Sonia Gardner says her degree in Philosophy from Clark University, near Boston, Massachusetts, was “great training for any career as it teaches you to think logically, evaluate arguments, to be critical, and open to new ideas,” adding that “it covers an array of areas that are necessary skills” for life and investing. Her subsequent studies at New York’s Benjamin Cardozo School of Law were more directly relevant to distressed debt investing as there are "many legal issues in the bankruptcy process and restructurings, and understanding the different legal systems in Europe and Asia” is crucial.
In 1987, Gardner and her brother Marc Lasry started the Bankruptcy and Corporate Reorganization Department at investment firm Cowen & Company. The two siblings established themselves amongst the pioneers of distressed debt investing, buying instruments such as trade claims and bank debt that were not widely perceived as traditional investments. They soon forged out on their own to form Amroc Investments, which later became the largest privately owned distressed brokerage firm. In 1995, the brother and sister team founded Avenue Investments, with just $7 million of capital. Gardner says, “My brother and I were doing virtually everything when we started… it was just the two of us.” In the late 80s, the asset class was “a very inefficient, illiquid market with very few players and where very few funds were active.”
Fast forward to 2013: Avenue now manages over $12 billion of assets globally and the distressed market has become much more liquid, even attracting interest from other types of funds. Yet, despite this increased competition, “we always find opportunities,” Gardner says. Members of Avenue’s investment team are experts in the area of distressed investing and have deep experience in these markets. She believes the LBOs initiated in the 2005-2007 period have left many companies with significant leverage and overly optimistic valuations, and few companies have successfully restructured and fixed their balance sheets. She also expects that Avenue will have opportunities given that the face value of US distressed bonds is $1 trillion, while in Europe $1.5 trillion in bank sales are expected as banks restructure their balance sheets.
As one of the largest investors in many distressed debt deals, Avenue has an advantage over funds that are somewhat temporary tourists. Avenue often is an active participant on creditor committees, enabling it to “influence and drive the bankruptcy or investment process,” says Gardner, who has been involved in analysing hundreds of bankruptcies over the years. The unofficial ad hoc committees of seasoned investors can also be important forums for groups of investors to channel their views and achieve their objectives.
In those early days of Avenue, Gardner was also involved in investing, which is the province of Lasry. While Gardner still sits on investment committees, her responsibilities today relate almost exclusively to management of the firm. As president and managing partner of Avenue, Gardner manages the business, “overseeing all aspects of global operations.” There are more than 200 staff spanning eight global offices and all of the departmental heads report directly to Gardner. The firm has developed, “a best-in-class, institutional-quality infrastructure,” she says, which includes reporting to at least three regulators – the SEC, FCA and the Securities and Exchange Board of India.
Previously Lasry made day-to-day investment decisions; today, he devotes his time to overseeing investment activities at a high level and spending time with clients. Avenue has over 18 portfolio managers and an additional 42 analysts across the globe analysing investments. Avenue recently raised a large fund in Europe, a region where Avenue now runs $4.3 billion – almost as much as the $5.2 billion invested in North America. Having started investing just in the US, Avenue went global in the search for more opportunities. There was not any preconceived plan to rebalance allocations towards Europe. Geographic exposures are simply driven by where Avenue finds the best opportunities on a bottom-up basis. Europe has grown significantly in recent years because Avenue has identified more opportunities in the continent’s stagnant and sclerotic economies. European office locations in London, Luxembourg and Munich are closer to the predominantly Northern European focus of most of Avenue’s European investments. However, Avenue has selectively invested in Southern Europe “PIGS” countries, with Spanish non-performing loans as one recent example of instruments where Avenue believes it will find value.
Gardner feels that current concerns about smaller firms in Europe being starved for credit are “very timely” and that hedge funds can help to address this market gap. To this end, Avenue will soon be starting a direct lending fund, specifically devoted to providing senior secured loan financing to European mid-market companies. These companies find it difficult to obtain capital as European banks are often constrained by the legacies of the credit crisis. Although its mandate will be pan-European, this new fund, like existing ones, is likely to invest predominantly in Northern Europe, which Avenue views as generally more creditor-friendly.
Other new funds will be launched as and when Avenue believes there are compelling opportunities. As Avenue invests right across the capital structure any new funds could involve a wide range of asset classes – focused mainly on distressed, and stressed bonds and bank debt, as well as the equities, private equity transactions, and real estate all on Avenue’s radar screen. After this year’s weaknesses in some Asian markets, Avenue is “starting to see more opportunities in Asia,” Gardner notes, and will seek to add to its $1.4 billion of assets in the region at some stage. The firm already has Foreign Institutional Investor status in India, and has also done deals in the largest South East Asian economy, Indonesia. Avenue’s global suite of products also includes a fund of funds that allocates only to external funds, an exchange-listed, closed-end fund, and a mutual fund accessible to nearly all investors.
Regarding the role of women in hedge funds, Gardner says, “Things have improved since I started over 25 years ago in terms of having more senior women – but there is room for more improvement in the coming years.” She adds: “I would like to see more women in both senior and middle-management positions. It’s a topic being discussedby many people now so I am hopeful that things will continue to improve.” Gardner serves on the board of directors of 100 Women in Hedge Funds, from which she received an Industry Leadership Award in 2008. Additionally Gardner has been selected as one of The Hedge Fund Journal’s Leading Women in Hedge Funds in all three surveys published so far.
On the philanthropic side, both Avenue as a company, and Gardner and Lasry personally, are “very involved in many different charitable causes as we strongly believe in giving back to the community.” Lasry sits on the board of the Big Apple Circus, 92nd Street Y, Council on Foreign Relations and Mount Sinai Medical Center Group and various other boards. Gardner also sits on the board of Mount Sinai, as well as the boards of 100 Women in Hedge Funds, the Managed Funds Association and she is very active in organisations such as inMotion, the Anti-Defamation League and various others. Over the years they have donated millions of dollars to various organisations with the most recent being a $1 million gift to Mount Sinai’s Lung Cancer Center to further early diagnosis and treatment.
• Received a B.A. with Honors in Philosophy from Clark University (1983)
• Received a J.D. from the Cardozo School of Law (1986).
• President, Managing Partner and Co-Founder of Avenue Capital.
• Partner in charge of managing the firm, with a focus on distressed investing.
• Served as senior attorney of the bankruptcy and corporate reorganisation department at Cowen & Company.
• General counsel and the senior managing director of Amroc Investments, L.P., the predecessor firm to Amroc associated with the Robert Bass Group, Inc.
• Co-founder of Amroc where she was a senior portfolio manager responsible for investing the partners’ capital.
• The recipient of the 100 Women in Hedge Funds’ 2008 Industry Leadership Award.
• Serves on the Executive Committee of the Board of Directors of the Managed Funds Association (MFA).
• On the board of directors of 100 Women in Hedge Funds.
• A member of the board of trustees of The Mount Sinai Medical Center.
Sonia Gardner was selected as one of The Hedge Fund Journal's 50 Leading Women In Hedge Funds 2013.