[music]

Bloomberg Audio Studios podcasts, radio,

news.

[music]

This is Masters in Business with Barry

Rick Holtz on Bloomberg [music] Radio.

This week on the podcast, another extra

special guest. Matt Sherwin is

co-founder and chief investment officer

at Maric Capital. He previously spent 16

years at JP Morgan Chase and then a

bunch of years at uh Cityroup beforehand

running all sorts of spread markets,

head of securitized product, lots of CIO

and risk management titles. Uh I came to

know through

>> [music]

>> um a live event we did at Bloomberg last

year. I found that his approach to

credit and trading is absolutely

fascinating and what MARA is doing is

really quite interesting. I thought the

conversation was brilliant and I think

you will also with no further ado my

conversation with Mar Capitals Matt

Sherwin.

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[music]

>> Matt Sherwin, welcome to Bloomberg.

>> Thanks for having me. This is exciting.

That was kind of that was that was a

bigger windup than I was uh

>> I likeing

>> I like a big windup cuz it gives us an

opportunity to roll back to the

beginning and say all right bachelor's

in economics from University of

Pennsylvania. What was the original

career plan? I I don't imagine people

going to college and saying I want to be

the head of global spread markets. Uh,

no. But that's super interesting because

um our oldest uh is a sophomore in

college now and he's in the business

school at American and I was just

talking to him yesterday and he said,

"I'm now in I think they call it like

finance for business. I really like this

new class." And I said to him,

>> "That reminds me so well of when I was

in undergrad business school and I did

the first couple semesters of econ and I

hated it." [laughter]

And

>> I had a similar experience.

>> It was like, you know, I I shouldn't

have hated it as much as I did, but at

the time, uh, it was ISLM curves, it was

supply, it was demand, etc. And it just

it felt it didn't feel very practical to

me and I didn't do very well. I didn't

go to class very often. I didn't do very

well. But then we got to kind of the

next semester which I think they called

finance 101 and was like

>> bond math discounted cash flows and I

was like oh this I like okay I am in the

right place.

>> Well it's much more realistic and you're

not dealing with homoe economy cuz that

is this theoretical version of humans.

>> Looking back on I wish I had listened a

bit more at some of those others. Um,

but you know, something I say maybe we

we'll get to is like it just a

recommendation I would give to other

people. It took me a little while to

realize what I was interested in, what I

was interested in being interested in.

>> And when I got into some of those

classes, kind of the more financy kind

of stuff, I was like, this I like this

makes sense. Uh, I want to learn more.

And I think that's kind of where it

starts. So I always wanted to get I just

like when there's, you know, numbers on

the page, it adds up to something.

You're trying to make money. It's

hopefully positive at the end. It might

be negative. It's pretty clear-cut.

>> Um, at least the goal is. And I always

like that. I always gravitate towards.

>> So, so economics way too abstract and

academic, but business and finance

practical, applicable, real life usage.

>> Yeah. Which is interesting too because I

also I'm a little bit like this a little

exaggerated, but I'm a little bit of

like a history buff. So, like it was

interesting that that what didn't appeal

to me because I do like kind of the

history of it. how did we get here? And

I think that's always something that I'm

like in this form as well. Um going back

to learn more about financial systems,

how money works, how they thought it

used to work, different schools of

thoughts, and I think really helps you

understand where you've been, where you

are, where you're going. So when you

look back when you were group treasurer

or chief investment officer at at the JP

Morgan um division you were you were

involved in what sort of lessons did you

take away from that? You're you're in

the real world managing real risk, real

portfolios. H how did that experience

change how you perceive risk?

>> Yeah, it's a great question. Um and

[clears throat] I'll tell you so

obviously I had a career with a

background in um trading running trading

teams both on the buy side and the sell

side and it was really that experience

that this next piece that was

transformative for me and um you know

really brought us to the point where um

my partner Derek Goodman and I decided

let's form Merrick and you know I'm sure

we'll get into that a bit but what

happened was I spent 20 odd years

trading mortgages trades, corporate

credit, high yield products like that,

working with specialty finance

companies, some that I worked with, some

I had a hand in running this kind of

universe and then uh in late 2019 I had

the opportunity to move over and this

was different building, different you

know walled off key card, different team

and be the CIO and the treasurer. So

this is now by side running the capital

of the firm, the investment of the firm,

hedging, managing, structural risk, lots

of things wrapped up in there. But the

real thing was the point in time where

this happened was late 2019, a few days

later was the repo crisis. If we

remember that

>> when all of a sudden if you wanted to

borrow overnight against treasuries, it

cost you 10%.

>> Okay. Six months after that pandemic

breaks out. And why I bring that up is

so much changed in dramatic size at

rapid speed that I saw something I'd

never seen before. And it was how does

the financial system really work and

what does it mean and how does it apply

to everything that I've done? And it was

one of these moments where I felt like I

just went from being the captain of the

ship, you know, my own little thing,

right? We'll be a little expansive with

it. I went from being the captain of the

ship to going to work in the engine room

and seeing the actual gearing and how it

works and how it doesn't and what could

stop it from working. And you spend

years, you know, you pull a lever, you

think the boat goes faster, but you

don't know why. And you don't know what

could stop it from doing that. And you

don't know what could make it work more

efficiently. But now you go work in the

engine room and you see it and you

understand it. It was just this aha

moment like we're two guys with glasses,

right? So, you know, when you go to the

the you get a new prescription, you get

your new glasses, you put them on,

you're like, "Oh my god, I can see."

Right? And by the way, how was I walking

around the streets of Manhattan with

that old prescription, but now I could

see clearly. And honestly, 20 odd years

into my career, that's how I felt at

that that moment

>> in 2019.

