April 30, 2024 • 1hr 7min

Marc Lasry - Making Bucks in Credit and Sports - [Invest Like the Best, EP.371]

Invest Like the Best with Patrick O'Shaughnessy

In this episode of Invest Like the Best, Patrick O'Shaughnessy interviews Marc Lasry, co-founder and CEO of Avenue Capital Group, which manages $13 billion in assets. Lasry is a pioneer in distressed debt investing and has recently become active in sports investments. The conversation covers Lasry's journey in building a major investment firm, the evolution of distressed investing, and the emerging opportunities in sports-related investments.

0:00

-0:00

Key Takeaways

Sports investing opportunities: There are hundreds of billions of dollars worth of opportunities in sports-related investments, from team ownership to real estate, media rights, and more.
Women's sports growth: Women's sports, particularly soccer and volleyball, represent a major growth opportunity due to lower costs and increasing interest from younger generations.
Evolving distressed investing landscape: The distressed investing world has changed significantly over the past few decades, with compressed bankruptcy timelines and increased litigation.
Team-building in finance: When building an investment firm, it's crucial to prioritize team players who can generate good returns, rather than just hiring top talent that may not work well with others.
Importance of trust in raising capital: Building strong relationships with investors based on trust, transparency about mistakes, and consistent communication is key for raising and retaining capital.
Approach to deal-making: Aim to structure deals that are good for you but fair to the other party, as maintaining a positive reputation leads to more opportunities in the long run.
Perspective on financial success: Maintaining a positive outlook and gratitude for financial success, viewing it as "winning the lottery," can lead to greater happiness despite potential complications.

Introduction

In this episode of Invest Like the Best, Patrick O'Shaughnessy interviews Marc Lasry, co-founder and CEO of Avenue Capital Group, which manages $13 billion in assets. Lasry is a pioneer in distressed debt investing and has recently become active in sports investments. The conversation covers Lasry's journey in building a major investment firm, the evolution of distressed investing, and the emerging opportunities in sports-related investments.

Topics Discussed

Early Career and Confidence (2:38)

Lasry attributes his early confidence to his mother's encouragement and the belief that he could accomplish anything. He emphasizes the importance of education in his upbringing, particularly after immigrating to the United States from Morocco.

Lasry's mother instilled a belief that he could do anything
Education was seen as the primary path to success, given the family's limited financial resources
Unlike many in his position, Lasry was not fueled by self-doubt

Raising the First Fund (3:41)

Lasry shares an amusing anecdote about raising his first fund, involving an investor named Gustave Lein who took photos of the office and staff to verify their authenticity before making an investment decision.

Investor Gustave Lein took photos of the office and staff during his initial visit
Lein returned months later to compare the photos and ensure the same people were still there
This unusual approach highlighted the diverse characters encountered when raising capital

Sports Investing Opportunities (5:01)

Lasry discusses his interest in sports as an investment category, highlighting its potential as a unifying force and the various revenue streams associated with sports franchises.

Misunderstood opportunities: Many people don't fully appreciate the various revenue streams in sports (media, sponsorship, ticket sales)
Unifying power of sports: Lasry emphasizes how sports bring people together regardless of background
Personal experience: Owning the Milwaukee Bucks allowed Lasry to connect with fans across the country

The Milwaukee Bucks Investment (7:13)

Lasry details the financial success of his investment in the Milwaukee Bucks, explaining the initial valuation and subsequent growth in value.

Purchased the Bucks for 100 times earnings, which seemed high at the time
Media deal exceeded expectations, tripling from $30 million to $90 million annually
Balancing profit and winning: Realized that focusing solely on profit leads to losing, which isn't enjoyable for owners or fans
Timing of sale: Sold after winning the championship, recognizing the peak value and challenges of repeating success

Emerging Sports Investments: Bull Riding and Sailing (14:00)

Lasry discusses investments in non-traditional sports like bull riding and sailing, highlighting the potential for significant returns based on growing viewership and media rights.

Bull riding: Went from zero media rights to potentially hundreds of millions in just a few years
Sailing: Larry Ellison's sailing league saw unexpected growth, with 2 million American viewers for a recent race
Focus on investing in leagues and teams with existing interest and potential for media rights growth

Economics of Sports Team Ownership (22:27)

Lasry explains the financial dynamics of owning a sports team, addressing the notion of vanity assets and the responsibilities of ownership.

Most owners buy teams believing the value will increase over time
Stewardship mentality: Owners often realize they are temporary stewards of a community asset
Balancing financial returns with the pressure to invest in winning
Challenges of frequent travel for owners not living in the team's city

The Vast Universe of Sports-Related Investments (24:30)

Lasry estimates the universe of eligible sports-related investments to be in the hundreds of billions of dollars, encompassing various opportunities beyond team ownership.

