Howard Marks
1946- · Oaktree Capital · The one who writes it down.
Distressed credit
19-23% a year○
decades · gross, fund-level
Overview
Co-founded Oaktree Capital in 1995 and built it into one of the largest distressed-debt investors in the world. His client memos are read far outside his own industry, and have made him the closest thing the business has to a resident philosopher.
The open question
Which raises the open question: is "you can't predict, you can prepare" falsifiable? A memo counselling caution is unlosable — if the market falls it was prescient, if it rises it was prudent. The honest test is where he committed capital rather than prose, and he did: in the fourth quarter of 2008 Oaktree spent around $400m a week buying distressed debt into the panic. The philosophy is only worth as much as that record, and the record is the part discussed least.
“You can't predict. You can prepare.”
Howard Marks
Background
Queens, then Wharton, then a Chicago MBA. He joined Citibank as an equity research analyst in the era when that meant covering the Nifty Fifty — an experience he describes as watching the best companies in America become terrible investments at the wrong price.
In 1978 he was asked to run a high-yield bond portfolio, essentially because nobody else wanted the job. Junk bonds were then unrated, unloved and largely Michael Milken's market. It turned out to be the founding accident of his career: he had been handed an asset class with no competition and no accepted way to value it. He moved to TCW in 1985, and in 1995 left with five colleagues to found Oaktree.
Style, and how it evolved
He does not invest in equities. The whole record is credit — high yield, distressed debt, and the securities of companies in or near bankruptcy — which is a different game with a different shape: the upside is contractually capped, so everything depends on not losing.
Risk is the permanent loss of capital, not the wobbliness of a price. This is the idea he is most associated with and it follows directly from the asset class.
Second-level thinking. A view only counts for anything if it differs from the consensus and turns out to be right. Agreeing loudly with everyone is not analysis, however well argued.
Where are we in the cycle? Not a forecast — a reading of temperature. He argues you cannot know what happens next but you can know whether risk is currently being rewarded or given away, and position accordingly.
The evolution is from a research analyst covering an asset class nobody rated, to a firm built to raise money before it is needed. That last part is the operational core of "prepare", and it is why Oaktree could deploy in 2008 while others were selling: the fund had been raised in advance, deliberately, while everything was still calm.
He also began writing memos in 1990 and, by his own account, received no response of any kind for about ten years.
Performance
paid offa decisiona losswalked awaythe lifeshaded columns are the crashes — hover any mark
Oaktree's distressed funds are reported at roughly 19-23% a year gross over decades, but these are fund-level figures rather than an audited public record, and they are gross. ○ The firm's assets reached around $100bn before Brookfield bought a majority stake in 2019 ✓. The verifiable achievement is institutional rather than a return series.
| Year | ||
|---|---|---|
| 1978 | Handed high yield at Citibank because nobody wanted it | ✓ |
| 1990 | Writes the first memo. No reply for about a decade | ✓ |
| 1995 | Founds Oaktree with five colleagues | ✓ |
| Jan 2000 | bubble.com, weeks before the Nasdaq peak | ✓ |
| 2007 | Raises the largest distressed fund ever, before it is needed | ✓ |
| Q4 2008 | Deploys about $400m a week into the panic | ✓ |
| 2019 | Brookfield acquires about 62% of Oaktree | ✓ |
✓ documented · ○ fund-level or gross figures, not an audited public record
Case studies
January 2000 — bubble.com. The memo that made his name, published a few weeks before the Nasdaq top. Read now, it is notable for what it does not do: it names no date and makes no forecast. It works through what the prices imply must happen and observes that those things cannot all be true. The mechanism: pricing the assumption rather than predicting the outcome. ✓
2007-2009 — raising before the fire. Oaktree raised what was then the largest distressed fund ever assembled, about $11bn, in 2007, when nothing was distressed and the money looked idle and expensive. Fourteen months later it was buying at roughly $400m a week while most competitors were meeting redemptions. This is the trade that gives the philosophy teeth: preparation is a funding decision taken years early, not a state of mind. ✓
March 2020 — and being wrong out loud. He wrote through the Covid crash in near real time, turned more constructive, and then said plainly afterwards that he had been too cautious and that the scale of central-bank intervention was something his framework did not price. Publishing that is worth more than the calls that went well. ✓
The other side of the record
A record this good is where scepticism is most worth spending, so:
The memos are a marketing asset, and cannot be read as disinterested. A firm whose founder is the most quoted philosopher in credit raises capital more easily and more cheaply than one whose founder is not. That does not make the writing insincere. It does mean the incentive runs one way.
Much of the philosophy is unfalsifiable. "Be cautious", "the cycle will turn", "we cannot predict" — these are always available and never wrong. Stripped of the dated, sized, capital-committing decisions, the doctrine is unlosable, which is the same thing as being untestable.
The edge was structural before it was intellectual. High yield in 1978 and distressed debt in the 1990s were markets with almost no competent competition. Both are now crowded with well-capitalised specialists, and the returns have compressed accordingly.
The numbers are hard to check. Fund-level, gross, private, and reported by the firm. That is normal for the industry and it is still a weaker evidentiary base than a public fund's audited record.
The ideas are curated more than original, which he would be the first to say. The framework leans on others — the line about more things happening than will happen is Elroy Dimson's, and Marks credits him every time. What he supplies is compression and consistency rather than novelty.
Key lessons
- Risk is the permanent loss of capital, not volatility. The distinction sounds academic and decides almost everything downstream of it.
- Second-level thinking, or nothing. A correct view already held by everyone is already in the price.
- You can't predict. You can prepare — and preparing costs money. It means holding capital that looks idle for years, which is unbearable in exactly the periods when it matters.
- Know the temperature, not the forecast. Whether risk is being rewarded is knowable; what happens next is not.
- Being early is indistinguishable from being wrong, and the difference is only visible afterwards, to people who survived.
Reading and links
- The Oaktree memos, 1990 onwards — free, and the primary source. Start with bubble.com (2000) and The Limits to Negativism (2008).
- The Most Important Thing — 2011. The memos, organised.
- Mastering the Market Cycle — 2018.
Marked ✓ where the figure is documented and ○ where it is fund-level or gross rather than an audited public record. This is a profile of an investor, not a view on any security.
Primary sources
Go to the thing itself. These are the subject’s own publications or an institution’s own site. No bookseller links, and no referral arrangements — a reading list that earns per click is not a reading list.
- The Oaktree memos, 1990 onwardsFree, complete, and the primary source. Start with bubble.com, January 2000.
Profiles of investors, not views on any security, and not personal advice. Figures are marked ✓ where they are documented and ○ where they rest on secondary or private accounts — investing biography is heavily mythologised and the well-known numbers drift with each retelling. Capital is at risk.
Corrections and right of reply. Where a criticism is made of a named person it is stated as a specific measure over a stated period, attributed to its source, and separated from opinion. Assessments are opinion, honestly held, on facts believed accurate at the date shown. If anyone profiled here — or anyone acting for them — believes a fact is wrong, it will be corrected promptly and visibly, and a reply will be published alongside it on request.