Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 23)

In addition to its New York headquarters, Marathon has full ofﬁces in London and Singapore and satellite operations in Hong Kong, Los Angeles, Mumbai, São Paulo and Washington. Hanover and Richards boast that the ﬁrm can invest in any part of the capital structure in any company in any industry in any region of the world. They make those investments through one or more of the three pillars of their alternative asset management operation — hedge funds, private equity and real estate. It’s not unusual for one of Marathon’s hedge funds to team up with the ﬁ rm’s private equity or real estate group to do a deal. In 2007, for example, the real estate group, headed by Jon Halpern, partnered with Marathon’s Singapore ofﬁce to work on a management buyout of Executive Centre, which owns and operates 28 business centers in 15 cities across Asia. The company provides ofﬁce space, furniture, equipment, receptionists and secretaries for ﬂedgling enterprises. Marathon’s real estate group brought its expertise managing ofﬁce buildings to the deal, while the Singapore team, led by Marathon’s head of Asia investments, Steve Kim, drew on its capital markets relationships to secure ﬁnancing and conduct due diligence. “I have operating experience in this industry, and Steve has local market expertise,” explains Halpern, who before joining Marathon in January 2004 was CEO of Dallasbased HQ Global Workplaces, which has 350 executive centers in 17 countries and was bought by the U.K.’s Regus Group, its biggest competitor. It’s this cooperation — across asset classes and investment structures — that distinguishes Marathon from most alternative-investment ﬁrms. “Marathon is very innovative in the ways it identiﬁes areas of opportunity,” says Bryan White, global head of BlackRock Alternative Advisors, which manages $71 billion in alternativeinvestment products. As CEO of Seattle-based fund-offunds ﬁrm Quellos Group, which BlackRock bought last year, he was one of Marathon’s earliest investors. Now, as Marathon celebrates its tenth anniversary, Hanover and Richards are undergoing an ambitious expansion. In addition to the new subprime fund, they are launching their ﬁrst separate private equity fund, hoping to capitalize on the past year’s surge in distressed credits and the growing number of busted or overleveraged LBO deals. Until now the ﬁrm — which controls more than a dozen companies, including Marex Financial, the European operations of onetime commodities trading giant Refco, and Marix Servicing, a loan-servicing company — made its private equity investments through the Special Opportunity Fund. Marathon is also making its ﬁrst major push into equities, turning its convertible fund into a multistrategy fund and renaming it Marathon Global Equities. “This is the best time for distressed investors to invest in four or ﬁve years,” Richards asserts. “We want to buy when the investment community is most stressed.” To help accommodate this expansion and address the Photo by Seth Kushner for Alpha acute overcrowding in its midtown Manhattan headquarters, Marathon plans to occupy two ﬂoors in the new Bank of America Tower near Times Square by Labor Day. The ﬁrm has committed to pay $10 million annually on a tenyear lease for 76,000 square feet of ofﬁce space that will have the capacity to house 450 people, more than triple the 130 Marathon currently employs in New York. It is also spending $18 million to improve the infrastructure and technology for its new ofﬁces. But in keeping with their conservative nature, Hanover and Richards are subletting a quarter of the space for the ﬁrst ﬁve years. MARATHON’S ABILITY TO MOVE quickly and decisively was critical when it came to Refco. The commodities broker had stunned the ﬁnancial world on October 10, 2005 — just two months after going public — when it disclosed that its CEO, Phillip Bennett, had hidden from Refco’s auditors and investors more than $400 million of debt owed to it by a company he controlled. The next day Bennett was indicted on charges of engaging in a conspiracy that caused the commodities giant to sell $583 million in stock to the public based on “false and fraudulent” ﬁnancial statements. A week later Refco ﬁ led for Chapter 7 bankruptcy protection, meaning that it would sell all of its assets. After Hanover heard the news, he passionately made the case to his colleagues for Marathon to bid for Refco. Working closely with their adviser, New York–based Marathon president and CFO Andrew Rabinowitz got the ﬁrm’s new subprime fund set up in just one month. DECEMBER 2007/JANUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 23

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008

Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative

Institutional Investor's Alpha Magazine - December 2007/January 2008

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