Co-Chairman, Oaktree Capital
Oaktree's Marks Says Market Attitudes Are More Balanced
Howard Marks, Oaktree Capital's co-chairman and co-founder, says "the bloom is off the rose" as market attitudes balance and sees a better investment environment for bargain hunters. He speaks with Lisa Abramowicz on "Bloomberg Surveillance."
About Howard Marks
Howard Marks, co-chairman of Oaktree Capital Management, has been active in media appearances discussing market cycles, the current investment environment, and the role of artificial intelligence in investing. In a June 2026 interview with Barron's alongside Brookfield CEO Bruce Flatt, Marks stated that since October 2022, "optimism has been in the ascendancy" in markets, which he said permits events like large IPOs. He described the current environment as one of "exuberance," but noted that he could not definitively say whether it is irrational, given uncertainty about what AI will be able to do and for whom. Marks also discussed the four ways he believes investors achieve superior returns: buying things for less than they are worth, applying the right financial structure, adding value to operations, and seeing assets go to a premium valuation. He said that in the period ahead, he expects a greater emphasis on "an ownership mentality, on buying things at reasonable prices and adding value." In separate appearances, Marks addressed the IPO market and AI. On the Prof G Markets podcast, he said that investing in companies like Anthropic or OpenAI involves accepting that one's activity is "closer to speculating than analytical investing," given the difficulty of forecasting earnings far into the future. He also said that while AI can marshal data and organize logic, he does not believe it can directly pick winning stocks, as successful investing still requires judgment and experience. Marks stated that AI "raises the bar and weeds out the people who don't add value," but added that he does not think it will replace the best investors.
Transcript (24 segments)
✨ AI-enhanced transcript with speaker attribution
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Interviewer0:00
I want to start with trying to understand investor psychology. As a student of history, where are we right now in terms of bullish or bearish?
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Howard Marks0:10
I think that attitudes were quite bullish prior to a few months ago. With the exception of a brief respite during the pandemic, we've been in a bullish climate since the end of the global financial crisis in '09. Not wildly bullish, certainly not what I would call euphoria, but optimistic. And that has been crimped now. A lot of the big-name stocks are all 50, 70, 80 percent down. The whole market is off, I guess, probably 15 percent from the high. So I would say that attitudes are more balanced today. But when there's euphoria, when there's optimism, when there's greed, when there's risk tolerance and so forth, that's a very difficult climate for the value investor to find bargains. So we're happier today than we were six months ago. I don't know if we're going to be happier six months from now, that is to say that the bargains will be more pronounced, but at least the bloom is off the rose.
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Interviewer1:26
At a time of such incredible uncertainty, how do you position seeing value now but also preparing for seeing more value in six months?
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Howard Marks1:33
You know, one of the six tenets of Oaktree's investment philosophy, which we established when we started in April of '95 and I've never changed a word and I believe in thoroughly, is that we're not market timers. And that means mostly two things: we never sell to raise cash to prepare for a decline, and we never say it's cheap today but it'll be cheaper in six months so we'll wait. If it's cheap today, we buy it. If it's cheaper in six months, we buy more. And I think that works much better than an assertion that we know where the market will be in six months.
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Interviewer2:10
This is really important at a time when so many pensions and institutional investors have been shooting for that 7.5 to 8 percent bogey. We talked about that extensively in the past five to six years, this idea that that seemed completely unachievable in an era of quantitative easing. Suddenly, high-yield bonds have an average yield of more than 7 percent. Is this the best period that you have seen for pensions to actually hit their bogeys for more than a decade?
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Howard Marks2:34
Well, I think that's right. Well, of course, many have hit their bogeys. It just didn't look in advance like they would, but the stock market and many other things have surprised on the upside for the last 10 years. But now, as you point out, one of our big activities is high-yield bonds. A year ago, they were yielding in the threes of percent. One deal was even done in the twos. That's not a very high yield for high yield. Today, as you say, they yield in the sevens. So a pension fund that needs 7 or 7.5 percent can make use of high-yield bonds. And everything, you know, when everybody gets concerned when prices decline, but if you flip that over, the flip side of price deterioration is increases in prospective returns. So now the prospective returns on many asset classes are higher than they were just a little while ago, and again, a much better climate for the bargain hunter.
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Interviewer3:41
Some people would counter this by saying inflation takes a lot of the value out of those returns. That basically, on a real basis, you're still not getting very much. How do you counter that as a long-term investor, by saying, you know what, at this point it's worth it to get higher returns even if on a real basis it's not necessarily that much more?
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Howard Marks4:01
Well, you're right in that we're not talking about an increase in real returns. We're talking about an increase in nominal returns. Most pension funds and other organizations reckon their need for return in nominal terms. But, you know, I mean, that is a challenge, and nobody knows what inflation is going to do. I think I heard out of one ear your previous guest say that some of the inflation factors will probably subside in the next few months, which means, all things being equal, an increase in real returns.
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Interviewer4:41
How much are you trying to game out where inflation is going to go over the next six to 12 months, considering the fact that I know that you do not time the market or look at a sort of day-to-day price swing kind of issue, but this really does determine how important some of these returns will be going forward?
