How Howard Marks Built Oaktree Capital: The Art of Distressed Debt Investing
Howard Marks, the co-founder of Oaktree Capital Management, has become a legend in the world of finance. His investment philosophy and approach to distressed debt investing have earned him the respect and admiration of investors and industry professionals alike.
Marks is a graduate of the prestigious Wharton School of Business at the University of Pennsylvania. After working at Citibank, he joined TCW (Trust Company of the West) in 1985, where he began his foray into the world of high-yield debt. In 1995, he co-founded Oaktree Capital Management, which has since become one of the leading investment firms in the world.
In this article, we will examine how Howard Marks built Oaktree Capital, the art of distressed debt investing, and the key factors that have contributed to the success of the firm.
Howard Marks: From Wharton to Wall Street
Howard Marks began his career in finance at Citibank, where he worked in the areas of corporate finance and commercial lending. However, it was his move to TCW in 1985 that set him on his path to becoming one of the most successful investors of our time.
While at TCW, Marks specialized in high-yield debt, which at the time was a relatively new and misunderstood asset class. His expertise in this area allowed him to generate significant returns for his clients, and he quickly gained a reputation as a savvy investor.
The Beginnings of Oaktree Capital
In 1995, Howard Marks and a group of like-minded investors co-founded Oaktree Capital Management. The firm’s initial focus was on distressed debt investing, which involves purchasing the debt of companies that are experiencing financial difficulties.
Oaktree’s early success was due in large part to Marks’ expertise in high-yield debt, which he had honed during his time at TCW. The firm quickly became known for its ability to identify undervalued distressed debt securities and generate significant returns for its investors.
Distressed Debt Investing: An Art Form
Distressed debt investing is often referred to as an art form, as it requires a unique set of skills and expertise to be successful. Howard Marks is widely regarded as one of the masters of this art form, and his investment philosophy and approach to distressed debt investing are highly respected in the industry.
At the heart of Marks’ approach is the belief that the market is not always efficient and that there are opportunities to be found in the mispricing of securities. He looks for undervalued assets that have the potential to generate significant returns, but he also understands the risks involved and focuses on risk management and downside protection.
A Unique Investment Philosophy
Howard Marks’ investment philosophy is based on a few key principles, including a focus on value, a willingness to be contrarian, and a belief in the importance of risk management. He also emphasizes the importance of patience and discipline, and he is known for his long-term approach to investing.
Marks has said, “In investing, what is comfortable is rarely profitable.” He believes that it is important to be willing to take on risk and to be contrarian when others are not, as this is often where the best opportunities can be found.
Crisis as Opportunity: Oaktree’s Strategy
Oaktree’s approach to investing is based on the belief that crisis creates opportunity. During times of economic uncertainty and market volatility, the firm looks for undervalued assets that have the potential to generate significant returns.
This strategy has served Oaktree well over the years, as the firm has been able to capitalize on a number of market dislocations and financial crises. For example, during the financial crisis of 2008-2009, Oaktree was one of the few firms that was able to generate significant returns for its investors.
A Focus on Risk Management
One of the key factors that sets Oaktree apart from other investment firms is its focus on risk management. Howard Marks and his team are acutely aware of the risks involved in distressed debt investing, and they take a highly disciplined approach to managing these risks.
Marks has said, “The most important thing is to protect your downside. Upside will take care of itself.” This focus on risk management has helped Oaktree weather market storms and generate consistent returns for its investors.
Oaktree’s Growth and Success
Since its founding in 1995, Oaktree has grown to become one of the largest and most successful investment firms in the world. The firm manages over $120 billion in assets and has offices in 18 countries around the globe.
Oaktree’s success is due in large part to its unique investment philosophy and approach to distressed debt investing. Howard Marks and his team have been able to identify undervalued assets and generate significant returns for their investors, while also managing risk and protecting their downside.
The Importance of Patience and Discipline
Patience and discipline are two of the key traits that have contributed to Howard Marks’ success as an investor. He believes that it is important to take a long-term approach to investing and to be willing to wait for the right opportunities to come along.
Marks has said, “It’s not about timing the market, it’s about time in the market.” He also emphasizes the importance of discipline and sticking to one’s investment strategy, even when it may be difficult or unpopular.
Howard Marks on Leadership and Teamwork
Howard Marks is known for his leadership skills and his ability to build high-performing teams. He believes that a successful investment firm is one that fosters a culture of teamwork and collaboration.
Marks has said, “If you want to go fast, go alone. If you want to go far, go together.” He understands the importance of having a strong team of professionals who share a common vision and work together to achieve their goals.
The Role of Culture in Oaktree’s Success
The culture at Oaktree is one of the key factors that has contributed to the firm’s success over the years. The firm places a strong emphasis on integrity, professionalism, and a commitment to excellence.
Howard Marks has said, “Culture is the most important thing in a company.” He understands the importance of creating a culture that fosters teamwork, collaboration, and a commitment to doing what is right for clients and investors.
Giving Back: Howard Marks’ Philanthropy
In addition to his success as an investor, Howard Marks is also known for his philanthropic endeavors. He has donated millions of dollars to various causes, including education, healthcare, and the arts.
Marks has said, “I believe that those who have been successful have a responsibility to give back to society.” He understands the importance of using his wealth and influence to make a positive impact on the world.
The Legacy of Howard Marks and Oaktree Capital
Howard Marks and Oaktree Capital Management have left an indelible mark on the world of finance. Their unique investment philosophy and approach to distressed debt investing have earned them a well-deserved reputation as one of the most successful investment firms in the world.
Marks’ legacy will be one of innovation, discipline, and a commitment to excellence. He has shown that it is possible to be successful in finance while also maintaining one’s integrity and making a positive impact on the world.
