Risk and Reward with Marek Capital Co-Founder Matt Cherwin

Episode Summary

Executive Summary: Matt Sherwin explains why Merrick Capital was founded around a “money, capital, credit, liquidity, regulation” framework, arguing that post-crisis market structure, deregulation, and policy shifts create persistent dislocations in rates, mortgages, securitized products, and credit. He says 2019–20 revealed how the financial system really works, and that AI, policy, and refinancing flywheels could amplify returns while reducing risk.

Main Topics: Merrick Capital’s founding thesis (Priority: 5/5): Sherwin and co-founder Derek Goodman launched Merrick to apply a unified lens across money, capital, credit, liquidity, and regulation to exploit inefficiencies in large liquid markets. 2019–2020 as a market education (Priority: 5/5): Moving from trading to CIO/treasurer roles during the repo episode and pandemic gave Sherwin a system-level view of how financial plumbing, leverage, and liquidity actually function. Post-Glass-Steagall market fragmentation (Priority: 4/5): He argues the financial system has effectively re-segmented into banks, private credit platforms, and trading firms, creating artificial boundaries and exploitable gaps. Policy, deregulation, and rate expectations (Priority: 5/5): Sherwin believes the current administration and potential Fed leadership changes are pushing toward lower rates and reduced regulatory burden, which could drive major market flywheels. Risk management and stress frameworks (Priority: 4/5): He emphasizes stress testing, balance-sheet liability focus, and understanding exits over relying on simplistic metrics like VaR or “money good” language. Securitized credit and commercial real estate opportunities (Priority: 4/5): Merrick sees mispricing in office, agency MBS, and other structured products, especially where fundamentals improve before prices fully reflect it. AI as a productivity and investment catalyst (Priority: 3/5): Sherwin says AI is speeding internal tool-building and creating new underwriting opportunities, especially by tying capex booms to securitized and corporate credit structures.

Key Arguments: Financial markets are best understood through the interaction of money, capital, credit, liquidity, and regulation rather than isolated asset classes. The 2019 repo episode and 2020 pandemic showed Sherwin the “engine room” of the financial system, changing his understanding of leverage and liquidity. Post-crisis regulation and market specialization have created artificial silos that generate pricing gaps and cross-market opportunities. Large liquid markets can be traded with a flexible, multi-asset credit mandate that improves returns and reduces risk. Current policy direction, especially lower-rate pressure and possible deregulation, is creating powerful financing flywheels across housing, credit, and securitized markets. Stress and liability-side analysis matter more than labels or headline metrics because liquidity can vanish quickly in a crisis. AI is not just an operational tool; it is also creating investable mispricings through infrastructure and capex spending that flow into credit markets. Office and CRE are being revalued by real changes in demand from large financial firms and by conversion dynamics, not just broad-brush pessimism.

Data Points: Time at JPMorgan Chase: 16 years - Sherwin’s tenure before founding Merrick Capital. Early Citi/JPMorgan career span: 20-odd years - He described spending roughly two decades trading mortgages, rates, credit, and securitized products before moving to the buy side. Repo market rate during stress: 10% - He cited overnight borrowing against Treasuries reaching 10% during the late-2019 repo crisis. Repo crisis timing: Late 2019 - The shift to CIO/treasurer coincided with the repo episode and shortly preceded the pandemic. Pandemic timing: About six months after late 2019 - Sherwin used the pandemic as the second major shock that clarified how the financial system transmits stress. Firm portfolio target: About 20 trades - He said Merrick aims to run around twenty trades, with each trade potentially containing many line items. Agency MBS purchase announcement: $200 billion - He discussed a Trump-directed plan for the GSEs to buy agency mortgage-backed securities. Agency MBS market size: $12 trillion - He used the size of the agency mortgage market to explain why $200 billion is meaningful but not decisive. Fed MBS holdings: $2.2 trillion - He noted the Fed’s large existing agency MBS portfolio in discussing whether new purchases would matter. Fed MBS runoff: Approximately $180 billion per year - He referenced the pace at which the Fed’s MBS holdings are paying down. Office thesis example: Triple B bond viewed as a double A - He described selected trophy-quality office exposure as structurally underappreciated relative to fundamentals. Career break: About one year - Sherwin took roughly a year off before launching Merrick Capital. Live-event research window: 2024-2026 references - He referenced the firm’s launch in 2024 and later policy/market framing into 2025-2026.

Pivotal Quotes: "I think about it in terms of money, capital, credit, liquidity, and regulation. That's my five: money, capital, credit, liquidity, regulation." — Matt Sherwin: Explaining the analytical framework Merrick uses to understand markets and build portfolios. "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." — Matt Sherwin: Describing how late-2019 and 2020 changed his perception of market plumbing and systemic risk. "We are going to have a new Fed chair in the middle of June, and he'll say all sorts of things in the confirmation hearing, but really it will be a catalyst potentially for change." — Matt Sherwin: Discussing how leadership and policy shifts could alter rates, regulation, and market positioning.

Implications: Listeners should expect greater opportunity in credit and securitized markets where policy, liquidity, and regulation are shifting faster than prices. Merrick’s thesis suggests the next regime may reward flexible, cross-asset analysis over narrow silos.