Trillions of dollars of problematic commercial real estate will have to be worked out over the next two to three years, creating an “amazing amount of opportunity” for investors, according to Marathon Asset Management chief executive officer Bruce Richards.

“There’s going to be problems because of all these loans that have been amended and extended into this calendar year, and been pushed out to next year, have to work their way through the system,” he said in an interview with Bloomberg Television on Tuesday.

Opportunistic buyers have been positioning to take advantage of the emerging turmoil after borrowing costs rose and office values plummeted. John Brady, global head of real estate at Oaktree Capital Management, wrote in a recent note that investors could be on the precipice “of one of the most significant real estate distressed investment cycles of the last 40 years.”

After being at the center of CRE distress over recent years, anticipated interest-rate cuts will benefit smaller lenders, Richards said, adding that banks have “been through the worst.”

In addition, credit markets and private credit will be a “magnificent investment” but investors might want to lean into longer duration fixed rate paper, he said.

That’s in part because he sees the pace of Federal Reserve rate cuts being a slow one.

“When they start lowering rates, they lower rates once or twice and then pause,” he said. “I think it’ll be a very slow path down.”

If Donald Trump is elected US president, markets will probably react more favorably than for a Joe Biden victory, he said.

Trades will be nuanced, however. Less regulation for oil and gas means “probably a lower commodity price, so what’s the investment you make there, possibly oil services,” he added.

  - Bloomberg