>> Yeah. I would say like in early 2020

about 6 months in it was kind of like oh

my goodness it's coming together now. I

wish I wish I had known this for the 20

years that preceded this but I felt like

now I know nothing and I'm starting to

learn. So I have to ask. So uh my

experience with 2019 was that wobble

seemed to go by so quickly compared to

0809 where you know to me you saw a lot

of warning signs first in housing and

then in securitized product and then in

construction and then you know the

market didn't peak till October07 and

the next 18 months were kind of fun if

you were on the right side of it but if

you weren't it must have been a blood

bath. It sounds like you derived more

out of the 2019 experience than you were

on a desk in 089. What sort of scar

tissue did that leave? H how informative

was that

>> moment? It's really interesting the way

you kind of put those together. And um

so to set the table a bit 0708 when I I

got to JP Morgan late ' 06 070809

I was in charge of um had a team we

traded asset back securities say credit

cards auto student loans um subprime

mortgages remember those?

>> Yeah. um CLOS's. So

really kind of like the center of what

ended up happening uh after that. And I

would say it was

so overwhelming at the time. I mean we

were there 2 in the morning handmarking

bonds. Okay. Walking across the street

between the two buildings like is there

more information? This company might buy

that company before the market opens.

What else can we do? Um the numbers were

huge. It was almost like a bit more than

you could process at the time. Um, but I

think each one of these became every

step there was like I understand what

I'm doing better now because but the

first thing I ever did was I started out

as a cash flow structure

>> and actually at that point in time um

the guy who ran the department was uh a

friend of mine named Bruce Richards who

went on to start Marathon and um has had

a fantastic career and we keep in touch

and he said I said I want to be a trader

and he said well I want you to be a

structure because if you learn how the

cash flow works, how the structure

works, then you'll be a better trader

later on. I think each piece helped me

understand the risk better and then the

system it sits in and that helps you

understand the risk better. And then

when you understand the risk better, you

understand the system it sits in better

and it builds and it builds on top of

each other. So I would say in '08 I

learned more in '08. We saw we felt like

we were the tip of the spear in like a

bad way and we could see it was getting

worse and it was accelerating and we

could see that people were maybe even

underestimating. And I remember some

conversations around at the time um that

we were basically saying like think

bigger, think broader, think worse.

That's the context we're talking about.

But all of that helped me understand how

does my product I'm trading fit into an

investment bank? How's an investment

bank impact the system? Um I think when

I went into 2019,

obviously a lot time had passed. I'd had

more experiences, etc. Um I remember

sitting in a meeting. We're in 7:30 a.m.

traders meeting. This is uh with the CIO

group. Um and we go around the table, my

you know, rates lead, my credit lead,

etc. And the repo guys walk in and they

say, "Hey, we can lend against

treasuries at 10%. should we do more?

And I said, "Guys, I this is my third

day with this team." Okay. [laughter]

Um I'm the person in the room who knows

the least about what you're talking

about.

>> But if you need my authorization, you

have it cuz that sounds pretty great.

>> 10% yield against Treasury.

>> Fantastic. My response to you is how

much can we not can we do more like how

much can we do? Meaning more and more.

Um, and that just became the beginning

of like why did that happen? How did we

get here? What's the where did it come

from? Where does it go? And I found that

certain people knew certain pieces but

not the picture. And then you're like it

it it was just starting to pull out

>> and that was your job to know the whole

picture.

>> It be it became it became the only it

became the focus of what I wanted to

know because unpacking that would help

me understand how do we get here? Why

does this happen? And by the way, what

are the pieces that put this all

together? Um and how do we um how do we

take advantage of that? How do we

protect ourselves? But also, how do we

take advantage of that? So, it was this

the whole thing um was this one of those

types of things you say, I opened up a

door, three doors behind it, and I want

to keep going that direction. And then

it felt to me like a purer and purer

version of everything I'd done in my

career getting closer and closer to the

source and pricing.

>> Really, really fascinating. One of the

things I think a lot of people don't

realize about JP Morgan Chase during the

financial crisis and I never uh doing

the research for Bailout Nation I never

got this really sourced the way I would

have liked to but JP Morgan Chase had

their own derivative scare a couple of

years earlier and the word was Jamie

just said clear all this junk off of our

balance sheet we we can't handle this

risk doesn't seem to be worth the

potential upside. So heading into 089,

they weren't dealing with the same sort

of um existential danger that Meil Lynch

and Wells Fargo and go down the list all

had all had to go through. They they

were ended up being an acquirer of

distressed assets, not a uh a seller of

distressed assets. Well, I think I mean

it was a tremendous place to work. I

worked with incredible people. I learned

a lot. Um, and I worked with great great

people that you're just part of a

terrific team. It's fantastic place.

I learned something that became

transformative to everything I'd spent

my career doing. So, that's why we set

out to and I said, I want to do this.

And that's why we set out to build

Merrick when we said, you know, I recall

Derek and I sat down one day and I said,

"Let me just here's how I think about

markets. I think about it in terms of

money, capital, credit, liquidity, and

regulation." That's my five. Money,

capital, credit, liquidity, regulation.

MCCLR.

>> How do you separate money from capital?

>> So, I think money to me is how do you

make it? How do you destroy it? How does

it move through the system? To me,

capital is a little bit more of how much

do you have? How do you measure it? How

much do you have? Are you making more?

Are you destroying it? Credit is really

how is it being formed? How is it moving

through the system? The financial system

is changing now.

>> It's very different than it was a few

years ago. We actually when we were you

know really trying to get our ideas uh

on paper we wrote a paper that we

outlined saying we described what we

thought was the new version of the

financial system. We said the financial

system is changing your de facto

recreating glass steagall. You have

gibbs. If you come from some of this

framework, you know, are the globally

systemat systematically important banks,

systemically important banks. Think JP

Morgan, Wells, Bank of America, etc. Um,

we said there are the new GIBs, people

like Apollo, Blackstone, KKR, BlackRock.

These are Aries. These are the folks

that are actually making credit

extension decisions in this economy.

