Howard Marks spoke today on the recent increase in asset prices across the spectrum. Howard Marks’ comments were not picked up by many, but that is why you read ValueWalk of course! Although Marks issues his famous memos frequently he rarely speaks. Marks said that the pre 2007 crash behavior among many investors is back. Whether one is a bull or a bear Howard Marks always has insightful comments. Marks specifically mentioned the reach for yield, which is allowing companies to issue debt at record low rates. He also thinks that private equity firms are overpaying in many recent LBOs and sees that as a caution sign. Reuters did a great job taking details notes on Mark’s speech. Below is a brief excerpt followed by a link to the full article.
Marks also predicted a looming “shake-out” in the hedge fund industry, as poor returns and a pre-crisis proliferation of firms leaves questions over the future of many in the sector.
Odey Discusses Howard Marks’ Astute Observation On Why Hedge Fund Alpha Is Increasingly Rare [January Letter]
According to a copy of the firm's January investor update which ValueWalk has been able to review, the Odey Asset Management Odey Special Situations Fund returned 7.7% in January, outperforming its benchmark, the MSCI World USD Index, by 8.7%. Q4 2020 hedge fund letters, conferences and more The $60 million fund, which Adrian Courtenay manages, Read More
He said it was not clear that such a large number of managers could make outsize returns and justify their fees.
“Extraordinary people deserve 20 percent of the money but not the run-of-the-mill people”, he said, referring to the typical 20 percent performance fees levied in the hedge fund and private equity industries.
“Today there are 8,000 hedge funds. Are there really 40,000 exceptional people (working for hedge funds)?” he asked.
Last year the average fund returned 6.2 percent while the S&P 500 rose 16 percent. This year the average fund is up 2.5 percent against the S&P’s 8 percent gain, according to Hedge Fund Research.
“How long can that go on?” Marks asked.
Full article here.