Marathon Asset Management

Macro Monday - big week ahead for markets: - EU and Japan agreed 15% tariffs on exports, while purchasing goods/investing in U.S. (Japan $550B, EU $650B). EU Commission President Ursula von der Leyen was highly understanding and complimentary to striking a deal when she emerged from the meeting this weekend with President in Scotland (chart below). With August 1st trade deal deadline, additional announcements will be forthcoming this week. Each trading partner begins paying rates outlined in the President's letter to nearly 200 countries that will eventually settle into 15-20% range, according to a survey of economist. Bullish as peak trade risk is behind us. - Chairman Powell to hold rates firm this week, so it’s not what he does, it’s what he will say at the Fed’s post-meeting press conference. It’s particularly intriguing since President Trump was the first President to pay a visit to the Federal Reserve since 2006, when he toured the Eccles Building to see the $3B renovation, telling Powell that rates are too high, reminding him that high rates are holding back growth. It’s not “if”, it’s “when” the Fed begins to ease rates, since the neutral rate is 150bps too high (should be 3%, not 4.5%). One way or another the President will get his way when he appoints a dovish Fed Chair in May ‘26. Bullish. - PCE inflation data released on Wednesday will likely show subdued inflation, one that is trending lower. Tariffs may have a marginally higher impact to inflation; however, we have seen little impact thus far since importers and exporters have absorbed most of this cost friction. Slightly Bullish. - Q2 GDP released Wednesday: Atlanta Fed GDPNow expects +2.4% Q2 GDP; NY Fed forecast is +1.7%; Q2 combined with Q1 shows a slowing economy but no risk of recession: AI productivity boom, deregulation, Fed beginning to ease later this year, tariffs settled, passage of the BBB - all signs point to improved economic momentum in the next year. Bullish. - 38% of S&P 500 reports Q2 earnings this week. Dispersion among the 34% of companies reporting Y-o-Y Q2 EPS: Tech Sector +18%; Financials +16.7%, Energy -23.9%; Healthcare -4.7% (bar chart below, big beat ratio). Strong performance by bank stocks indicates risk on with less regulations, more favorable capital requirements, lower loss expectations in loan book, steeper yield curve driving NIM. STOXX 600 (EU) bank stocks are +28% y-t-d w/improved growth, ECB aggressively lowered rates. Equity markets at all-time highs currently pointing higher as peak uncertainty behind us. Bullish. - Employment report due Friday likely shows job and wage growth that’s supportive for consumers. Neutral to Bullish. All signs point to a constructive backdrop: easing inflation, dovish Fed pivot, tariff clarity, solid earnings, and stable GDP, inflation, and jobs data. These macro tailwinds support firm credit spreads, improved credit quality, and strong loan demand, great news for credit markets overall.

Autonomous Vehicles The AV revolution is underway. Driven by breakthroughs in AI, compute, and simulation, and dramatic cost reduction in sensors and hardware, Robotaxis are being tested in several U.S. cities. Globally there are more than 30 companies piloting/scaling fleets. In the U.S. there are 10 million workers who drive for a living: a) 3.5M truck drivers, b) 2M ride-hailing drivers (Uber, Lyft), c) 1M delivery van drivers (UPS, FedEx, Courier), d) 500k bus drivers (school & transit), e) 400k taxis, and f) 3M drivers in the GIG economy (food delivery) - representing 6.25% of the total workforce. Globally, there are ~400M workers globally that drive for a living. The truck driver or Uber driver replaced by AV is estimated to cut costs per mile by more than half. The implications are massive. In the U.S annually, auto accidents result in 44,000 fatalities, 2.3 million injuries with an economic cost of $350 billion annually (medical, productivity loss, property damage, legal expense). AVs are expected reduce accidents by 90%+. AI on wheels as one analyst labels it, is powered by neural networks, trained on billions of road miles (Waymo alone has logged 100 million with no human driver behind the wheel). Tesla recently launched its pilot program at a price point well below Uber ($4.20 per ride), while Uber itself plans to deploy 20,000 AV (no driver). Bank of America estimates a $1.2 trillion AV spend on robotaxis, logistics, delivery, agriculture, and public transit. This shift could redefine urban design, free up parking, reduce congestion, and accelerate the timeline for traditional auto ownership where more people use AVs on demand vs. owned vehicles. China may lead the race given its demographic urgency and regulatory structure, but the U.S. isn’t far behind. The winners will be OEMs who master software, data, hardware integration, cost-efficient assemblage. Key technology and components are Radar, LiDAR, Camera, Chips, Cockpit to console with nearly 100 companies providing parts, technology and components that has largely evolved beyond traditional auto parts suppliers My most immediate questions/issues related to the advancement of AV include: - Employment, and potential displacement of active drivers - Demand and profitability for the auto OEMs (GM, Ford, Stellantis vs. Tesla)—new car sales, adoption, fleet size, efficiency. - Auto Parts Supplier relevance in a AV transport world - Rental Car Companies (Avis, Hertz, Budget) vs. Robotaxi model - Auto Insurance, premium vs. payout model with fewer accidents and Tesla providing vehicle insurance from their insurance arm The auto sector has underperformed in 2025; credit spreads have widened. Stay tuned, it’s early days.