Okay? You have the traders like Citadel

Securities,

uh, Jump, Jane, some of these other

names everybody's familiar with. This is

disagregating the financial system and

putting it into different buckets. So,

basically, we think about where's it

coming from, where does it go, who wins,

who loses, what are the flywheels here.

Um, this is a process that we apply to

everything we do. Some of the guys on

the team call it MC Clear, um, MCCLR.

It's the lens that we look at because we

believe money, capital, credit,

liquidity, and regulation drives

economies, markets, and prices. And then

you can really start to understand

monetary policy, real estate, housing,

um the types of specialty finance

companies, we've talked about, consumer.

So, this to me actually explains how it

all works and we apply that. It's a huge

addressable universe. Um, we trade

rates, mortgages, securitized products,

corporate credit related equities. It's

an enormous addressable universe with

investors that have very narrow mandates

that transact at different points in

time and sometimes non-economically and

bound by potentially non-economic rules,

which means there are a lot of overlaps

that people don't take the advantage of

and there's a lot of gaps that they

quite simply don't bridge. and the setup

for all of this, I think, um, and I've

seen some stuff. Um, a lot of your, um,

your your listeners have, um, seen quite

a bunch of stuff. We've seen things go

right. We've seen things go wrong. This

is one of the best setups we've seen in

a long time. And so, that's why we went

out to say, um, I saw some interesting

stuff. I learned some interesting stuff.

There's an opportunity set that we want

to prosecute right now. and it is an

incredible time to do so. So, we built

the team. Sorry, go ahead. I was going

to say I was just going to No, I'm

fascinated. I want to roll back to

something you said earlier, which was

GlassSteagall is sort of being backdoor

reapplied.

Is that a function of people being risk

averse or is that a function of people

just specializing in their own silo? So

you don't have, you know, glass deagle

for people who aren't uh economic and

policy wonks, separated the FDIC

safe banks from the riskier investment

banks. And once that was repealed in the

late '9s, didn't cause the financial

crisis, but allowed all these banks to

merge and get bigger. And maybe it made

the crisis a little worse, but it I

don't I don't think of it as the

underlying cause. But um the idea that

the market is working its way back

towards that is kind of fascinating.

Address that.

>> Right. As you laid out like glass

seagull to say to oversimplify basically

said like you can hold deposits, you can

underwrite securities, you can trade

securities, things like that. Um and

there were rules.

Right now, there are like some rules

that say what you can and can't do, but

really there's a lot more that has

morphed into um what people like to call

private credit or we're going to extend

credit through these fashions or some of

the rules don't apply to this group. So,

we can trade the markets differently or

we can make markets in a way that maybe

um the big banks can't. And then the big

banks say, well, we're viewed as super

safe because I would argue we are and

that has its advantages also. So it's

like we created these artificial

boundaries. What is great for us and the

way we look at the world is we saw that

we see that we understand that we also

see and understand and think about all

day long and put it into our portfolio

construction and the the the risk that

we build. It's all up for grabs again.

Right. So, um, we've got Kevin Walsh

nominated to be the Fed chair and Mickey

Bowman is the vice chair for supervision

and they are, um, I don't know what what

the right adjective for it is, but

they're changing the rules and they're

pulling some of them down. And in my

opinion, people just don't understand

which of them matter and which of them

don't. and the market moves to place on

some that simply don't matter like its

lack of understanding of what SLR was

and how that worked and we all need to

dive into that but to simplify they said

we're going to remove this rule and it's

a big deal and we at MARA said you can

take it off it doesn't matter so

everything the market's doing in

reaction to that is a potential

opportunity for us

>> in other words people are overreacting

to a regulatory change that isn't

[music] significant long term

>> in that example yeah

>> coming up we continue our conversation

with Matt Cherwin, co-founder and chief

investment officer at [music] Mara

Capital, discussing why he launched the

firm in 2024. [music] I'm Barry Rit

Haltz. You're listening to Masters in

Business on Bloomberg Radio.

[music]

I'm Barry Raltz. You're listening to

Masters in Business on Bloomberg Radio.

My extra special guest today is Matt

Sherwin. He is co-founder and chief

investment officer [music] of Mar

Capital specializing in a variety of

alternative credit and related private

[music] products. Uh previously he spent

16 years at JP Morgan Chase where he had

a number of very important titles. Uh

before that Croup. Are we in all that

unique a period of time? Is the

opportunity set that much greater than

what we typically see in the normal? You

know, this is a little more

geopolitically volatile administration

than than even the previous Trump

administration. Is that a driver or is

it the deregulation and misapprehension

of of what these rule changes mean?

>> I think it's a combination of what's

going on. So we have we just kind of use

some little catchphrases among the team

that help us sort of like you know

gravitate around concepts or communicate

quickly. Um we say this is an

administration that's in the business of

being in business

>> and that's just a there's no opinion or

judgment one way or the other. It's just

it's just a statement. Um

what this environment is also we also

came up with something that we thought

was just made us chuckle one like it's

important to have a little bit of sense

of humor. We found our investors

actually do read the materials very

closely and they tend to have a sense of

humor which is good but we created this

thing we called the one big beautiful

chart.

>> Uhhuh.

>> And we just said you know what they

really need they need rates to get down

and they need it to come down a lot more

than what the market and the curve has

already priced in because of how much

debt the country has, what it costs,

what they want to accomp. So here's what

they need to accomplish and they're

going to do everything they can to it.

So, you know, we construct poor

portfolio. We have a nar we have an

investment thesis. We have a narrative.

Everything we put in the book has to fit

that narrative. Has to contribute to

what we're trying to achieve. Has to be

the best version of that or it has to

protect us from what could go wrong. So,

getting back to your question a little

bit, we think it's a very business

forward environment, uh, business

forward administration.

