Waterfall Asset Management

Waterfall Asset Management, LLC

File:Waterfall Asset Management 2.svg
Company type	Private
Industry	Investment management
Founded	2005 (2005)
Founders	Tom Capasse Jack Ross
Headquarters	1251 Avenue of the Americas, New York City, U.S.
Products	Hedge funds Alternative investments
AUM	Template:US$ (July 2023)
Number of employees	183 (2023)
Website	waterfallam.com

Waterfall Asset Management (commonly referred to as Waterfall) is an alternative investment firm based in the United States, with its main office located in New York City. The firm concentrates on credit structured products, particularly specializing in high-yield asset-backed securities (ABS), alongside engagements in real estate and private equity sectors. Waterfall serves clients worldwide through additional offices situated in London, Dublin, and Hong Kong.

Background

The company was established by Tom Capasse and Jack Ross, who initially worked together at Merrill Lynch during the 1980s and early 1990s, where they created the firm's ABS Group. Ross was instrumental in launching the first auto loan securitization in 1985 while at Drexel Burnham Lambert, whereas Capasse contributed to the development of early subprime mortgage-backed securities at Merrill Lynch. Following separate career paths—Ross founding Licent Capital and Capasse overseeing principal finance at Macquarie Group—the duo reunited in 2004 to form Waterfall Asset Management with backing from boutique firm M.D. Sass. Their initial fund, named the Waterfall Eden Fund, focused on residential mortgages and home equity ABS.

By 2007, as ABS transactions transitioned from private placements to public securitizations, Waterfall leveraged market upheavals triggered by the subprime mortgage crisis. The firm introduced innovative private placement deals that prioritized principal reduction strategies rarely employed by competitors. It targeted ABS securities that had been downgraded from AAA ratings to junk status, capitalizing on distressed asset opportunities.

Broadening its approach beyond conventional hedge fund structures, Waterfall expanded into separately managed accounts and private equity investments, securing mandates from pension funds and retirement plans. In 2012, it collaborated with Coldwell Banker Commercial to establish Coldwell Banker Commercial Alliance, acquiring distressed commercial real estate assets valued under $10 million for resale and leasing purposes.

In 2013, Waterfall launched Ready Capital by converting a private investment vehicle into a publicly traded commercial mortgage REIT listed on the NYSE under the ticker 'RC', concentrating on small- to medium-sized commercial loans. Waterfall continues to serve as Ready Capital’s external manager.

That same year, Dyal Capital purchased a minority interest in Waterfall from M.D. Sass-Macquarie Financial Strategies—a joint venture between M.D. Sass and Macquarie Group specializing in fund investments. In August 2020, Navigator Global Investments arranged to acquire Dyal’s stake in two stages through 2025.

Waterfall further diversified its offerings with significant transactions such as issuing $571.8 million in jumbo reverse mortgage bonds in 2018—the first issuance of this type since the 2008 financial crisis—and acquiring Alternative Credit Investments for £639 million cash in November 2020.

These strategic initiatives have strengthened Waterfall’s position within alternative credit markets and supported its global presence across various asset classes.