Real estate opportunities near stadiums (hotels, restaurants)
Food services within arenas
Anything sports-related presents potential investment opportunities

The Evolution of Distressed Investing (28:35)

Lasry reflects on the changes in distressed investing over his career, highlighting key shifts in the industry.

Early days: Bankruptcies took 3-6 years, required deep understanding of law and finance
Changes in bankruptcy laws: Favored creditors, leading to shorter 18-24 month processes
Increased capital in the industry has led to more litigation and fighting among creditors
Scale importance: Being large is now more crucial than being nimble in distressed investing

Experiences with President Clinton (30:37)

Lasry shares amusing anecdotes from his time traveling with former President Bill Clinton, including meetings with world leaders and Clinton's approach to testing security measures.

Meeting Putin with Clinton at Davos
Clinton's method of testing if rooms were bugged by complaining about decor
Appreciation for the opportunity to travel with a former U.S. president as an immigrant

Building and Managing an Investment Firm (34:10)

Lasry discusses the challenges and trade-offs in building a large investment firm, reflecting on decisions made throughout Avenue Capital's growth.

Early focus on returns rather than building the firm as a business
Returning $12 billion to investors in 2012 due to lack of distressed opportunities
Missed opportunities: In hindsight, should have expanded into areas like direct lending and private equity
Team building: Prioritizing team players who can generate good returns over pure talent

Memorable Investments and Lessons Learned (39:15)

Lasry shares stories of significant investments, including TXU and Ford bank debt during the 2008 financial crisis, highlighting key lessons learned.

TXU investment: Learned the importance of not always seeking the last dollar of profit
2008 financial crisis: Buying Ford bank debt as it declined, reinforcing the need to constantly reassess investment theses
Importance of avoiding the temptation to liquidate companies for short-term gains

Working with Family in Business (42:38)

Lasry discusses his experience working with family members, including his sister as a co-founder and his children in various roles.

Partnership with his sister Sonia works well due to trust and complementary skill sets
Challenges of working with family members, particularly children
Importance of trust and defined roles in family business relationships

Perspective on Financial Success and Happiness (44:30)

Lasry shares his positive outlook on financial success, viewing it as "winning the lottery" despite potential complications.

Chooses to focus on the positives of success rather than potential negatives
Maintains excitement about unique experiences, such as White House visits and championship celebrations
Emphasizes gratitude for the opportunities that financial success has provided

NBA Championship Experience (46:57)

Lasry recounts memorable moments from the Milwaukee Bucks' NBA championship run, including the trophy ceremony and locker room celebration.

Nervousness about lifting the trophy on national television
Unexpected pain from champagne in the eyes during celebrations
Overwhelming number of congratulatory messages from various contacts

Diversity Among NBA Owners (50:10)

Lasry discusses the diverse backgrounds and perspectives among NBA team owners, highlighting generational differences and varying levels of wealth.

Three groups of owners: long-term (30+ years), mid-term (10 years), and recent buyers
Differences in age, wealth sources, and team valuation at time of purchase
Varying levels of wealth tied up in team ownership

Investment Approach and Mentorship (51:51)

Lasry shares his approach to selecting investment managers and the importance of mentorship in the finance industry.

Preference for investing with talented individuals rather than firms
Highlights several respected investors in various fields
Mentorship: Emphasizes the rarity and value of true mentors who want others to succeed independently

Risks and Opportunities in Various Asset Classes (58:01)

Lasry discusses the major risks facing long exposures in credit, equities, and sports, as well as sharing insights on specific investments like his airline fund.

Main risks: Geopolitical and exogenous events that can't be controlled
Airline fund: Strategy of buying and leasing older planes, impacted significantly by COVID-19
Importance of adaptability and thorough analysis in the face of unexpected events

Deal-Making Philosophy (1:03:44)

Lasry outlines his approach to deal-making, emphasizing the importance of fairness and maintaining a positive reputation.

Aim to structure deals that are good for you but fair to the other party
Avoid trying to extract the last dollar in negotiations
Building a good reputation leads to more deal opportunities over time
Chose not to pursue strategies that would harm others, even if potentially more profitable

Conclusion

Marc Lasry's conversation with Patrick O'Shaughnessy provides valuable insights into the worlds of distressed investing, sports team ownership, and building a successful investment firm. Lasry's career spans decades of evolution in the financial markets, and his recent focus on sports-related investments highlights emerging opportunities in this space. His emphasis on maintaining a positive outlook, valuing relationships, and approaching deal-making with fairness offers important lessons for investors at all levels. Lasry's experiences, from working with family to celebrating an NBA championship, underscore the diverse and often unexpected paths a career in finance can take.