Um, we think that it is one that needs

rates to come down. we are going to have

a new Fed chair in the middle of June

and there he'll say all sorts of things

in the confirmation hearing but really

it will be um a catalyst potentially for

change uh in the middle of the year and

then we have a bias within markets to

strip back some of the layers of of

regulation and away from whether you

support that or not I can tell you

because I've been on the other side of

it the layers of process

and bureaucracy and spending your time

backsolving instead of what could we do

better. When you change what your goal

is and how you're pointed, you're going

to get different results. We think that

combination is spinning flywheels in the

market now that um in our opinion,

people are just they're underestimating

the power of some of these flywheels.

>> Really, really interesting. Last

question before we talk a little bit

about Merrick. Um, in the old days, and

I was never a big believer in this, but

everybody else was, there was some

constraints on deficits and ongoing

government debt, cuz the bond vigilantes

would punish you. The bond vigilantes

seem to have disappeared in part

replaced by the stock vigilantes who any

policy they don't like they just sell

off until they have their hissy fit

until they get their way and then okay

thank you very much and we're off to the

races again. Uh what do you think of the

you know 80s9s era bond vigilantes? Is

that just ancient history? there's no

discipline on deficit spending anymore

or and by the way I think deficits are

not all that relevant. Look at Japan.

Look at the US history. We've been

warned about deficits and they haven't

caused much of a problem most of this

history.

>> Yeah. I mean look, I love the term and I

think we've seen some of those episodes

um last year we saw um around the

whatever we call liberation day in

April. There were a couple days where

treasuries and mortgages said like

enough, okay, that's it. Um, and we're

either going to have one of those days

where they are giving stuff away or you

got to pull back. And I think what we

saw was the administration did pull

back. So I think in some level it's

still there. But part of what we do at

Merrick and what influences our thought

process is um big parts of this have

been really broken down. The markets are

so big now that it's been broken into

specific functions. Like people have a

thing to do and they do that in a narrow

mandate. We have a more flexible mandate

to us. The products, they're widgets.

They're tools in the toolbox for us to

achieve our goals and our investment

thesis and the portfolio risk and

construction and diversification that

we'd like to have. Um, but the markets

are hyper specialized in very very large

markets. So, you get some of those

episodes where it's like, uhoh, crowded

trade, we got to get out. Um, I think

the question of

um, does the administration react to the

markets? Does the markets react to the

administration? It's something that

we've actually focused on uh, quite a

bit. We actually um

you know we wrote another piece in June

of 2025 that we called the wars fed and

it was just about what could happen and

we sort of went through to your point

like the concept of risk-free rate and

credit spread are completely intertwined

and co-mingled now and they don't exist

separately. So I think that's some of

the concepts you're getting at like is

this um a problem for credit? Is it a

problem for rates? Are those the same

thing? Now um one of the most

interesting things and um I would just

say before we get back to your your

question is um what was really

interesting observation to us was during

the last government shutdown whatever

mini version of that we're going through

right now it was almost in the data was

not forthcoming and then VO went down.

So, it was this sort of like a little

bit like if we don't know, maybe

nothing's happening. But what it also

was was a little bit to the to what you

were saying is

when things were a little less

hyperfocused,

they actually were a little less jumpy

around um small moves. And that was a

big takeaway um big takeaway for us.

It's a big thing you're going to hear

from Kevin Walsh if he ends up in the

chair seat. Um, you're going to hear a

long narrative from him for his time in

that seat of we need to step back from

the dayto-day and the minute-by-minute

information and think about the bigger

picture and the trend and where we're

headed and be a be a little more

forward-looking. I think that's the kind

of guidance that you will get from that

chair.

>> Really, really interesting. So, so let's

just start out with why you left the

comfort of a big shop to have the uh

headache of your own firm. What What's

the elevator pitch? What problem does

Maric Capital solve that couldn't be

solved at a large Wall Street bank?

>> Look, I think quite simply there are

some things that banks can do and some

things that banks can't do. There are

some things that they can do and that

they don't want to do. Um in my career

I've always been involved in these types

of markets being rates, mortgages,

curized products, corporate credit, the

equities related to that that around it,

these types of specialty finance

operating companies and always felt that

when you have when you can apply the

various lenses to these products being

the trader lens, the structurer lens,

the operator lens, you understand it

better and you get the gearing and the

pieces. is and when you learn about the

financial system that it sits within

then you actually can understand but

take advantage of the risk and return in

a more elevated and efficient way.

>> I want to address that. Is it that the

big firms, the bigger banks were risk

averse and didn't want to take advantage

of it where they were prohibited on a

regulatory basis or when they're just

doing their macro risk assessment? Hey,

we'll go this far, but no further.

>> I I think it's even simpler than that.

Um, we look at the world through our

lens. We look at the world through the

Maric lens of money, capital, credit,

liquidity, and regulation,

which drives economies, markets, and

prices.

That helps us understand the drivers of

the capital markets that we sit within.

helps us understand monetary policy,

housing finance, commercial real estate

finance. Understand both the gearing of

it. Then you can look at something and

you can say, "Okay, I'm looking at

Croup. I could buy it. I could sell it.

I could understand what they're doing in

the markets. They have a footprint in

what that means for the markets. Do I

want to buy that?" So like where are the

flywheels? What does it spin to next? So

everything we were doing was very much

about

what do we want to do? because we see a

very large addressable opportunity where

we have a unique perspective, a defined

lens and a way of applying that to these

big liquid markets that we think very

strongly we can take advantage of in a

way that people simply haven't had the

opportunity to learn about and to

understand and apply to these products

with the type of flexible mandate that

we have. Which boiled down means we look

at the world a little differently.

These are big addressable markets which

have dislocations, volatility, and

opportunity all the time. And we can use

that combination to achieve what's a

very very simple goal. Improve the

return a little bit while reducing the

risk a little bit.

>> That's all anyone can ask for. Better

returns at lower risk. Um I'm I'm kind

of fascinated by the overall Merrick

investment philosophy we'll get to, but

let's let's start a little bit with

structure. I think of you guys as an alt

credit shop, but you also look a little

bit like a multistrat shop. Like a is it

kind of a hybrid? Like tell us about the

structure.

