SALT Voices: Jason Mudrick | Chief Investment Officer, Mudrick Capital Management

TL;DR

Jason Modrich, CIO of Modrich Capital Management, discusses the challenges faced by hedge fund managers in modern markets and explains why they focus on credit markets instead of equities.

Transcript

this is natasha de sousa reporting for salt voices and i'm here at the inaugural salt abu dhabi with jason modrich the chief investment officer of modrich capital management welcome to Abu Dhabi Jason thank you thank you for speaking with us today or tell me a little bit more about the panel that you were part of yesterday we had some great interes... Read More

Key Insights

• 🦔 The hedge fund industry has become highly competitive in modern markets, with thousands of funds managing trillions of dollars.
• 🦔 Computer-driven trading has made equity markets hyper-efficient, making it challenging for hedge fund managers to generate alpha.
• 💳 Focusing on credit markets, particularly event-driven credit, can provide opportunities for hedge fund managers to outperform.
• ✋ Modrich Capital Management specializes in distressed credit in the middle-market segment, which offers less competition and potentially higher returns.
• 💦 Due diligence is crucial in the illiquid credit market, requiring upfront work similar to private equity investing.
• 🥹 Modrich Capital Management targets a 20% return on investments and typically holds them for two to three years.
• 🌎 The firm does not invest outside of North America but has clients and potential clients in the Middle East.

Questions & Answers

Q: What were the main takeaways from the panel discussion on hedge fund opportunities in modern markets?

The panelists, including Jason Modrich, agreed that equity markets have become hyper-efficient due to computer-driven trading, making it difficult for hedge fund managers to outperform the markets.

Q: Why does Modrich Capital Management focus on credit markets?

Modrich Capital Management focuses on credit markets, especially event-driven credit, because it is harder for computer-driven trading to trade credit. This type of investing requires more resources, is illiquid, and provides an opportunity to generate alpha.

Q: How does Modrich Capital Management differ from its competitors in distressed credit investing?

Modrich Capital Management is known for investing in middle-market credit, which comprises two-thirds of the leveraged credit market. While competitors manage vast sums of capital, investing in smaller deals that are not worth their time, Modrich Capital Management finds interesting opportunities in this space.

Q: What is Modrich Capital Management's investment philosophy when it comes to distressed opportunities?

Modrich Capital Management conducts extensive due diligence, similar to a private equity firm, before making investments in distressed opportunities. They hold these investments for two to three years, structuring them into posteriori equity, with a target of 20% returns.

Summary & Key Takeaways

• Jason Modrich participated in a panel discussion on hedge fund opportunities in modern markets and found that despite investing in different ways, all panelists reached similar conclusions.

• Equity markets have become hyper-efficient in the last 20 years due to computer-driven trading, making it challenging for hedge fund managers to generate alpha.

• Modrich Capital Management focuses on credit markets, particularly event-driven credit, to find opportunities and generate alpha.