The work of billionaire Mark Lasry's investment management: how it works

Modern Formula 1 engines accelerate in sync, preparing for practice on the streets of downtown Singapore ahead of the annual race in September at the Marina Bay Street Circuit.

Marc Lasry, billionaire co-founder and CEO of the investment firm Avenue Capital Group with a capital of $12.5 billion, interrupts a party on the top floor of the Paddock Club to visit the garage of the Mercedes-AMG Petronas team. "We were looking for Formula 1 teams to invest in, so I wanted to come here to immerse myself in the atmosphere and talk to different people," says Lasry, trying to be heard over the sound of pneumatic guns as Formula 1 star Lewis Hamilton gets into his car. Lasry does not name the team he is looking at, but it is unlikely to be one of the podium favorites like Mercedes.

In April, Lasry sold his 25% stake in the NBA team Milwaukee Bucks for a valuation of $3.5 billion, marking a sixfold increase after nine seasons, including the Milwaukee Bucks' first NBA championship in 50 years in 2021. This deal raised Lasry's net worth to $2.1 billion. Despite an impressive 17% growth compared to last year, he is still $800 million short of this year's threshold for inclusion in the Forbes 400 list.

When he bought the team in 2014 with fellow billionaire private investor Wes Edens (net worth $3.9 billion), the Milwaukee Bucks were at the bottom of the NBA standings. Lasry, 63, and his sister Sonia Gardner, 61, are investors in distressed assets, and for most of the past 35 years, bonds and other forms of debt have been their specialty.

After the 2008 crisis, Avenue unexpectedly made a profit of $400 million by investing in the debts of Ford Motor Company, which had fallen below 40 cents on the dollar due to fears of its collapse. Ford ultimately paid back the full 100 cents on the dollar. Lasry says from his mansion on the Connecticut coast: "If you stay calm and buy when everyone is in a panic, in the end, everything will be fine."

Since its inception, Avenue has offered investors in its various funds returns ranging from 10% to 19% net of fees. Additionally, Avenue's goal is for its managers not to start taking the accrued interest until their limited partners achieve an 8% return. Currently, Lasri is finding opportunities due to the rapid rise in Federal Reserve rates, which are putting pressure on many small banks, forcing them to stop lending. "The refusal to guarantee deposits accelerates the disappearance of smaller banks. They can't grow," says Lasri. "At best, they just tell everyone, 'Don't worry, we're fine,' and the moment they explain why everything is fine, it's not." Avenue is now providing its partners with private loans at interest rates of up to 15%. Government tax liens have become another fruitful area for Lasri; he has started buying them in bulk. When property owners delay payments on property taxes, municipalities typically sell portfolios of tax liens to investors like Avenue. Thus, Lasri's company takes on the payment of interest, which can range from 9% to 18%. Tax liens have priority over mortgage debt. Therefore, if a house goes into foreclosure, Avenue gets paid before the mortgage holder. "There is no risk of loss," says Lasri. "A house worth a million dollars should cost less than $15,000 because the property tax is 1.5%, which is impossible."

Born in Morocco, Lasry emigrated to the United States with his parents in 1966 when he was 7 years old. His mother, who taught French at the school attended by him and his two younger sisters, made Lasry learn English by reading the Funk & Wagnalls encyclopedia. His father was a programmer in Connecticut. "You needed nerves of steel to invest during that period," says co-founder Sonia Gardner about Avenue's deals during the 2008 financial crisis. Mark and Sonia studied at Clark University in Worcester, Massachusetts, where Mark graduated in 1981 with a degree in history. Before attending law school in New York, he worked as a UPS truck driver and briefly considered abandoning his academic plans due to the high salary and good benefits.

In 1995, attracted by more significant deals in the thriving private equity business, Gardner and Lasry founded Avenue with $7 million in capital. "Marc has always been focused on investments and investors. I focus on managing the business every day," says Gardner. The formula works well. By 2008, Avenue's assets had grown to $20 billion. During the financial crisis, Avenue fell by 30%, but thanks to smart investments in Ford and redeemed AIG bonds, its assets recovered by 80% in 2009 and by 30% in 2010. Then Lasry decided to return $9 billion to his investors, reducing Avenue's assets to about $12 billion. "There was no longer a problem, so we thought, completely mistakenly, that we would return the capital, and the next downturn would come in two or three years and would be wonderful," says Lasry. "The next cycle came 12 years later."

Since the beginning of the pandemic, Lasri and Gardner have been finding a variety of discounted assets. Avenue spent $110 million to acquire 100% of the debt of an Indian toll road operator that is building a highway through the coastal western state of Gujarat. During Covid, there were fewer drivers on the roads, and the operator faced challenges, so Avenue restructured the company and took it under its control. Now it generates returns of 10% to 15%, and if people start driving more, Lasri says that figure could increase to 20%. More than half of Avenue's assets are currently in its funds outside the U.S. Its sixth Asian fund has been yielding an annual return of 11.5% since April 2020. It also has $4 billion in its funds for Europe.

Sports could become another success for Avenue investors. Staying true to his style, the new Avenue Sports Fund by Lasry, worth $2 billion, takes a value investor approach rather than simply buying expensive shares in NBA or MLB teams. He has already assembled a "Council of Athletes," which includes NFL Hall of Famer and co-chair of Good Morning America Michael Strahan; skier Lindsey Vonn; and soccer star Lauren Holiday (both Olympic champions); as well as former WNBA star Candace Parker. In exchange for a small stake in the fund, the athletes will help establish connections and provide advice. Lasry hopes to leverage women's sports and emerging global leagues, including the Basketball Africa League, which completed its first season in 2021 and, in his view, is poised for exponential growth. He points out that in Africa, teams can still be acquired for less than $25 million on a continent with a population of 1.5 billion people. "Mark has a unique connection to the continent," says NBA Commissioner Adam Silver. "He drew a parallel between what is happening in Africa and what was happening in the NBA several decades ago, and I think that's true. He has a clear vision of what is needed."