Simply Genuis The GENIUS Act establishes the U.S. as epicenter for Stablecoins, cementing its role in the global financial system as we enter the digital age. This legislation sets the regulatory framework that legitimizes digital assets with a legal and formative foundation for digital assets, while reversing the repressive framework that limited financial institutions participation and put digital asset investors at greater risk. This act signed into law by super-majority with over 100 Democrats joining their Republican colleagues to pass the bill that paves the way for innovation, fosters trust, and positions the U.S. as the epicenter of the next financial revolution. Paul Atkins, the new SEC Chair helped reverse measures put in place by Gary Gensler and other members of the prior administration whose goal was to kill digital assets. Stablecoins have a market capitalization exceeding $150 billion and now it is set to grow rapidly. Treasury Secretary Scott Bessent says Stablecoins will create trillions in demand for short-term UST since every dollar in stablecoin must maintain 100% reserve backing with short-term, high-quality liquid assets, such as UST bills. Secretary Bessent further stated that this legislation will “expand US dollar usage via these stablecoins all around the world." The Act requires monthly audits, and best practices for AML/KYC rules. By establishing clear, balanced regulations, entrepreneurs feel free to innovate utilizing blockchain technology. Stablecoins will ultimately reduce costs for businesses and consumers, as citizens around the world can transact instantaneously with minimal friction. Blockchain technologies will power the next generation of payments, as the U.S. dollar comes on-chain. Will we see a “Walmart Coin," a “JPMorgan Coin?" Will the payment rails begin to move away from Visa and MasterCard? The American Bankers Association (ABA) warned that banks avoiding stablecoins risk losing customer deposits to fintech companies or other banks issuing stablecoins, i.e., cross-border payments or remittances. Other major currencies such as the Euro and the Yen will move towards a stablecoin architecture as there are strong use cases to drive efficiency gains and cost savings. Beneficiaries: USDC, Coinbase and other exchanges (Kraken), Banks who now have a green light to trade and custody digital assets, or issue their own stablecoin, while PayPal and select fintech companies should also benefit. Bankruptcy laws are also favorable for stablecoin holders since the law states that stablecoin holders must be paid if front of other creditors. As a credit investor focused on principle protection, an important feature of stablecoins is they are 1:1 backed by treasuries and other liquid assets. What other assets will move on to the blockchain for efficiency, transparency, and cost savings? We are already seeing mortgages and notably, a major credit manager has raised >$100m for Private Credit on the blockchain.

Past Performance Does Not Guarantee Future Results: (But It Usually Does). Despite the standard disclaimer that “past performance does not guarantee future results,” empirical data suggests that when evaluating private equity and private credit funds, past performance is indeed indicative of future results. Research by a leading investment consultant and a top-tier private markets data provider shows top-quartile managers tend to deliver strong performance in subsequent funds, especially when the observed manager has demonstrated such results in consecutive fund vintages. One study analyzing over 1,400 fund families found that top-quartile results are highly repeatable, particularly when they have demonstrated this track record over a six-year period that include 2 successive fund vintages. Another analysis of more than 1,700 funds confirmed that top-quartile managers consistently outperform their mean peers in subsequent vintages. This persistence isn’t coincidence. It reflects institutional advantages: experienced and highly motivated investment teams, repeatable investment processes, disciplined underwriting and structuring expertise, economic alignment, and proprietary deal sourcing networks. These strengths create structural edge, and that edge compounds generating alpha and absolute returns that consistently outperforms relevant benchmarks across market cycles. Sophisticated allocators and investment consultants evaluate performance holistically, assessing not just IRR, but also MOIC and DPI, which I call the tri-vector of investment performance. While a firm’s infrastructure, risk management, culture, are all important, the three dimensions of performance (IRR, MOIC, DPI) will always represent the cornerstone by which investment managers are measured. The Investment Advisors Act of 1940 requires that performance advertising by registered investment advisors (PE and PC operating in the U.S.) included relevant disclosure and disclaimers when marketing fund offerings, most sophisticated investors rely on historical performance for a reason. While there are no guarantees in life beyond death and taxes, when it comes to manager selection, track record matters. I believe that the strongest predictor of future outperformance is an alternative asset manager with all the requisite skills who has consistently done it before.

