of being a vigilant reader of everything on financial analysis, especially on the macro level. Over the years, it will make it easy to form views on market issues of the day. However, he stressed to take the John Maynard Keynes quote, ‘When the facts change, I change my mind. What do you do, sir,’ to heart.

“You can be wrong about anything you think you know. The trick is in knowing how wrong you can be and how to protect yourself against that,” Richards said.

Before the night ended, Richards presented the audience with his advice for managing hedge funds:

• Start small. You need a strong infrastructure to support your traders. Without the proper organizational structure, you cannot survive changing market situations.
• Hedge funds charge big fees, so you must make people money somewhat consistently. Only Bernie Madoff produced complete consistency.
• Being the No. 1 hedge fund is not a goal, but always being excellent is.
• The point is to provide your clients with great service and make their money work for them. Focus on this and the rest will follow.

Rachel Hester, Marketing and Communications Coordinator, Office of Marketing Communications