Howard Marks Presentation

distressed opportunities


june 10,2012 2014 morgan stanley financials oaktree conference conference

Investing In A Low-Return World Howard Marks, Chairman Oaktree Capital Management

Titles you can't find anywhere else

Try Scribd FREE for 30 days to access over 125 million titles without ads or interruptions! Start Free Trial Cancel Anytime.







The Investment Environment: A Mixed Bag a slow, gradual, unsteady economic recovery in the u.s. • Less economic vigor and bigger problems elsewhere • The U.S. economy is clearly “the best house on a bad block”







The Investment Environment: A Mixed Bag (continued) serious long-term issues • Debt reduction vs. stimulating growth • Globalization and competitiveness • Less-than-constructive Less-than-constructive politics • Job growth • Geopolitics







The Investment Environment: A Mixed Bag (continued) low central-bank-mandated interest rates • Free markets do a good job of allocating capital; there’s no free market in money today • Borrowers are being subsidized; lenders and savers are penalized • Low-risk investments offer ultra-low returns • Therefore investors are forced up the risk curve in pursuit of return







The Investment Environment: A Mixed Bag (continued) most assets priced “on the high side of fair”

• Equity valuations are reasonable • Yield spreads on bonds are reasonable • But interest rates are historically low – low – dragging dragging down all fixed income prospects, and other returns by contagion







The Cycle of Investor Behavior as markets rise, participants become increasingly euphoric and optimistic • Thus they want to invest more, even at high prices ac cepting lower prospective returns, weaker structures and greater risk • They compete for investments by accepting

• The quantity of issuance rises to meet the demand • The quality of issuance declines simultaneously • This is “the race to the bottom” • This is a time for caution









The Cycle of Investor Behavior (continued) as markets fall, participants become depressed and afraid • They want to invest less, and to sell, and even tually to sell at any p rice • There are few buyers for the things that are for sale







The Cycle of Investor Behavior (continued)







The Temperature of Today’s Markets • The economic news is good, or at least improving. improving. There may be a positive wealth effect as 401-Ks and home prices rise

• The capital markets are accommodating, making it easy to refinance debt and feasible to do risky deals Consequently distressed situations, defaults and bankruptcies are few







The Temperature of Today’s Markets (continued) • The demand for risk assets is high; cash flow into mutual funds is strong • There are many buyers and few sellers. There’s no distress among holders, and thus no forced sellers • Bargains are few, especially in easy-to-access areas







Disclosures This presentation and the information contained herein are for educational and informational purposes only and do not constitute, and should not be construed as, an offer to sell, or a solicitation solicitation of an offer to buy, any any securities or related financial financial instruments. Responses to any inquiry that may involve the rendering of personalized investment advice or effecting or attempting to effect transactions in securities will not be made absent compliance with applicable laws or regulations (including broker dealer, investment adviser or applicable agent or representative registration requirements), or applicable exemptions or exclusions therefrom.

Howard Marks Presentation

Recommend Documents