Howard Marks, a titan of the investment world, has left an indelible mark on finance through his disciplined approach, insightful writings, and remarkable track record. As the co-founder and co-chairman of Oaktree Capital Management, Marks has built a reputation as one of the most astute investors of his generation, particularly in the realm of distressed securities. His journey from a young finance enthusiast to a billionaire investor offers a compelling narrative of intellect, resilience, and unconventional thinking. This article delves into Marks’ life, his investment philosophy, his performance history, his advice for investors, and concludes with some of his most memorable quotes.
Early Life and Education
Born in 1946 in New York City, Howard Stanley Marks grew up in a middle-class family with a keen interest in numbers and logic. His academic aptitude led him to the Wharton School at the University of Pennsylvania, where he earned a Bachelor of Science in Economics with a focus on finance in 1967. At Wharton, Marks honed his analytical skills, laying the groundwork for his future career. He furthered his education at the University of Chicago Booth School of Business, completing an MBA in 1970 with specializations in accounting and marketing. During his time at Chicago, he was awarded the George Hay Brown Marketing Prize, recognizing his potential as a standout student.
Marks’ early exposure to finance was shaped by the intellectual rigor of his education and the dynamic economic environment of the 1960s. These formative years instilled in him a deep respect for critical thinking and a curiosity about markets that would define his professional path.
Career Beginnings and Rise to Prominence
Marks began his career in 1969 at Citibank, where he worked as an equity research analyst. His role involved dissecting company financials and market trends, a task that suited his meticulous nature. Over the next decade, he rose through the ranks, eventually becoming Director of Research at Citicorp. In the early 1970s, he shifted his focus to convertible securities and high-yield bonds, areas that were less understood and often overlooked by mainstream investors. This move marked the beginning of his fascination with undervalued assets.
In 1985, Marks joined TCW Group, a Los Angeles-based asset management firm, where he led the high-yield bond and convertible securities divisions. Alongside colleague Bruce Karsh, he established one of the first distressed debt funds at a major financial institution in 1988. This period was pivotal, as it allowed Marks to refine his expertise in distressed securities—assets trading at steep discounts due to financial or operational difficulties. His ability to identify mispriced opportunities in this niche set him apart.
Frustrated by TCW’s constraints, Marks, Karsh, and three other partners left in 1995 to found Oaktree Capital Management. The firm started with a modest $2 billion in assets under management but quickly grew, driven by Marks’ vision of specializing in high-yield bonds, distressed debt, and private equity. Oaktree’s focus on alternative investments and risk-controlled strategies resonated with institutional investors, propelling the firm to global prominence.
Oaktree Capital Management and Track Record
Oaktree Capital Management became a powerhouse under Marks’ leadership, managing over $160 billion in assets by 2025. The firm’s flagship distressed debt funds have consistently delivered stellar returns, averaging 19% annually net of fees over decades. This performance outpaces the S&P 500’s historical average of roughly 10%, earning Marks comparisons to investing legends like Warren Buffett.
One of Oaktree’s defining moments came during the 2008 financial crisis. While many investors panicked, Marks and his team raised $10.9 billion for the largest distressed debt fund in history. Their contrarian approach—buying deeply discounted assets when others were selling—paid off handsomely. Investments in undervalued corporate bonds and securities of troubled companies yielded substantial profits as markets recovered, cementing Oaktree’s reputation as a leader in distressed investing.
Marks’ track record is not without challenges. The early 2000s dot-com bust and the 2020 pandemic-induced market crash tested his strategies. Yet, Oaktree’s emphasis on risk management allowed it to navigate these periods with minimal losses compared to peers. Marks’ philosophy of aiming for “always good, sometimes great, never terrible” results has underpinned this resilience, prioritizing consistency over erratic home runs.
Investment Strategy: The Art of Risk Control
Howard Marks’ investment philosophy centers on value investing, risk management, and understanding market cycles. Unlike many investors who chase high returns, Marks prioritizes avoiding losses, encapsulated in Oaktree’s motto: “If we avoid the losers, the winners take care of themselves.” His approach draws heavily from Benjamin Graham’s principles but is uniquely tailored to distressed and alternative assets.
1. Value Investing with a Twist
Marks believes the key to superior returns lies in buying assets below their intrinsic value. However, he argues that traditional research offers little edge in today’s information-saturated markets. Instead, he focuses on “second-level thinking”—going beyond surface-level data to infer deeper implications. For example, during the 2008 crisis, while others saw only chaos, Marks recognized that widespread fear had driven asset prices to irrational lows, creating buying opportunities.