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Howard Marks5:00
Yes, it does, but I don't think there's anything to be known on that subject, and I'm sure we don't know it. You know, another tenet of our investment philosophy, there are only six, we're going to touch on two today, is that our investment decisions are not based on macro forecasts. Macro forecasts are very important, the only problem is they're rarely right. And more importantly, any one forecaster is rarely right more often than the others. So we don't make our decisions on that basis. We are what's called bottom-up investors. We invest on the basis of micro, not macro: companies, industry, securities. And we feel that through hard work and skill, we can get an edge.
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Interviewer5:48
So where are some of the industries, some of the areas that you're actually seeing deep value?
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Howard Marks5:54
You know, they are much more spread around than they were before. Some growth names are offering much better value than they did a year or two ago, down 70 percent. But you know, we continue to find opportunities throughout the investment universe. And the prosaic industries are also offering good value.
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Interviewer6:28
When you talk about the global investment picture, I know over the years, especially as the U.S. yielded less and less in real terms and in nominal terms, you looked overseas, in particular to China, as a potential area of prospective return. Has that changed as yields have gone up in the U.S. and frankly the economy has slowed so substantially in China?
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Howard Marks6:48
Well, on the one hand, we have a preference for investing in the U.S. The U.S., in most regards, has the best economy in the world, and it has an excellent environment for rule of law, for being able to predict the outcome when various stakeholders' rights come into conflict. That's very important to us, especially, you mentioned our business in distressed debt investing. That's very important if you're going to buy distressed credits, to be able to predict how you'll be treated by the law. On the other hand, from time to time, other parts of the world offer better bargains. We have the best in the U.S., but the best usually doesn't come cheap. And third, on the third hand, we like to have some diversity in our portfolio. So we've been investing in places like China and India in the last couple of years, and absolutely will continue to do so. When I hear people say, you know, I've made my living for the last 50 years investing in the things other people said were uninvestable: high-yield bonds, distressed debt, emerging markets in '98, etc. And when I hear people say that China's uninvestable, to me, uninvestable says maybe there are some bargains there if everybody else is boycotting that sector.
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Interviewer8:15
How fully invested are you? Are you always fully invested?
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Howard Marks8:17
We strive to be fully invested. Again, we're not market timers. Market timers say, well, right now we want 20 percent cash. We strive to be fully invested. Our clients hire us to invest in our asset class, not to time the market. And again, if better bargains arise, I'm always confident that we'll be able to raise more money to take advantage.
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Interviewer8:40
About three years ago, when we were talking about what prospective returns seemed plausible or realistic on some sort of safe or reliable basis, you said 5 to 5.5 percent. You have a good memory. Where are we now?
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Howard Marks8:54
I think we can make 7 to 7.5 percent. I mean, I'm not talking... I'm saying an institutional portfolio. At that time, I was talking for the Metropolitan Museum of Art, where I chaired the investment committee, and I talked the expectation down to 5, 5.5 percent, as you say. Or I think we came out, I think the committee as a whole came out at 6. Today, I think an institution like the Met or another pension fund, endowment, etc., can make 7, 7.5 percent. Of course, you have to be willing to go into alternatives to do it, but most people are willing.
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Interviewer9:29
What kind of alternatives?
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Howard Marks9:32
The big asset classes are private equity, private debt. Then there's distressed debt, there's real estate, and specialized forms of investing. The important thing is not which sectors. The important thing is which manager. You know, in the public asset classes like stocks and bonds, we call them beta markets because most of the return is determined by the performance of the market, and which manager you have means a little plus or a little minus. In the alternative markets, there isn't that gravitational pull toward the market return. There's no really market to pace it. What really matters is whether your manager is highly skilled and disciplined or not. And that's why we call them alpha markets, skill markets.
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Interviewer10:22
Do you think that your peers are taking undue risk or not enough risk?
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Howard Marks10:28
Some of each, of course. There's a disparity, you know, there's a range, and all peers do different things. The point is, an area like private lending, where we're very active, has been a darling in the past decade. A lot of money and a lot of managers and a lot of funds have moved into the area. Buffett always puts it best: when the tide goes out, we find out who was swimming without a bathing suit. When economic and financial conditions become more difficult, we find out who made good credit decisions and who made bad ones. We'll see.
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Interviewer11:04
What's the historical precedent for this moment?
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Howard Marks11:08
For this moment, oh, you know, it's very hard to find one that fits exactly. You know, we've never had this externality of the pandemic. There hasn't been a war going on in a long time, an important international conflict with the threats this embodies. The U.S. has never had an economic rival like China before. We've never really had an economic rival since World War II. And of course, we have historically low interest rates. We had interest rates went down by what we call 2,000 basis points, that is to say 20 percentage points, from '82 to '22, and that was a big tailwind. So these conditions are not reminiscent of any that I've lived through. But I think the important thing for your purposes and hopefully your audience's purposes is that I think conditions are fairly normal today in terms of how you should manage your money and the risks you should take. And to me, that's the key decision.