Morocco to Milwaukee
How I Got My Start in Finance
Featuring Marc Lasry
Published on: April 1st, 2019 • Duration: 10 minutesMarc Lasry is the co-founder of Avenue Capital Group, a co-owner of the Milwaukee Bucks, and has worked with several U.S. presidents. In this episode, he shares what his road trip to starting a hedge fund was like, even though he started out as a bankruptcy lawyer. This clip is excerpted from a piece published on Real Vision on April 20, 2018.
JUSTINE UNDERHILL: Welcome to Real Vision's How I Got My Start in Finance. In this episode, you'll hear from billionaire hedge fund manager Marc Lasry. He is a co-founder of Avenue Capital Group, the co-owner of the Milwaukee Bucks, and he has worked alongside several US presidents. In this interview, Marc explains how he began his career and became a prominent voice in the financial industry today.
MARC LASRY: I was born in Marrakech. It's great city. You're happy to leave, I think. We went to live in Paris for a while, and then, I think, when I was seven, we moved to Hartford, Connecticut. So Marrakech, Paris, Hartford are sort of all-- it's all the same. Yeah, so and then just grew up in Hartford, went to college on scholarship.
When I was in law school, I'd done really well, and I got a job. I got recommended to work for the chief bankruptcy judge of the Southern District of New York. So I went to work there for about a year. And then what ends up happening is if you work there, the offers you get when you graduate from law school are obviously in bankruptcy. Right? It's just because you worked for a judge.
So it wasn't like I went to law school thinking, oh, I really want to be a bankruptcy lawyer. I went to law school not really knowing what I wanted to do. One thing led to another. So I practiced law for about a year, and then I got out to go work at an investment firm that specialized in distress.
MARC LEVINE: So which one was that?
MARC LASRY: It was R.D. Smith, so this guy Randy Smith. I did that for about a year. I made him $25 million my first year. That's when $25 million was huge amounts of money, so big.
And at the end of the year, he gave me-- you get your bonus. So what do you think you would ask as a bonus? I thought, oh, half of 1%, 1%. That would be great, and I got $10,000. That was my bonus, and that's when I decided it was time to leave.
MARC LEVINE: Yeah, well, good for you. Yeah. So Randy Smith may be regretting that compensation call.
MARC LASRY: Yeah, probably.
MARC LEVINE: So $25 million, so were you principalling?
MARC LASRY: We were just investing money. They had a fund at the time. So we were investing the firm's capital, and then he was managing a fund. So we did it in companies like Storage Technology, Manville.
And then I left there to go to Cowen and Company, where we ran Partners Capital. They gave us $25 million. We did about 60% a year for about two years. And then I left there in '88 to go join the Bass brothers, so Robert Bass Group. So we started running money, they gave me $150 million, in 1988. At the time, that was the largest distress fund in the world, $150 million.
MARC LEVINE: How old were you?
MARC LASRY: I was 28. Yeah. So it was fun. You think back and did that for a couple of years, and then I left to manage my own money. Wasn't a lot, but you thought, oh, I'd be great, manage your money, and we did really well. We doubled the money every year for about five years. So we were just investing one or two things, and that's how we started Avenue. We started Avenue in '95.
MARC LEVINE: Got you. So was there any one particular deal that-- just give a taste of what you were working on.
MARC LASRY: It was interesting. Back then, there was no internet. Right? There was a company Smith International which was in California. It was in Newport Beach. So you'd fly out, and if you flew out, you got to see the docket every day. Because most people, the docket got sent at the end of the week to people, and you had to pay a fee to get it.
So really, what we did is-- or what I did is-- I went out there, and you would see as claims ended up getting approved. You would actually contact the people who had those claims and try to buy those claims at a pretty big discount. And back then, people viewed companies in bankruptcy, it's got no value. But in Smith International, you were getting paid somewhere around, on the restructuring, $0.75 on the dollar. And you can buy those claims for anywhere between $0.10 to $0.50 on the dollar.
So you just kept buying, and really you had to call individual creditors. There was no exchange, so you would contact individual creditors, and you would negotiate with everybody. And you'd buy claims one by one, and that's how he made a lot of money back then. Really, the overriding concern was people didn't understand bankruptcies, so they didn't want to be involved. Right? So you'd have a plan that was filed that said we're going to pay you X, so let's say, we'll pay $0.75.
And you would contact people and say, well look, the plan's got to get approved. You're going to have this. You need that. I'll give you cash today of $0.30, or I'll give you cash today of $0.40, and people would rather have that. They didn't want to wait six months or a year for everything to work itself out.
Then, you've got to remember, back then, the only people who had capital were these wealthy families. So it was the Pritzker. It was the Bass family. Like, an investment bank didn't have real capital.
So when I ran money for Cowen, the firm had $100 million in capital. So look, I'm sure Bear Stearns was higher or Lehman or everybody else, but the people who had real money was families. So what you had, I think, were some of the best and brightest people would go work there, because you were given a lot of capital. And so you found on the real estate side Tom Barrack who formed Colony, did a phenomenal job. David Bonderman who created TPG, Jim Coulter who's part of TPG, you had a lot of really talented people who were there.
And then over the years, people moved on, because you were able to raise capital from others. When we first raised capital in-- our first fund in '88 was $120 million fund. Right? I mean today, you've got investors who are giving you $250, $500, sovereign wealth funds, here's a billion. Right?
Getting $10 million from one investor was a big deal back then. That's not that long ago. That's 30 years ago. So the families who were worth billions of dollars had a huge edge in attracting talent.
MARC LEVINE: So Avenue really started, it sounds like, you made a few bucks with Cowen, with Bass. You started running your own money. You brought your sister in.
MARC LASRY: Is that normal?
MARC LEVINE: I think the first thing I said said to you was like, I love my sister to death. I'm not going into business with her. But yeah, how does it that work with the two of you?
MARC LASRY: I think a lot of it ends up being how well do you get along with your sister or brother? Right? I think for me when we came to the United States, my sisters and I shared a room till I went to college. So you either hated each other or you get along extremely well. It's one of the two. Going through puberty with your siblings in a room that isn't that big causes a lot of different issues.
And I think for Sonia and I, we both went to the same college. We went to different law schools. When I started, she came in-house as our in-house lawyer. We were just buying trade claims, and then as the business grew, she started focusing on the operations of the business, the legal side of the business, the compliance side.
So it became a great partnership. I could do the investing, and Sonia could manage everything else. So it turned out to be a great partnership, because she had no interest in doing what I wanted to do. And I had no interest in doing what she wanted to do, and I think that's why it works.
MARC LEVINE: And still works today.
MARC LASRY: Yeah, it still works today.
MARC LEVINE: There has never been a--
MARC LASRY: It doesn't changed.
JUSTINE UNDERHILL: So Marc Lasry quit law to work for an investment firm. He made $25 million during his first year and only got a small cut for his achievement. Because of that, he left and started working for prominent funds, and because of his success, he started Avenue Capital Group with the money he earned. Now, his net worth is $1.8 billion. For Real Vision, I'm Justine Underhill.