Below is an interview with Oaktree Capital's Howard Marks, by Randy Diamond of Pensions and Investments. The article originally appeared on page 36 of the October 29, 2012 print issue.
Howard Marks has earned a reputation among peers and clients as am extremely savvy investor and for good reason: His firm, Oaktree Capital Management (OAK, Financial) LP (OAK), has been in business for almost two decades now and has developed a record of strong investment performance.
It all started in 1995 when Mr. Marks and five partners left investment firm TCW Group Inc. in a dispute to found Oaktree, a firm that forged a reputation as specialists in the distressed-debt and high-yield bond markets. Los-Angeles-based Oaktree today has more than 650 employees and is the one of the largest distressed-debt investors. It raised almost $11 billion back in 2008 for the largest distressed-debt fund in the world, according to data provider Preqin. Oaktree's 17 funds in that category have averaged annual gains of 17.5% for the 23-year period ended June 30, net of fees. Mr. Marks is also known for his investment memos, many of which were compiled in a May 2011 book: “The Most Important Thing: Uncommon Sense for the Thoughtful Investor.”
Oaktree went public on April 12 of this year and is now listed on the New York Stock Exchange.
What is your secret sauce? No. 1, it's possible, especially in inefficient markets, to gain a knowledge advantage. By definition, an inefficient market is one where hard work and skill can pay off. We can also control our psyche and emotions so that we don't make the human mistakes that are so common. Of course the other thing is we have a philosophy of controlling risk. So that doesn't necessarily make us the winner rather than the loser in the transaction, but it increases the probability that we engage in transactions of the sort that we and our clients want.
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Howard Marks has earned a reputation among peers and clients as am extremely savvy investor and for good reason: His firm, Oaktree Capital Management (OAK, Financial) LP (OAK), has been in business for almost two decades now and has developed a record of strong investment performance.
It all started in 1995 when Mr. Marks and five partners left investment firm TCW Group Inc. in a dispute to found Oaktree, a firm that forged a reputation as specialists in the distressed-debt and high-yield bond markets. Los-Angeles-based Oaktree today has more than 650 employees and is the one of the largest distressed-debt investors. It raised almost $11 billion back in 2008 for the largest distressed-debt fund in the world, according to data provider Preqin. Oaktree's 17 funds in that category have averaged annual gains of 17.5% for the 23-year period ended June 30, net of fees. Mr. Marks is also known for his investment memos, many of which were compiled in a May 2011 book: “The Most Important Thing: Uncommon Sense for the Thoughtful Investor.”
Oaktree went public on April 12 of this year and is now listed on the New York Stock Exchange.
What is your secret sauce? No. 1, it's possible, especially in inefficient markets, to gain a knowledge advantage. By definition, an inefficient market is one where hard work and skill can pay off. We can also control our psyche and emotions so that we don't make the human mistakes that are so common. Of course the other thing is we have a philosophy of controlling risk. So that doesn't necessarily make us the winner rather than the loser in the transaction, but it increases the probability that we engage in transactions of the sort that we and our clients want.
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