Howard Marks on capital structure
From Howard Marks Genius Fundraising Strategy that Built Oaktree Capital · · Investors Club
“If you think about a balance sheet, a capital structure, like a tree, it dies from the bottom. So if there's a financial problem first the equity loses its money and then among the creditors the senior the subordinated bonds are in the first lost position and one of the important things in investing is to invest within yourself.”
On , Howard Marks, Co-Chairman at Oaktree Capital, spoke about capital structure during Howard Marks Genius Fundraising Strategy that Built Oaktree Capital on Investors Club.
About Howard Marks
Howard Marks, co-chairman of Oaktree Capital, has continued to discuss his investment philosophy and market outlook in a series of recent appearances and memos. He has described artificial intelligence as a tool that can "marshal the data, organize the logic, out frame the question," but said he does not believe it can directly pick winning stocks because successful investing still requires human judgment and experience. Marks stated that AI "raises the bar and weeds out the people who don't add value" but will not "replace the best." He has also emphasized the importance of balancing offense and defense in portfolio positioning, noting that the most important decision an investor makes is whether to emphasize one or the other. Marks has reflected on Oaktree's history, including the firm's decision to keep Fund Four smaller than it could have been, which he said "created our reputation." He has reiterated his view that macro forecasting is largely unreliable and that the firm's actions are not driven by such forecasts. On market cycles, Marks said that prices fluctuate wildly around a gradual trend line due to fluctuations in psychology, and that the "scariest thing in the world" is the belief there is no risk. He has also discussed the role of leverage, calling it "dynamite" when combined with volatility, and noted that the tide going out in private credit will reveal which structures may have been unwise.