Invest Like the Best with Patrick O'Shaughnessy Episode: Andrew Milgram - Full-Contact Capitalism - [EP.436] Release Date: August 5, 2025

Introduction

In Episode 436 of Invest Like the Best with Patrick O'Shaughnessy, host Patrick engages in an in-depth conversation with Andrew Milgram, founder of Marblegate Asset Management. The discussion delves into Andrew's unique approach to distressed investing in the middle market, exploring the nuances of a K-shaped economy, strategic investment stories, and the human dynamics of financial distress.

The K-Shaped Economy

Timestamp: 05:03

Andrew introduces the concept of a K-shaped economy, highlighting the divergent performance across different sectors. While some segments flourish, others, particularly in the middle market, experience significant decline.

"Everyone in the US Economy at least has this underlying sense that there are some parts of our economy that are doing exceptionally well. But at the same time they have this internal notion that there are other parts that are just worse than it seems..."
(Andrew Milgram, 05:03)

Key Points:

• The middle market constitutes about one-third of the US economy and over two-thirds of restructurings and bankruptcies.
• Unlike publicly traded companies, middle-market firms lack transparency, making them less understood and harder to analyze.
• Marblegate utilized data from Rapid Ratings to assess the financial health of over 1,200 US middle-market companies, revealing a 20-25% decline in EBITDA since 2019.

Distressed Investing in the Middle Market

Timestamp: 16:45

Andrew defines distressed investing as the provision of capital to companies in tough financial situations, aiming to solve their operational and financial challenges.

"Distressed investing covers a lot of things... it's provisioning capital into difficult situations that are capital constrained."
(Andrew Milgram, 16:49)

Key Points:

• Traditional distressed investing involved buying a company's debt and using legal remedies to drive operational improvements.
• Today, distressed companies often require more extensive restructuring due to wider covenant terms.
• Marblegate focuses on acquiring distressed assets with the belief that they can implement structural and operational fixes to generate high-risk-adjusted returns.

Case Study: NYC Taxi Medallions

Timestamp: 24:40

Andrew shares the legendary story of Marblegate's $600 million investment in New York City taxi medallions, showcasing their hands-on, full-contact approach to distressed investing.

"We walked away with 48 outright medallions. But most importantly, we had created a mark that we then had hand delivered to every lender in the space."
(Andrew Milgram, 28:21)

Key Points:

• Pre-Uber, a single medallion was valued at over $1.2 million, with drivers owing an average of $550,000.
• Uber's entry dramatically reduced medallion values as drivers shifted to the subsidized ride-sharing platform.
• Marblegate conducted extensive research, including Andrew becoming a taxi driver to understand the ecosystem firsthand.
• Through strategic bidding and negotiation, Marblegate acquired 48 medallions at significantly discounted prices, signaling market distress to other lenders and facilitating further acquisitions.
• Marblegate emphasized respectful and constructive engagement with regulators and the Taxi Workers Alliance to ensure sustainable outcomes for drivers and the medallion system.

Navigating Regulatory and Human Dynamics

Timestamp: 32:01

Andrew discusses the complexities of dealing with regulators and the human aspects of distressed investing.

"Regulation, regulation, regulation... People think of banks as economic actors. They're not. They're regulatory actors."
(Andrew Milgram, 38:27)

Key Points:

• Engaging transparently with regulators and political figures was crucial in Marblegate's acquisition of taxi medallions.
• Marblegate established a dedicated servicing team to manage over 4,500 individual medallion assets, addressing borrower issues with empathy and efficiency.
• Building relationships with stakeholders, including taxi drivers and their unions, helped mitigate conflicts and foster cooperation.

Investment Strategies and Lessons

Timestamp: 55:17

Andrew shares key investing lessons from their distressed investing journey.

"Distressed assets... it's a full contact sport. You have to be willing to engage."
(Andrew Milgram, 55:28)

Key Points:

• Active involvement in both financial and operational restructuring is essential to mitigate risks and drive value.
• Understanding the needs and constraints of counterparties, whether they are banks, borrowers, or stakeholders, is fundamental to successful negotiations.
• Transparency, respect, and empathy are critical when dealing with distressed entities and individuals.

