Waterfall Asset Management

Last updated

Waterfall Asset Management, LLC
Company type Private
Industry Investment management
Founded2005;19 years ago (2005)
Founders
  • Tom Capasse
  • Jack Ross
Headquarters 1251 Avenue of the Americas, New York City, U.S.
Products Hedge funds
Alternative investments
AUM US$12.5 billion (July 2023)
Number of employees
183 (2023)
Website waterfallam.com
Footnotes /references
[1]

Waterfall Asset Management (Waterfall) is an American alternative investment management firm headquartered in New York City. The firm's focuses investments in credit structured products mainly high-yield asset-backed securities (ABS). It also invests in real estate and private equity.

Contents

Outside the U.S., Waterfall has offices in London, Dublin and Hong Kong.

Background

In the mid-1980s to the early 1990s, Tom Capasse and Jack Ross worked together at Merrill Lynch where they established its ABS Group. Ross worked on the first auto loan securitization in 1985 when he was previously at Drexel Burnham Lambert while Capasse crafted some of the first subprime mortgage-backed securities in the late 1980s for Merrill Lynch. They later went their own ways with Ross creating his own broker-dealer firm, Licent Capital while Capasse moved to the Macquarie Group managing the principal finance group. [2] [3]

In late 2004, Ross called Capasse with an idea to start their own firm, Waterfall Asset Management. They connected with boutique asset management firm, M.D. Sass to launch its first fund, the Waterfall Eden Fund which targeted residential mortgages and home equity ABS. [2]

During this time ABS deals became publicly traded and by 2007 private placements had given way to the securitization market. When the subprime mortgage crisis occurred, Waterfall was able to take advantage as Capasse and Ross were able to structure private placement deals in a new manner. Waterfall made use of principal reduction for mortgages which were was rarely used by its peers. The best opportunities for Waterfall were found in ABS securities that were once had a credit rating of AAA but later downgraded to junk status. [2] [3] [4]

By 2012, Waterfall had become known as a big buyer of distressed single-family home mortgages. To support its effort, it formed a venture with Coldwell Banker Commercial named Coldwell Banker Commercial Alliance. Waterfall would buy distressed commercial real-estate assets and the venture would will sell and lease the properties. The leasing deals would be under 100,000 square feet and sales valued at $10 million or less. [5]

Waterfall moved away from a traditional hedge fund structure to become more like an asset management company. Apart from the hedge funds it managed, it also dealt in the separately managed account business as well as private equity. By offering a wider product offering, it was able to attract mandats from pension funds and retirement plans. [2]

In 2013, Ready Capital was founded by Waterfall converting one of its private funds to a commercial mortgage REIT and listing it on the New York Stock Exchange under the ticker 'RC'. It is a real estate finance company that deals in small to medium balance commercial loans. Waterfall currently is its external manager. [6]

In July 2013, Dyal Capital acquired a minority interest in Waterfall from M.D. Sass-Macquarie Financial Strategies, a joint venture between M.D. Sass and Macquarie Group that invests in investment funds. [7]

In November 2018, Waterfall issued $571.8 Million in jumbo reverse mortgage bonds, the first offering of its kind since the 2007–2008 financial crisis. [8]

In August 2020, Navigator Global Investments (NGI) agreed to buy Dyal Capital's stake in Waterfall. The deal was done in two parts with the second part being after 2025 where NGI will purchase the remainder of Dyal Capital's interest. [9]

In November 2020, Waterfall agreed to acquire Alternative Credit Investments for £639m in cash. [10]

Related Research Articles

The Carlyle Group is a multinational private equity, alternative asset management and financial services corporation based in the United States with $376 billion of assets under management. It specializes in private equity, real assets, and private credit. It is one of the largest mega-funds in the world. In 2015, Carlyle was the world's largest private equity firm by capital raised over the previous five years, according to the PEI 300 index. In the 2023 ranking however, it had slipped to fifth place.

A real estate investment trust is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping centers, hotels and commercial forests. Some REITs engage in financing real estate.

<span class="mw-page-title-main">Bear Stearns</span> American investment bank

The Bear Stearns Companies, Inc. was an American investment bank, securities trading, and brokerage firm that failed in 2008 as part of the global financial crisis and recession. After its closure it was subsequently sold to JPMorgan Chase. The company's main business areas before its failure were capital markets, investment banking, wealth management, and global clearing services, and it was heavily involved in the subprime mortgage crisis.

<span class="mw-page-title-main">Mortgage-backed security</span> Type of asset-backed security

A mortgage-backed security (MBS) is a type of asset-backed security which is secured by a mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals that securitizes, or packages, the loans together into a security that investors can buy. Bonds securitizing mortgages are usually treated as a separate class, termed residential; another class is commercial, depending on whether the underlying asset is mortgages owned by borrowers or assets for commercial purposes ranging from office space to multi-dwelling buildings.

<span class="mw-page-title-main">Structured finance</span> Sector of finance that manages leverage and risk

Structured finance is a sector of finance — specifically financial law — that manages leverage and risk. Strategies may involve legal and corporate restructuring, off balance sheet accounting, or the use of financial instruments.

A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS). Like other private label securities backed by assets, a CDO can be thought of as a promise to pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool of bonds or other assets it owns. Distinctively, CDO credit risk is typically assessed based on a probability of default (PD) derived from ratings on those bonds or assets.

An asset-backed security (ABS) is a security whose income payments, and hence value, are derived from and collateralized by a specified pool of underlying assets.