2. Mastering Market Cycles
Marks’ book, Mastering the Market Cycle: Getting the Odds on Your Side, underscores his obsession with cyclicality. He views markets as pendulums swinging between optimism and pessimism, greed and fear. By gauging the “temperature” of the market—through metrics like valuation multiples, investor sentiment, and credit availability—he positions Oaktree to buy when assets are unpopular and sell when euphoria peaks. This contrarian streak allows him to capitalize on mispricings caused by herd behavior.
3. Risk Management as a Cornerstone
Marks redefines risk not as volatility but as the likelihood of permanent capital loss. He advocates for defensive investing, emphasizing diversification, margin of safety, and humility. Rather than predicting outcomes, he prepares for a range of possibilities, acknowledging that uncertainty is inherent in markets. This mindset drives Oaktree’s disciplined approach, ensuring portfolios can withstand adverse scenarios.
4. Psychological Discipline
Marks frequently highlights the role of psychology in investing. He warns against emotional traps like greed, fear, and overconfidence, which lead to poor decisions. His memos often explore how collective investor behavior fuels market extremes, urging readers to stay rational when others succumb to mania or despair.
5. Distressed Debt Expertise
Marks’ specialization in distressed securities sets him apart. He seeks companies or bonds trading at discounts due to temporary distress, betting on their recovery or restructuring. This high-risk, high-reward strategy requires deep analysis and patience, qualities Marks has mastered over decades.
Advice for Investors
Marks’ writings, particularly his Oaktree memos and books like The Most Important Thing: Uncommon Sense for the Thoughtful Investor, distill decades of wisdom into actionable advice. Here are key lessons for investors:
Embrace Second-Level Thinking
To outperform, think differently. First-level thinkers see only the obvious; second-level thinkers question assumptions and anticipate consequences others overlook. Ask: What’s priced into this asset? What could others be missing?
Know What You Don’t Know
Intellectual humility is vital. Markets are complex, and no one can predict them with certainty. Admitting uncertainty protects against overconfidence and rash decisions.
Focus on Risk, Not Just Return
High returns mean little if they come with high risk. Assess the downside first, ensuring your portfolio can survive worst-case scenarios. Diversification and a margin of safety are non-negotiable.
Understand Market Cycles
Markets move in cycles, not straight lines. Learn to recognize signs of exuberance or panic, and adjust your strategy accordingly. Buying low and selling high requires patience and discipline.#
Control Your Emotions
Fear and greed distort judgment. Stay calm during volatility, and don’t chase trends. A disciplined process trumps impulsive reactions.
Buy Things Well
Success comes not from buying good assets but from buying assets at the right price. A “bad” stock bought cheaply can outperform a “good” stock overpriced by the market.
Be Contrarian
The best opportunities arise when others are fearful. Buying unloved assets requires courage but offers the greatest potential for profit as sentiment shifts.
Marks’ advice resonates because it’s grounded in timeless principles, applicable to novices and professionals alike. His memos, praised by Warren Buffett as must-reads, blend practical guidance with philosophical insights, making complex ideas accessible.
Personal Life and Legacy
Beyond investing, Marks is a philanthropist and family man. Married to Nancy Freeman, he has a son, Andrew, a venture capitalist, and a stepdaughter, Jane Hait, who founded a nonprofit. Marks has endowed scholarships at the University of Pennsylvania and supported medical research at UCLA, reflecting his commitment to giving back.
His legacy extends through his writings and influence. The Oaktree memos, publicly available on the firm’s website, have a cult following among investors, offering candid reflections on markets and life. His books are required reading in finance curricula, and his ideas have shaped a generation of value investors.
Memorable Quotes
Howard Marks’ words capture the essence of his philosophy with clarity and wit. Here are five of his best quotes:
“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.”
This underscores the importance of emotional discipline in navigating markets.“You can’t predict, but you can prepare.”
Marks emphasizes readiness over futile attempts to forecast the future.“The safest and most potentially profitable thing is to buy something when no one likes it.”
A nod to his contrarian approach, highlighting opportunities in unpopular assets.“Investment success doesn’t come from ‘buying good things,’ but rather from ‘buying things well.’”
Price matters more than quality, a core tenet of value investing.“If we avoid the losers, the winners take care of themselves.”
Oaktree’s motto reflects Marks’ focus on risk control as the path to success.