In this article by CFA Magazine, Howard Marks gave an interview on his company's management techniques as well as some of his investment strategies. He also touched upon his beliefs regarding industry regulations. One of the most important factors to running a successful business, according to the Howard Marks interview, is minimizing risks, which he follows for both his business and his investing.
Chairman and co-founder of Oaktree Capital Management, Howard Marks feels he has learned all of his lessons the easy way. When starting his business in 1995, the company had a total of 5 owners. Now that number is up to 160 owners. Oaktree gives some of their employees ownership rights, to give them more direct incentive in protecting the company's money making abilities. The owners are not only the investment analysts, either. Anyone can become a partial owner in Oaktree, including accountants, marketing, and compliance. This helps pull the entire company together to support teamwork.
Teamwork is also important in the management of employees at Oaktree. The payment schedules at Oaktree are based on how well each project makes money, overall. It is not based on individual contributions; rather the contributions of the entire team assigned to any given project. There is no hard and fast formula for pay scales, but the profits of the team, rather than the skill of any one individual, is the major factor used in determining compensation. Along those same lines, a certain amount of the entire profits of the company is set aside for use in bonuses for all employees.
Oaktree is a very successful company in the world of capital management. Marks attributes this to Oaktree's motto of minimizing risks. Many companies will take higher risks with their money, earning higher returns when successful, or even lucky as Marks views it. Marks feels that the best way to earn money for Oaktree is to not take the larger risks and earn a steady return while not risking large amounts of money on potentially larger returns.
Reading the Howard Marks interview in the September/October 2010 issue of CFA Magazine is a great example of thinking out of the box in the investment world. While his tactics may not work for every capital management firm in business, they are definitely worth taking a look at.
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About the author:
Jacob WolinskyMy investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com