Wit, candour, contrarianism

Every year Private Equity International honours one individual who, over the course of their career, has made a crucial contribution to the development of private equity as an industry and an asset class. They have helped private equity grow into the position of influence it occupies today and continue to lead by example.

It is with great pleasure we can reveal the third recipient of our Private Equity Leader Award as Oaktree Capital Management’s chairman and co-founder, Howard Marks.

Regarded for his wit, candour, and contrarian thinking – all of which are disseminated widely among the investment community via his renowned monthly memos – the  64-year-old Marks was raised in a middle class neighbourhood in the New York borough of Queens and first earned a reputation as  a junk bond genius working for Citicorp Investment Management from 1978 to 1985.

Howard
Marks

Today, one finds Marks splitting his time between Los Angeles and London, presiding over one of the largest and most versatile alternative investment houses aggressively expanding around the globe. The firm has grown to more than 600 employees across offices in 14 cities. As of 31 March, it had $76 billion in assets under management – up from $47 billion at the end of June 2007 – and, having in 2007 taken a portion of its management company public on Goldman Sachs’ private “GSTrUE” exchange, the firm has a market capitalisation of just over $5 billion.

The firm’s investments span many asset classes and involve both short- and long-term approaches, but Oaktree’s signature strategy has always been distressed debt investing, making it incredibly well-placed for the recent credit and financial crises that paralysed the global financial system. It was perhaps not surprising for some then, that in May 2008 Oaktree raised nearly $11 billion for the largest-ever distressed investment fund.

Marks founded the firm in 1995 along with Bruce Karsh, Steve Kaplan, Larry Keele, Richard Masson and Sheldon Stone. “We didn’t have a business plan, budget or numerical goal in terms of assets,” Marks recalls. “Our only thought was that if we continued to do a good job of investing, our business would be a success.”

Marks attributes part of the firm’s investment and business success to its ability to “operate on a high moral plane and put our clients first”.

The firm’s investment performance over the past five years is a particular point of pride for Marks. “In the years leading up to the crisis we issued warnings, sold assets, distributed cash, replaced large maturing funds with smaller ones, and invested with caution,” he says. “Then, in the teeth of the crisis, we raised large sums of money and invested aggressively.” 

Now that market dynamics are changing and bargains harder to find, however, expect the firm to raise smaller distressed investment vehicle(s). Marks declined to comment on fundraising issues, but in a November 2007 interview he told PEI that Oaktree doesn’t shy from shrinking funds and turning away capital. “Why should it be that regardless of the cycle, every fund has to be bigger than the last one? That doesn’t make any sense.”

The Private Equity Leader Award is our only award to be decided by our editorial board rather than readers votes.