Marathon seeks $750m for specialty finance fund

The firm is seeking more than double its $370m debut fund, which won a $100m allocation from a Minnesota retirement plan.

Marathon Asset Management is raising a new specialty finance fund set to back an array of strategies from healthcare royalties to real estate, according to documents from the Minnesota State Board of Investments (SBI).

The New York-based credit manager is seeking $750 million for its Marathon Secured Private Strategies Fund II. The inaugural 2014-vintage vehicle locked down a total of $370 million and has posted a 10.8 percent net internal rate of return and a 1.3x net multiple on invested capital as of 31 March, St. Paul-based SBI papers showed. The Minnesota pension plan approved a $100 million commitment to the new fund.

A Marathon representative could not be reached for comment.

Fund II will invest in aviation finance, deploying capital into early to mid-life aircraft, with a focus on airplanes equipped with more recent technology, in which the lessee will pay for maintenance, insurance and taxes on the aircraft.

In addition, the vehicle will deploy capital into corporate and residential real estate, which includes originating and purchasing pools of loans, the SBI meeting materials showed. The commercial real estate credit may be secured by an array of property types including logistics and industry buildings and multifamily apartments. Investments may also include mezzanine debt, preferred equity and B-notes, the second tranche of commercial mortgage-backed securities.

Marathon will also invest in asset-based corporate debt and healthcare and royalty-backed loans. The corporate credit investments will be backed by real estate, equipment, receivables and intellectual property. Healthcare debt will be secured by US Food and Drug Administration-backed assets.

Charges for Marathon funds generally include a management fee of 0.3 percent-2 percent on committed capital and a performance fee of up to 20 percent, according to a Securities and Exchange Commission registration document.

The firm, founded in 1998, manages $17.3 billion of assets. In addition to private credit, Marathon invests in corporate credit and leveraged loans, emerging markets debt, real estate and structured credit.