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September 22, 2017  

Koch Family Office Readies Buying Program

The Koch brothers are plowing some of their personal fortunes into asset-backed securities.

The investments are expected to start by yearend via 1888 Management, a Koch Industries arm that launched in 2015 to invest on behalf of Charles and David Koch. Word is circulating that the portfolio could start at $100 million and grow from there.

Sources said the investments would consist mainly of senior bonds backed by auto loans, credit-card receivables and personal loans.

While its focus is investing directly in companies, 1888 Management oversees a mix of holdings — including corporate bonds. To that end, the Wichita, Kan., operation apparently views asset-backed bonds as offering a more favorable profile than unsecured bonds issued by some companies.

Indeed, investors have been eyeing securitized products as a safer but still relatively high-yielding alternative to corporate bonds. At the same time, they have taken a dimmer view of unsecured debt amid an increase in many issuing companies’ reliance on leverage. “Face it. Asset-backed deals, especially auto and credit-card deals, are the best safe haven out there right now,” one issuer said.

The investments presumably would be overseen by Josh Buffolino, a senior investment analyst who manages 1888 Management’s fixed-income and real estate holdings. Buffolino has been trading for various Koch businesses since arriving from Fiserv in 2005.

The head of 1888 Management is Denver-based chief investment officer Trent May. He joined Koch in 2011 from Wyoming Retirement, where he engineered a push into hedge funds that included vehicles run by Bridgewater Associates and Moore Capital. Earlier, May ran Deer Creek Capital.

The Koch brothers are worth a combined $95 billion, according to Bloomberg. They have pledged an estimated $2 billion of that amount to 1888 Management.