This week on our Masters in Business radio podcast, we speak with Howard Marks of Oaktree Capital. He is also the author of the highly regarded The Most Important Thing. We last had him in the studio July 2015, and we were overdue for a revisit. (You can hear that earlier interview here).
Marks formed Oaktree Capital with his partners in 1995, running high-yield bonds, distressed debt, private equity, and other credit based strategies. Oaktree now manages 22 separate debt funds, totaling over $100 billion dollars in AUM. Their returns have averaged over 19% per year after fees over the past 22 years. That’s is by any measure an amazing track record.
Marks had the foresight to set up an $11 billion dollar distressed fund raising capital from March 2007-08. By June 2008 Oaktree had only deployed 12% of it; following the collapse of Lehman Brothers on September 15th 2008, they began putting half a billion dollars per week to work in the credit marks. They finished the year about 70% invested, deploying 6.5 billion dollars by years end:
“All you had to do to make money in the crisis – was have money to spend and the nerve to spend to it. You didn’t need caution, conservatism, risk control, patience selectivity, discipline, any of those things. All you needed was money & nerve. But not all the time, because sometime money and nerve will get you killed. One of the keys to investing is to know which is which.”
Marks is perhaps best known for his Chairman’s Memos that he has been writing since 1990. Marks describes the first decade of printing them, inserting them into envelopes and physically mailing them off into the world. He received precisely zero response. It wasn’t until his January 2000 letter “Bubble.com” that he there seemed to be any evidence people were reading them.
Next week, we speak with Professor Jeffrey Sachs of Columbia University.