Howard Marks Letters: Insights from Oaktree Capital

Howard Marks is a renowned investor and the co-founder of Oaktree Capital, a global investment manager with over $120 billion in assets under management.

He has been writing "Memoranda" and "Chairman's Letter" to Oaktree's investors since the 1990s.

These letters offer valuable insights into his investment philosophy and process.

In his letters, Marks emphasizes the importance of being cautious and disciplined in investing, often warning against the dangers of speculation and overconfidence.

A unique perspective: Peter S Lynch

Howard Marks Letters have been a trusted source of investment wisdom for many. His letters are published quarterly and have been widely read and respected in the investment community.

Marks' investment philosophy is centered around the concept of "second-level thinking", which involves considering multiple perspectives and evaluating information from different angles. He encourages investors to think critically and avoid emotional decision-making.

Marks' letters have been praised for their clarity and accessibility, making complex investment concepts easy to understand.

In Letter 196, Bruce Karsh wrote to investors in 2017. Bruce Karsh is the Co-Chairman of Oaktree Capital Management.

The letter highlighted the importance of recognizing the difference between risk and uncertainty. He emphasized that risk is quantifiable and can be managed, while uncertainty is unpredictable and can't be.

Investors often confuse the two and take on more risk than they're comfortable with. This can lead to significant losses, as Karsh noted in the letter.

Karsh used the example of a car accident to illustrate the distinction. A car accident is a specific event that can be predicted and managed, whereas the uncertainty of being in an accident is unpredictable and can't be.

Investors should focus on managing risk and being aware of their own comfort level with uncertainty.

Howard Marks is not the founder of Oaktree Capital, but rather one of its most well-known cofounders. Howard Marks, along with five other cofounders, founded Oaktree Capital in 1995.

Oaktree's investment approach is centered around the concept of liquidity, which Howard Marks defines as the ability to sell an asset quickly without incurring significant losses. This is a crucial aspect of their strategy.

In his letters, Marks emphasizes the importance of liquidity in avoiding forced selling, which can lead to poor investment decisions. He notes that liquidity is often undervalued, yet it's a critical component of a successful investment strategy.

Marks highlights the dangers of investing in illiquid assets, citing the example of a company that's heavily leveraged and has a low market value, making it difficult to sell shares quickly. This can result in significant losses if the company's financial situation deteriorates.

A key principle of Oaktree's approach is to prioritize liquidity over potential returns, recognizing that a liquid asset can be sold quickly to meet financial obligations.