Diversification into Tax Credits

Timestamp: 60:07

Marblegate's venture into purchasing Employee Retention Tax Credits (ERTCs) illustrates their adaptability and innovative approach to distressed assets.

"We were buying credits that we felt really, really good about that would be non-controversial and would get paid."
(Andrew Milgram, 65:06)

Key Points:

• ERTCs emerged from the CARES Act as a significant government transfer payment program.
• Marblegate leveraged inefficiencies and bureaucratic delays within the IRS to purchase these credits at a discount, earning returns from the guaranteed interest rates and minimizing risks through stringent underwriting.
• This strategy mirrored their approach with taxi medallions—identifying underpriced distressed assets with potential for reliable returns.

Insights on Private Credit and Private Equity

Timestamp: 80:47

Andrew critiques the current state of private credit markets and private equity, emphasizing the prevalence of superficial investment strategies.

"There's a lot of laziness that's happening. I want to disparage everything that is happening, but I do think that there is an opportunity to be much more actively engaged in that portion of the market."
(Andrew Milgram, 85:34)

Key Points:

• The private credit market has seen excessive allocation to low-quality (B− and below) assets, leading to high default rates.
• Marblegate advocates for active management and critical thinking rather than relying on automated or brokered investment decisions.
• In private equity, Andrew values firms that engage deeply with operational restructurings rather than merely making financial investments and participating passively in board meetings.

Personal Journey and Motivations

Timestamp: 71:15

Andrew reflects on his personal history, shaped by early-life challenges and the loss of his father, which instilled resilience and a drive for problem-solving.

"I love the problem solving of it. I like finding a way through. I like taking things that are undervalued, misunderstood and getting them back into a condition where they can be again, durable, profitable and a successful."
(Andrew Milgram, 71:15)

Key Points:

• The loss of his father at age 11 profoundly impacted Andrew, fostering a sense of agency and determination.
• His family's entrepreneurial spirit and experiences influenced his approach to investing and life.
• Andrew emphasizes the importance of understanding and addressing human elements in business challenges, advocating for compassionate and respectful dealings.

Future Outlook and Closing Thoughts

Timestamp: 77:34

Andrew shares his vision for the future of both Marblegate and the broader asset management industry.

"America, the greatest system that has ever existed... we have to have a system that works for everybody."
(Andrew Milgram, 77:34)

Key Points:

• Andrew critiques the current divide between the "haves" and "have-nots" in the American economy, advocating for a more inclusive and equitable system.
• He foresees significant changes in asset management, with a shift towards partnership models and innovative capital access methods.
• Emphasizes the need for active, thoughtful investment strategies that prioritize long-term value and societal well-being over superficial profits.

Notable Quotes

1. On the K-Shaped Economy:

   "They can't quite put their finger on it because they look at CNBC and Bloomberg and they read the Wall Street Journal and there's green arrows in the ticker tape."
   (Andrew Milgram, 05:03)

2. On Distressed Investing:

   "Distressed assets... it's a full contact sport. You have to be willing to engage."
   (Andrew Milgram, 55:28)

3. On Regulatory Dynamics:

   "Regulation, regulation, regulation. People think of banks as economic actors. They're not. They're regulatory actors."
   (Andrew Milgram, 38:27)

4. On Personal Resilience:

   "Every single investment is both a complicated business problem and a human drama."
   (Andrew Milgram, 68:20)

Conclusion

Andrew Milgram's journey through distressed investing epitomizes a blend of strategic acumen, data-driven decision-making, and deep personal commitment to resolving economic disparities. His work with Marblegate Asset Management demonstrates the profound impact that active, empathetic investment strategies can have on both businesses and individuals. As the economy continues to evolve, Andrew's insights offer valuable lessons on navigating financial distress, fostering resilient markets, and maintaining the human element at the forefront of investment decisions.

For more insights and detailed episodes, visit joincolossus.com.

This summary captures the essence of Andrew Milgram's conversation with Patrick O'Shaughnessy, highlighting key topics, strategic insights, and personal narratives that define full-contact capitalism in distressed investing.