<span class="mw-page-title-main">Oaktree Capital Management</span> American global asset management firm

Oaktree Capital Management is an American global asset management firm specializing in alternative investment strategies. As of March 31, 2023, the company managed $172 billion for its clientele.

A synthetic CDO is a variation of a CDO that generally uses credit default swaps and other derivatives to obtain its investment goals. As such, it is a complex derivative financial security sometimes described as a bet on the performance of other mortgage products, rather than a real mortgage security. The value and payment stream of a synthetic CDO is derived not from cash assets, like mortgages or credit card payments – as in the case of a regular or "cash" CDO—but from premiums paying for credit default swap "insurance" on the possibility of default of some defined set of "reference" securities—based on cash assets. The insurance-buying "counterparties" may own the "reference" securities and be managing the risk of their default, or may be speculators who've calculated that the securities will default.

This article provides background information regarding the subprime mortgage crisis. It discusses subprime lending, foreclosures, risk types, and mechanisms through which various entities involved were affected by the crisis.

<span class="mw-page-title-main">Ares Management</span> American asset management company

Ares Management Corporation is a global alternative investment manager operating in the credit, private equity and real estate markets. The company was founded in 1997 with additional offices across North America, Europe, and Asia.

MatlinPatterson is a distressed securities fund that participates in distressed and credit opportunities on a global basis. The firm was established in 2002 as a spinout from Credit Suisse First Boston. It is headquartered in New York City and has offices in London and Hong Kong. MatlinPatterson was founded by David Matlin and Mark Patterson. MatlinPatterson, through MatlinPatterson Global Advisers, manages private equity vehicles with a distressed-for-control mandate as well as an open-ended strategy seeking non-control credit investment opportunities.

<span class="mw-page-title-main">Public–Private Investment Program for Legacy Assets</span>

On March 23, 2009, the United States Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the United States Treasury Department announced the Public–Private Investment Program for Legacy Assets. The program is designed to provide liquidity for so-called "toxic assets" on the balance sheets of financial institutions. This program is one of the initiatives coming out of the implementation of the Troubled Asset Relief Program (TARP) as implemented by the U.S. Treasury under Secretary Timothy Geithner. The major stock market indexes in the United States rallied on the day of the announcement rising by over six percent with the shares of bank stocks leading the way. As of early June 2009, the program had not been implemented yet and was considered delayed. Yet, the Legacy Securities Program implemented by the Federal Reserve has begun by fall 2009 and the Legacy Loans Program is being tested by the FDIC. The proposed size of the program has been drastically reduced relative to its proposed size when it was rolled out.

Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs). Investors are repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing. Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS).

An asset-backed commercial paper program is a non-bank financial institution that issues short-term liabilities, commercial paper called asset-backed commercial paper (ABCPs), to finance medium- to long-term assets.

Ellington Management Group is a multi-billion dollar hedge fund operation. As of June 2019, the firm was reportedly managing $8.5 billion in structured products and other credit instruments.

<span class="mw-page-title-main">Blue Owl Capital</span> American alternative asset management firm

Blue Owl Capital is an American alternative investment asset management company. It is currently listed on the New York Stock Exchange under the ticker symbol: "OWL".

<span class="mw-page-title-main">HPS Investment Partners</span> American credit investment firm

HPS Investment Partners (HPS) is an American investment firm headquartered in New York City. The firm focuses on investments in private credit and public credit as well as private equity and real assets. Outside the United States, the firm also has offices in Europe, the Middle East and Asia-Pacific.

Heitman LLC (Heitman) is an American real estate investment firm headquartered in Chicago. It has three main business areas, private equity real estate, real estate debt and investment in real estate securities such as Real estate investment trusts (REITs).

<span class="mw-page-title-main">Navigator Global Investments</span> Australian investment management firm

Navigator Global Investments (NGI) is an Australian alternative investment management company headquartered in Toowong, Brisbane. It has been publicly traded on the Australian Securities Exchange (ASX) since 2006.

References

  1. ↑ "Form ADV" (PDF). SEC.
  2. 1 2 3 4 "Waterfall Asset Management Spreads it Wings". Asset Securitization Report. November 5, 2010. Retrieved February 12, 2024.
  3. 1 2 O'Hara, Neil (February 1, 2011). "ABS 2.0: Waterfall Asset Management returns to its roots". Institutional Investor. Retrieved February 12, 2024.
  4. ↑ Yoon, Al (November 11, 2010). "Mortgage pioneer Capasse shuns repurchase strategy". Reuters.
  5. ↑ Kusisto, Laura (August 1, 2012). "Waterfall Spills Into Distressed Commercial Real Estate - WSJ". WSJ. Retrieved February 12, 2024.
  6. ↑ Loria, Keith (April 27, 2023). "Ready Capital is Making Major Inroads into the Commercial mREIT Segment". www.reit.com. Retrieved February 12, 2024.
  7. ↑ "Dyal Capital Takes Minority Stake in Waterfall Asset Management - WSJ". WSJ. July 10, 2023. Retrieved February 12, 2024.
  8. ↑ Callahan, Maggie (November 1, 2018). "Waterfall Asset Management Issues $571.8 Million in Active Jumbo Reverse Mortgage Bonds". HousingWire. Retrieved February 12, 2024.
  9. ↑ Bhowmik, Satarupa (August 13, 2020). "Navigator Global Investments picks interests in six asset managers". Private Banker International. Retrieved February 12, 2024.
  10. ↑ Gaw, Kathryn (November 3, 2020). "Waterfall buys Alternative Credit Investments for £639m cash". Alternative Credit Investor. Retrieved February 12, 2024.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.