Howard Marks
Oaktree Capital founder who redefined risk management through market cycles and second-level thinking
Howard Marks co-founded Oaktree Capital Management, which manages over $170 billion in assets and specializes in alternative investments. His investment philosophy centers on market cycles, risk perception, and second-level thinking. His Oaktree memos, written since 1990, are considered must-reads by top investors including Warren Buffett. His 2011 book 'The Most Important Thing' became a classic in value investing literature.
Methodologies
- Market Cycle Positioning Checklist - Systematically observe credit conditions, valuation levels, investor sentiment, and capital flows to determine where the market sits in its cycle.
- Second-Level Thinking Question Framework - For any investment judgment, add one more layer of questioning: what does the market already know? Is the consensus already priced in?
Key decisions and timeline
- 1969 Joined Citibank, Beginning Credit Research Career - Seeking out inefficiently priced niches outside mainstream markets is an effective path to building differentiated competitive advantages.
- 1978 Joined TCW and Launched High-Yield Bond Fund - Building specialized capabilities early in emerging market niches can create competitive barriers lasting decades.
- 1990 Published First Investment Memo 'The Randomness of Investment' - Systematically recording and sharing ideas not only helps others but deepens and refines one's own thinking through repeated articulation.
Beliefs and mental models
- Belief 1 - Superior investing is not about maximizing returns but about achieving reasonable returns for a given level of risk; the ability to perceive risk is what separates ordinary from exceptional investors.
- Belief 2 - Markets do not random-walk; they pendulum between fear and greed in cycles. Identifying where we are in the cycle is the most critical context for investment decisions.
- Belief 3 - First-level thinking says 'this is a good company, buy it'; second-level thinking says 'this is a good company, but the market already knows it, so the price isn't cheap.' Alpha comes from thinking one level deeper than the consensus.
- Model 1
- Model 2
- Model 3