>> Um we just define what we do. Okay. We

are who we are. We do it the way that we

do.

>> Um

we run we're right now we're running a

hedge fund um which trades these

products as Oh yes. has tools in the

toolbox as as widgets. We do it in one

collaborative portfolio. So, our setup,

our structure, we've got an amazing

team. Um, we have specialists in rates,

in mortgages, in non- agency mortgages

and ABS, in credit, in CLOS's. Um, I am

on the phone every day with traders and

salespeople myself. Um, we trade it as

one book,

>> one portfolio. So, it's really a

multistrat within a single um

expression. It is what we think is the

best expression of the trade

>> or I shouldn't call it multistrat. It's

really multi-asset. It's a variety of

different credit assets all under one

umbrella

>> within our lane. Okay. Sticking to our

knitting what we believe we know very

well. Um what we know we have a

differentiated insight into

>> and extracting from that. Okay. The team

is phenomenal. Um they have a ton of

buyside and sellside experience. They

work very well together. Um it's very

exciting to be I mean and and

additionally

doing this together like Derek and I

doing this together putting our name on

the door like Marrick is Matt and Derek,

>> right?

>> Um because we spent way too much time

trying to think of what's a clever name.

>> They've all been taken. Good luck in New

York. means, you know, alpha extraction

in Sanskrit or some something, you know,

and um Derek's wife one day was like,

"Enough. It's Merrick, Matt and Derek,

now go do some real work." And I think

she said in a little bit more of a spicy

way. Um but we were like, "Yeah, that

could work. All right, let's do that."

I think just a little footnote, if

you've ever incorporated an LLC or any

other entity in New York State, every

Greek and Roman god, every Babylonian

god, every cereabus, name the creature

from mythology, it's either a fund or an

LLC, they're all they're all taken. It's

astonishing.

>> But the real point I I I wanted to make

also um that I don't want to lose is

this is putting our name on the door.

Okay? It's our name. It's our reputation

because and that really cemented it for

us. That was something we really wanted.

I took some time off and which was

fantastic and I met some of the most

amazing and interesting people in the

world. When you're unaffiliated, people

speak to you in a different way because

they have no one to talk to. Okay. I sat

down with the CEO of one of the world's

largest pension fund uh sovereign wealth

funds and we had and I'd never met the

person before. We had an hourlong

conversation

because

he just needed to talk to someone and I

learned a lot in that and I met some of

the most interesting people in venture

cap in um alts in private equity etc.

And it was just more way of learning

parts of the system but it got to the

point where after my you know academic

wander through the wilderness I was like

okay you know what um at the time we had

three teenagers living at home and it

was an amazing time. I used to always

say you should be able to retire in your

40s and go back to work in your 50s.

Like that's the way business should

work. Um obviously that's a luxury that

very few have. But um

I was getting to the point where I was

like, "Okay, I feel great. I want to do

this. I miss markets. I love this. I

want to get back to it and I want to do

it in the way that I want to do it."

>> How long of a gap was that between

>> I took like about a year off. You know,

it's a you know it's a riot. So in our

deck, we put a little timeline of my

experience and Derek's experience and

just to help people understand who

hadn't met us, who we are.

>> Uhhuh.

>> And at the very end, I put, you know,

this my background simple. I was here

for 10 years. I was there for 16 years.

And then we put like a little one-year

nugget on the end of the timeline that

just said chilling with no G. No G. Just

C H I L L I N.

>> Right.

>> I don't remember.

very unw wall street sort of

>> thing. It was like our 900th version of

the deck and we were just getting a

little punchy and we're like it made us

laugh. Okay, you got to have a sense of

humor. It made us laugh. So we're like

this is going in.

>> Every investor brings it up. They bring

it up and they love it. And you know

what to us it's like wow you are reading

every part of the deck and also it's

nice to know you have a sense of humor.

But getting back getting back to it was

like

>> people this is always shocking people

read the foot.

>> Oh yeah that's been a big learning for

us. They read it. Um so when we were

doing all this you know my wife was like

yeah why would you want to do something

for anybody else?

>> And I thought to myself exactly what are

we going to work harder at? What are we

going to make sure succeeds? It's the

thing that we put our name on the door,

our reputation that we believe

other people don't get it that we

believe is the right way to approach

these markets that we believe can

extract from a setup is which is one of

the best that we've ever seen. So if you

tick all those boxes,

why would you do it for anybody else?

>> Huh. Really, really intriguing. So it's

2026. I'm legally obligated to ask how

do you use artificial intelligence in

research portfolio construction or

operations at Meritt Capital?

>> Sure. I would I was make two two points.

I'm an AI optimist. That's not one of my

two points. That doesn't count.

>> Um we use it every day. We build stuff

more quickly. We build our own tools and

we build them more quickly than we ever

could before. You know, the guys on the

team, they're building stuff at their

desk in a week that would have taken a

year to do somewhere else, literally.

And I know because I've been in that.

And then once you built it, it would

have taken like six months to get

approval to release it into your s etc.

This is like light speed versus what we

used to do. Now

changing a little bit of how you frame

that question. Um AI is a really really

interesting um thing in financial

markets as well. Okay. So I don't think

we're there yet, but we're going to get

to a place where people are using it for

risk management. They're using it for

compliance. They're using it for KYC.

Put all that aside. The most interesting

to me right now is we look at the AI

capex boom.

>> Mhm.