‘Peak’ Private Credit? A prominent bank CEO in the news has stated Private Credit has peaked. With the highest level of conviction, I can assure you that is simply not the case. First, some imply that Direct Lending (DL) defines Private Credit (PC), however, it is just one of the three main pillars that represent private credit. DL is currently the largest segment of PC, it is still growing, and I expect it to grow proportional to PE, a business that will undoubtably be bigger 5-10 years from now than it is today. As corporate earnings grow, the corporate sector at-large will support more debt that allows a company to add operating leverage, a reasonable assumption since corporate earnings grow with GDP and earnings are only temporarily interrupted by an occasional recession that comes along ~1x every 10 years or so. Second, Assrt-Based Lending (ABL) is only getting started. Although Marathon has been in the ABL business for 20 years, having invested $30B+, investor interest in ABL is just ramping up now. A leading consulting firms released its survey of institutional clients with ABL representing the #1 allocation request for the coming year. The TAM for ABL is enormous with some estimates providing a range of $30 to $40 trillion. In the next 5-10 years, I believe the ABL business overall will grow by 30% annually as AUM for ABL becomes as large as DL. The ABL outlook should enable PC to grow 2x on its own. Diversification and low correlation to DL, makes ABL a terrific compliment for PC investors (institutional, insurance, wealth management). The third PC leg to the stool is Opportunistic Credit, which includes capital solutions and special situations. Capital solutions provide tailored financing to meet a company’s strategic needs, ranging from growth capital and debt refinancing to solve for liquidity or restructuring through credit or hybrid structures, structured as debt, often with equity upside. The return objective for Opportunistic Credit should allow managers to generate higher IRRs than observed in DL & ABL. As DL has slowed over the past year, capital solutions have picked up rather significantly. PC also includes infrastructure debt, data centers, and more. Specialty finance such as litigation finance and NAV lending are not sectors that Marathon favors, however, they do represent a growth for PC. So, while, certain skeptics may question the growth of PC, you should have no doubt the direction of travel—the size and scope are huge and getting bigger. As the global economy grows $3 trillion per year (global GDP now exceeds $100 trillion), the amount of credit needed grows proportionally. Private Credit peaking? Not even close; that’s like saying the internet peaked in 2001 à before smartphones, cloud computing, streaming, social media, and more recently AI has helped to re-define the global economy. The Private Credit markets are ~$4T today and I believe it will grow to $10T over the next 7 years.

#directlending #assetbasedlending #democratisation Hear the latest from Marathon Asset Management’s CEO Bruce Richards on future trends for #privatecredit. The big takeaway: Private Equity and Direct Lending will be a lot bigger in the years ahead. In particular the level of demand and the market size for Asset Based Lending will grow strongly to be as large as Direct Lending over the next 5-7 years. The democratisation of private markets exposure by Wealth and Savings channels will be a core driver behind this continued expansion. Click below to hear more.

Enjoyed joining Bloomberg TV’s Closing Bell with Scarlet Fu and Romaine Bostick, CFA to cover everything from the Fed to Private Credit. While equities hit fresh all-time highs, the Fed and long-end rates remain firmly on pause. Watch our conversation on what’s driving markets—and what’s next: https://xmrrwallet.com/cmx.plnkd.in/eN-kuXYQ

