NEW YORK (
investor Stephen Feinberg has more than a little regret in regards to the nearly $15 billion his firm - Cerberus Capital -- spent on the auto makers prior to the onset of the financial crisis.
"One thing about investment management is you'll never cease to be amazed at your own ability to be an idiot," Feinberg said at the
Private Equity Analyst Conference in the Waldorf Astoria Hotel Tuesday.
With his head-slapping auto's experience over -- which wasn't all lossmaking after a $6.3 billion sale of Chrysler Financial to
Toronto Dominion Bank
(TD - Get Report)
in 2011 -- Feinberg laid out Cerberus Capital's more credit market focused investment strategy.
Feinberg said that Cerberus will probably stay away from the giant deals it was known for in the past. While Cerberus was able to initiate operational change in past investments, he said "one of the mistakes we made in the '08 period was we bought too many cyclical businesses."
Investments like Chrysler and GMAC both were highly centered around cycles in the extention and contraction of consumer credit and spending, Feinberg explained. Within a span of just months, both companies needed multibillion dollar injections of capital from the U.S. Treasury.
After doing giant leveraged buyouts in 2006 and 2007, Cerberus is becoming more focused on investing in debt tied to housing such as residential mortgage backed securities and European bank loans. It's a market where Feinberg believes Cerberus can use both its technology and loans expertise to find high returning investments. "The credit market today is an exciting opportunity," said Feinberg.
In particular, housing related debt looks attractive to Cerberus because of how hard it is for prospective homeowners with good FICO scores to get a loan. Feinberg said that factors such as credit tightness and interest rate volatility for mortgage loans are causing "tremendous inefficiencies in the system" and are the reason the average new home loan is backed by an estimated 29% down payment and just 71% loan-to-value. He added, "this kind of an environment is tough on your existing positions, but there is also tremendous opportunity" for new ones.