>> And we say here's a product that is

commercial real estate with securization

technology around it. You're talking

about where is it? Is it built? If not,

how long is it going to take to build

it? Who are the tenants? How long are

the leases? What are they paying? What's

it worth when it's all done? Is there

residual risk like you have in an auto

lease?

only some of it comes to the securitized

market because it's just not that that

market is not big enough for it. So it

comes to the corporate bond market. So

that to us is like that's the type of

opportunity that piques our interest

where we say um this is something that

looks like ABC

[snorts] and being wrapped up and put

into a different market that is asking

one two three and those are good

questions but it's really like put it

all together look at all the factors

what are the additional are you getting

more structure are you getting less are

you charging for the risk are you paying

away for it? So the AI capex boom to us

is actually like a source of very cheap

risk for us to look at and each one has

a little bit of different flavor and

we're very opinionated about which ones

we like.

>> Huh. It sounds It sounds really

fascinating. It also sounds like um

anytime there's a novel area, the

opportunity for mispricing seems to

really

>> There's that. There's that. Um we look

at some of those firsttime issuers. We

have like we have some things in the

book. We have something called the

northstar playbook

>> which is what are companies and bonds

that have clear missions and objectives

that they can execute on that are

aligned with us with the instrument that

we have or misaligned or that they're

not able to execute. Um but some of it

it's actually not just about the novel

structures. Let's look at agency

mortgage back securities. Those have

been around for a long time. Okay.

couple weeks ago tweet from the press or

whatever we call a post on truth social

4:26 PM I've instructed my

representatives to buy 200 billion of

agency MBS boom bomb in the agency

mortgage back this is a there are it

billion 12 trillion of these things

outstanding in the agency mortgage

market it's 9 trillion hundreds of

billions of it trade every day and that

was a aftermarket

post tweet um when complexity event. So

then

>> are you out buying into that that rise

to take advantage? Are you are you a

price taker or a price maker? What are

you doing when that that's happening?

>> It's both. We look instantly like what

does this mean? What was our

expectation? Now in that instance we

expected the GSC's who will be the ones

who actually buy it. We expected the

GSC's to be buyer.

I think our view was a little bit at the

high side or out of consensus. Even we

thought this is going to be a support

mechanism for this market over the

course of the year. Fanny and Freddy are

going to buy a lot of this stuff

>> assuming they haven't already started.

>> Well, they had been and that's a great

point. They had been, but buying 200

billion with like an aftermarket tweet

and nobody knew like is it going to be

200 and then another 200? Are you going

to start buy are you going to buy 40

tomorrow? How's this all going to work?

>> Um this exceeded even our expectations

and you saw right away. Um I think we

were positioned for that type of event.

Um we were positioned to take advantage

of some of the policy risk as opposed to

get hit by some of the policy risk. You

could see that um there was a massive

short covering rally right after that.

Um and you could see that that wasn't

necessarily people's expectations and

how they were uh how they were set up

for it.

>> I have I have a mortgage related

question to this but I'm going to save

it to the next segment. Uh coming up we

continue our conversation with Matt

Sherwin, co-founder and chief investment

officer of Marrick Capital, discussing

credit and risk in today's markets. I'm

Barry Rhalt. You're listening to [music]

Masters in Business on Bloomberg Radio.

[music]

I'm Barry Rholz. You're listening to

Masters in Business on Bloomberg Radio.

[music] My extra special guest this week

is Matt Cherwin, co-founder and chief

investment officer of Maric Capital.

Previously, he spent 25 or so years uh

running credit and various types of risk

at JP Morgan Chase and Croup. So, we

were talking earlier about the Trump

tweet uh directing the GSC's to buy $200

billion worth of agency paper. You would

have thought that should have sent

yields plummeting and mortgage rates

down, which would stimulate the housing

market. I assume part of the motivation

for that tweet and for that purchase.

What What's going on in that market? And

why does it seem so difficult to drive

rates lower? Right. That's a great

question. And as silly as it sounds,

like 200 billion, it's just not enough.

>> Pocket cash, right? Walking around

money.

>> That's one way.

>> I mean, in a 12 trillion market, 12

trillion, it's not even 1%.

>> Yeah. If you're if you are if you've got

35 trillion in treasuries outstanding

and Yeah. Yeah. Um it's a big number and

it moves the needle. But what they they

really want to move it and keep it

there. Like that's a little bit of the

hard part because don't forget that the

Fed owns 2.2 trillion. So they're going

to buy 200 billion.

Didn't give a lot of information and

that sort of helped them in that moment.

The lack of information after probably

led some of it to kind of like bleed out

and unwind a bit. But the Fed owns 2.2

trillion and those are paying off and

that's approximately 180 billion a year.

So then you start to think about like

well if the rate moves and mortgage

prices go up are some of the money

managers just going to sell a hundred

billion over time and do you kind of

neutralize it? So I think it's helpful.

Um it's indicative. Here's the real

takeaway for us. Okay. So at that moment

it's how do we trade this? What's the

price? What's the next step? But then

we're really thinking from there like

what does this mean? What's going to

happen next? um and sort of coming full

circle. What it really does is show you

how hard they're going to try to drive

the mortgage rate down to drive rates

down overall to um sign up for an agenda

and a plan to get rates down. Okay. So,

some of it is what do we do in that

specific market and some of it is how's

it informing our view of the bigger

picture. So, you guys have two

I I I don't want to say conflicting, but

somewhat different

um risk factors you're juggling with.

Obviously, when you buy paper, you're

thinking long term, and we want to watch

this play out to our broader thesis, but

at the same time, you're actively

trading on the short term. uh uh how

much do these complement each other or

do you ever find yourself long in one

duration of the portfolio and short in

another? How do how do you balance this

out?

>> Yeah, I mean we have longs and shorts

across the book within mortgages, within

credit. Um we there we're you know long

what we like and short what we don't to

keep it super simple. um or long what

helps uh contribute to our thesis or

protect and vice versa and you know

protect the convexity profile that we're

looking to achieve. Um we are we trade

every day. We are active in these

markets. It's part of more of a sort of

a medium-term um thought process how

they're going to play out. But every day

is iterating on that. Is this still what

we think? Are we positioned with the

best version of it? Do we have the bonds

that are going to contribute to what we

are trying to achieve? Like right now,

we're very focused on the flywheels that

exist within financing markets. And if

you think about what does that mean?