The Great Chinese Housing Collapse: China's housing market remains mired in a historic oversupply crisis, with ~50 million vacant residential units—enough to house the entire population of Germany. What began as a growth engine for China, has become deadweight for its economy as the entire home builder/home products supply chain is in deep depression. Developers, driven by a speculative boom and a presale model where 90% of the sale price was collected by the builder from the buyer prior to completion has been crushing for home buyers—since the units and surrounding infrastructure were never completed. The national pastime for wealthy and middle-class Chinese investors was to own multiple homes and apartments, as the equity market was passed over in favor of owning residential property as the bubble burst. The largest developers like Evergrande and Country Garden filed for bankruptcy, leaving the Chinese banks holding the bag of construction loans that are worth pennies on the dollar, as many of these communities are ghost towns. Banks have yet to realize some of these staggering losses. Distressed investors who stepped in to buy the debt learned the hard way, that the courts in China do not rule in favor of foreign ownership - foreign investors are essentially barred from taking control of the distressed inventory, making this a domestic-only workout. The shift away from presales to "sell-on-completion" has upended the industry. Only the strongest capitalized development firms can survive without presale cash flows—so, mid-tier and smaller developers are failing fast and by the dozen. Property values in many areas have halved, while raw land have fallen by a greater percentage than home prices, which is always the case during a Real Estate market crash. Land sales once a great source of revenue for local governments has dried up. Beijing is attempting a rental conversion strategy to absorb the glut, encouraging the creation of affordable rental housing. Roughly 50 REITs have been listed to bring in equity capital to absorb supply, but REITs trade poorly. Meanwhile, China’s population is shrinking that to generation of its one-child policy means the demand needed to absorb this oversupply will never materialize. This is not a typical housing correction—it’s a structural collapse. When the U.S. housing market collapsed leading up to/during the GFC, the national home price decline was 33%, which took 8 years to fully recover, but the market was not over-supplied like China, simply over-priced as mortgage lenders carelessly extended credit that led to an overvaluation in home prices, which naturally corrected. What happened is the U.S. is fundamentally different from what China is experiencing.

Safety of Principal is Paramount When Investing in Fixed Income and Credit The smart money has moved to the short end of the yield curve—and for good reason; the long end is getting smoked. The U.S. 30-year Treasury closed at 5.01%, while UST 10-year pierced 4.5%. This isn’t just a U.S. story: German 30-year Bunds and French OATs are now trading at their highest yields since the 2011 Eurozone crisis. The graph below shows that Japan’s 30-year JGBs just hit their highest yield since inception 25 years ago! In a few minutes we will get the PPI report. Yesterday, June core CPI came in slight soft at +0.2% month-over-month, below consensus (+0.3%), yet markets have trouble digesting this data since traders and economists are concerned that the Fed will delay lowering rates, waiting for clarity regarding the inflationary impact to core goods from tariffs. As the Fed waits and rates move higher, the political heat is rising. President Trump has been vocal, declaring, “Our Fed Rate is AT LEAST 3 Points too high,” which is “costing the country a fortune.” As global bond markets aggressively reprice long duration risk, I strongly advocate for Direct Lend and Asset-Based Lending strategies, which can offer materially higher returns with superior volatility-adjusted profiles. Earning a 12% IRR with half the volatility of that return is a far better risk/reward than sitting in long duration USTs, I believe. I'd take well-underwritten credit risk over duration risk any day—unless you’re a macro trader who needs to stay nimble and liquid and is exceptional at trading the rates market. Reminder: A 30-year Treasury with a 20-year duration means that 100-basis point move higher in rates results in a 20-point drop in price.

Real Estate Debt Performs, While REITs Stall: As shown in the table below, publicly listed REITs are essentially flat year-to-date, with a total return of just 0.4%. Counter to what most investors assume, Data Centers have been the worst-performing REIT sector, down 12.9% YTD. This underperformance is exemplified by Equinix—the sector’s largest company—falling 19.5% as cap rates have risen, while data center vacancy rates have doubled from below 3% to approximately 6%. In contrast, Marathon Asset Management’s top real estate pick—senior housing—has been a clear standout, rallying 12.6% in 2025. A noteworthy comparison is the divergence between real estate equity and debt performance. Credit managers continue to extract property-level cash flows while benefiting from substantial downside protection. By assembling baskets of investment-grade (BBB-rated) CMBS, leading managers are generating annual IRRs north of 15%. Marathon sees compelling value in purchasing “money-good” securities trading at steep discounts to par. Similarly, specialized Commercial Real Estate Debt platforms are originating high-quality loans at attractive spreads, with ample downside cushion driven by conservatively underwritten LTVs on well-located assets sponsored by top-tier operators. The lending environment remains highly attractive, offering opportunities to provide flexible capital to support owners, operators, and financial sponsors.