George Hicks, one of three former Cargill financial executives who launched Värde Partners in 1993, next year will be the last to phase out of managing the Minneapolis-based investment firm.
A lawyer by training, Hicks is the antithesis of the go-go stereotype of a hedge-fund jockey. He is thoughtful, methodical and careful with his words.
"We're a registered investment adviser and our funds are private," said Hicks, 67. "Our goal is to top equity-like returns of 8 percent to 9 percent with good downside protection. A bad deal is break-even. We fall into clients' alternative-investment bucket, along with private equity and venture capital.''
Värde invests in the distressed debt of solid companies that are buffeted by recession, restructuring or other events. It raised $2.6 billion globally this year to do just that as a result of the recession.
Hicks and two co-founders, including Marcia Page, who is executive chairwoman of Värde's board, were successful at Cargill's financial unit. They wanted to spread their wings and own the results.
"Värde is doing well," Hicks said. "Our growth speaks to our performance. Over time, we've transformed from three partners at the water cooler to a proper firm with investment and other committees."
Värde, which gets its name from the Swedish word for value, has expanded beyond beaten-down debt to equity investments and operations in financial services and real estate.
Värde has invested $75 billion around the globe and manages $14 billion in assets. It has been in Europe and Asia for years. The Minneapolis-based firm boasts 320 employees, 16 partner-owners and 11 offices, including New York, London and Singapore.
The firm grew slowly in the early years. It now boasts about 500 clients. They are a private and public fund that typically keep a small portion of portfolios in alternative investments, including the Minnesota State Board of Investment and other public institutions, family offices and university endowments.
"We caught the growth of alternatives as pensions and endowments started developing alternative allocations," Hicks said. "In 1993, we were a distressed debt hedge fund. Now, I'd say we're a global-alternatives firm with a focus on credit. We've always tried to build credibility by doing what we do well."
Värde is a big step down in size and notoriety from behemoths such as KKR, Carlyle Group and Apollo.
"We just wanted to do a good job and be a good place to work," Hicks said. "Five or six years ago we decided to continue to grow and not turn it into a family office. That happens to some private funds. The older partners and new partners decided Värde is a great business and to keep it going."
Hicks, the son of a Pipestone, Minn., car dealer, will be succeeded as CEO in 2022 by Ilfryn Carstairs, a veteran of the firm's London and Singapore offices. Carstairs was named co-CEO with Hicks this year. Hicks will remain a board member in retirement along with Page, who retired five years ago.
Hicks plans to increase his focus on philanthropy. Meanwhile, he will be busy in 2021.
Värde just closed on the $1.6 billion "Värde Dislocation Fund" on top of $1 billion raised for the same purpose earlier this year through a private bank.
The Värde portfolio managers are buying into "historic market dislocations and economic disruption resulting from the COVID-19 pandemic" that has resulted in a lot of distressed, discounted debt in the transportation, hospitality and travel and other industries.
"The unparalleled speed and disruption to society and markets has caused fundamental damage to the global economy," said Carstairs, who also is chief investment officer. "Our platform is well-suited to the opportunity … to pivot to markets and geographies where we see the best relative value."
For example, Värde has invested in senior bonds of select U.S. carriers that Värde believes can sustain reduced traffic well into 2021. Värde foresees increased value as the pandemic declines.
"We believe the profound impact of COVID-19 has marked the start of a major, connected cycle," Hicks said. "We bring to bear our experience investing through many credit cycles to guide us as the crisis unfolds."
One Värde winner was debt-saddled Crest Nicholson, a private British homebuilder.
During the 2008-09 recession and the slow-growth period afterward, Värde invested in its bonds, exchanged for equity and profited mightily when it worked with the company to go public in 2014, according to British press accounts.
Hicks declined to discuss specifics on that and other investments.
"You remember your mistakes more than your winners," he quipped.