Okay, so rates come lower. We talk rates

go lower. We talked about that a little

bit. But credit spreads are also really

tightening. And when rates are lower and

credit spreads are tighter, tighter,

your cost of borrowing has gone down

means you can refinance all sorts of

assets. It means some assets are even at

that point in time worth more valued

highly. Now that it's worth more, you've

got a lower LTV loan that you could take

out an even tighter credit spread on.

And how did these spin and what is this?

So this is very much what we're thinking

about now. I think the market completely

underestimates the power of those

flywheels and what it can be achieved.

So we that is one of we look at our

portfolio and say we want to have about

20 trades in it. And a trade is not one

line item. A trade could be 30 line

items. But

>> the flywheel is a trade. It's a little

bit of a maybe even a bigger higher

order one. But

>> we look at what is happening at that

moment. Is there something to take

advantage of? But also

what are the ripple effects of what's

happening in that moment? And what does

the market need to do? what is it going

to do? Does it understand this? And then

we unpack it and say like where's where

where's the opportunity? So coming back

to what we talked about, we believe when

you look at the world through this lens,

>> we look at markets through the Maric

lens

that the lack of connections made

through these markets and the lack of

extracting from some pretty obvious

pockets are an opportunity an like we

talked about to improve your return and

reduce your risk. And it's a process. So

it's just as much a process in a machine

through which you're extracting alpha

from from the market. We have our views.

We hope to be right. It's also it's a

process through which you work through

these markets that you extract all the

time. And the mandate is pretty clear.

Like as I think of it, the mandate is

very clear. You need to make money when

markets go up and you need to make money

when markets go down.

Every day, every month, every quarter,

every year. then you probably won't, but

that's the mandate that you're going

for. And it's it's quite simple when you

frame it out that way.

>> You mentioned in 2019 there was a sea

change in how you perceived what was

happening in the market and how

different that had become. How does that

affect how you look at and define risk?

It it risk definitions have obviously

changed over your career, but 2019 was

such a sea change. What's different

about managing risk today? Yeah, I think

I believe managing risk at scale is a

skill.

Okay,

you have your numbers and you want to

know what those are and those are

indicators and those are starting

places. VAR is a number and a starting

place and an indicator. Stress is a

number. DV1, CSO1, these are we I like

to look at the world in a stressbased

framework and we create a bunch of

different stresses. Some are quite

simple. Um, rates go up, rates go down,

credit crunch, a flight to quality. Some

we had our little like, you know, we're

getting a little punched. We have one we

call QE for Eva and Eva.

>> Um, and looking at these, it's really

about like it's a starting place for a

conversation, okay? Because you do need

to know where it's coming from and

what's the attribution. What's the

return attribution? Where's it where you

hoping it comes from? And what's the

risk attribution? And very importantly,

what could go wrong? um understanding

that what you're trying to achieve, but

knowing where the exits are. Like I

think it's really like a philosophy to

to risk and to managing risk to make

sure you're pointed to achieve your

goals

um while managing your risk properly and

knowing what you would do if things

changed. Right? You have a plan and then

things change.

>> H really really interesting. What when

you're looking out at a variety of

different opportunities, what do you

think today presents the best risk

opportunity? You're looking at

structured credit, corporates, relative

value. What what what is really drawing

your attention?

>> Yeah, we really thought that one of the

places to extract from the flywheel is

in securitized markets.

>> Um actually, as an example, like we've

been very focused on um Trophy Quality

Office and Gateway Cities, and this goes

back a little ways. These are the super

a resident um commercial real office,

>> right? So that all came to be from us

pulling at the thread of how the

financial system works. We talked a

little bit about the new gibs and what

you had was everybody was going back to

work, back to the office, but took

longer than we kind looking back on it.

That took a long time. The part of the

financial system that was changing were

those new GIBs, Apollo, Aries, KKR,

Blackstone, Black Rockck, and they were

coming back to office and they were

growing and they were finding that two

things. one, they needed nice offices to

kind of, you know, get everybody where

they want them to be, but also they were

growing and they outgrew what they had.

And then they went looking for more. And

what they found was there's actually not

that much trophy real estate out there.

And so like our view on the evolving

financial system led us to have very

strong conviction about a supply demand

imbalance in commercial real estate when

applied correctly. And then we just

looked for what's the best place and

it's tightened a lot but actually we

think it continues to and has been

because it's like the it's continued to

be one to two steps behind the

fundamentals. So what that really means

the way we think of to wrap it up in a

nutshell this is a triple B bond that we

think is a double A

>> h really really cuz everybody's painting

with a broad brush of hey forget B's

even A buildings are 60% occupied in

terms of

>> but they're not they're 100% occupied

with

>> I mean in terms of staff returning to

office so it's fully leased but the uh

what is it castle key cards are running

60% of prepandemic levels in a lot of

cities but the A+ the bigger shops, the

JP Morgans, they want everybody back in

the office, as does Goldman Sachs, as

does a lot of these places. And they're

all in trophy properties.

>> And it's not just New York, it's uh

Miami, it's actually San Fran has come a

long way. There are certain buildings

there that we like. We actually, I would

say, a little bit out of consensus. We

like DC, certain part, not the

government buildings, but um nice

offices. Like we said, this is an

administration that's in the business of

being in business, which means you got

to go see them and make your case. You

want to get some business done, which

means you need lawyers with a nice

conference room that need a decent

office and etc., etc. I mean, like, it

sounds a little glib, but it's true.

>> It's the cost of doing business.

>> It's true. And so, you can see there are

certain companies that are buying

buildings, knocking them down in DC, and

building brand new ones. And there are

buildings that are being taken offline

to convert to resi. By the way,

everything we wrapped up in what we

said, the conversion from office resi is

actually spinning faster now. In DC,

some buildings are being con and just

outside DC, some buildings are being

converted to data centers.

>> So, actually like stocks being removed

all the time. Anyways, it's just an

example of how like we're pulling on

threads and we're finding where we can

best take advantage of it and like what

are the next couple steps and ultimately

we're looking for what's something

that's already gotten better except the

price hasn't changed yet.

>> Huh. That that's really that's really

interesting. You you've mentioned stress

scenarios a couple of times. Um we know

that correlations have a tendency to go

to one and liquidity disappears. Well, I

think I've seen that personally, right?

Liquidity disappears. Um,

>> I think I would just wrap that up. We I

make two comments to people. I say like

one, you don't go out of business

because your assets. You go out of

business because your liabilities.

>> Uhhuh.

>> And when you start looking at that side

of the balance sheet first, then you

understand things a little bit better.

And then also, you know, with with my

traders and all the people I work for,

it's really great because some of the

people I hired a long time ago, they're

MDs at places now. It's I actually take

a lot of pride in the people I've worked

with who have gone on and done fantastic

things. I really really hate the phrase

money good. Okay, I don't think anybody

should be allowed to say it.

>> Um it is this like false crutch. I also

in many many conversations have said to

people I think you're right. In fact,

you've convinced me. I believe you are

right. I'm just letting you know you're

going to get fired long before we know

the answer to this question. Okay, let's

take everything we thought, everything

we've known, and let's put it into the

context of how do we apply this in

markets? What's going to happen? What's

everybody else doing? And how do we take

advantage of that?

>> Huh. Really, really fascinating. Last

question before I get to my favorite

questions. What do you think investors

>> I thought those were your favorite

questions.

>> Oh, no. You'll you'll you'll see the

favorite questions. Um, what do you

think investors in the credit and alt

space are not talking about but perhaps

should be? What topics, assets,

geographies, data points are getting

overlooked, but really shouldn't.

>> Yeah. So, it's a great question. Um, we

touched on a little bit. They're

underestimating the power of this

flywheel. Like with with the background

I've had and we've talked about and I've

seen a lot of things blow up. Like we

could come up with a lot of examples of

things that could go wrong. I think

they're underestimating

the things that could go right or what

the power of financing and um the

mechanics around financing and the

provision of liquidity and credit credit

spreads when they're good and when

they're tight and when the machine is

flowing what that financial engineering

can really do to both un recover value

and create value. I think they're

underestimating that really. The other

quick thing is

>> in the middle of the year

if Kevin Worsh ends up sitting in that

seat and if we get a little bit of the

the setup that he's looking for,

he's going to change everything, right?

So he believes we're going to have a big

productivity dividend from AI and we're

going to have a big productivity

dividend from deregulation. And that

that would allow you to have lower rates

and a smaller Fed balance sheet at the

same time.

And if he gets a little bit of what he

needs to craft that argument,

we're gonna have a very different second

half of 26 than the first half.

>> Really, really interesting. All right,

let's jump to our favorite questions,

our speed round. We'll get you guys out

of here at a reasonable time. Uh,

starting with who are your mentors who

helped shape your career?

>> Oh, I've worked for some pretty amazing

people. Um, and I tried to learn from

everyone. I just had the the bosses that

I've had are, you know, legends in this

industry, whether it's Bruce Richards,

TM Plo,

Jimmy Demar, Matt Z, Daniel Pinto. I

mean, these are got these are people who

defined these markets. Um, and they all

had a huge impact on my career.

>> Really interesting. Let's talk about

books. What are you reading now? What

are some of your favorites?

Oh, you know, but like I am in front of

a computer screen and reading so much

and I read so much analytics, research,

etc. When I get home, it's a little bit

more like hang out with my wife and kids

and a little TV.

>> Uhhuh.

>> Um,

>> well, that's my next question. What are

you listening to or streaming?

>> Give us your favorite next Netflix,

Amazon Prime, whatever.

>> I will watch pretty much anything.

Taylor Sheridan, you know, like

>> we just finished season two of Land Man.

It's so good. like Land Man, all the

Yellowstones, everyone. 198, 1823, 1920,

all of those. Lionist, uh, any of those.

>> Lionus was also great. There should be a

new season of that coming out one of

these days.

>> Uh, yeah, there is. I mean, I think I've

watched both seasons like a hundred

times.

>> Final two questions. What sort of advice

would you give to a college grad

interest in a career in investing,

credit, trading, what have you? I just

think it's not, you know, it doesn't

have to be a commitment for life. Just

look at it as what's something I'm

interested in being interested in. I

think you can pick the kind of people

you work with and you want to be around

good people who will teach you, who will

support what you're doing and just say,

I'm going to give this a spin for 3 to 5

years and if I like it, I love it. Um

maybe I'll sign up for another five. Um

but you know, you have an opportunity to

try something out and see if it's for

you. And our final question, what do you

know about the world of trading credit,

investing in alternative sources of of

liquidity and other products that would

have been helpful 25 or so years ago

when you were just getting your legs

onto you?

>> I wish I knew a fraction

of what we are applying at MARIC any

point before we did this. If I knew a

drop of what we're doing when I sat in

other seats. Yeah, I'll put that all in

the I wish I knew bucket.

>> Really, really absolutely fascinating.

Matt, thank you for being so generous

with your time. We have been speaking

with Matt Sherwin. He's co-founder and

chief investment officer of Mara [music]

Capital. If you enjoy this conversation,

well, be sure and check out any of

[music] the previous 600 or so we've

done over the past 12 years. You can

find those at iTunes, Spotify, [music]

um, Bloomberg, YouTube, wherever you get

your favorite podcasts. I would be

remiss if I didn't thank the Crack team

that helps us put these conversations

[music]

together each week. Alexis Noriega is my

video producer. Sean Russo [music] is my

researcher. Anna Luke is my podcast

producer. I'm Barry Rutultz. You've been

listening to Masters in Business on

Bloomberg Radio.