Howard Marks and OakTree S-1


Howard Marks, the CEO of Oaktree Capital is one of the most famous investors who manages to keep a low profile, despite managing over $85 billion. If you visit the company’s website you will see that Oaktree discloses how much it invests in different sectors, but does not reveal individual holdings. The RIA is run for institutions and high net worth individuals.

Marks is one of the great value investors. Despite managing more money than Warren Buffett, Marks has produced phenomenal returns.

According to Bloomberg:

Carlson Capital’s Double Black Diamond Strategy Gains 5.3% On Jewelry Play

Black DiamondCarlson Capital's Double Black Diamond fund added 3.09% net of fees in the second quarter of 2021. Following this performance, the fund delivered a profit of 5.3% net of fees for the first half. Q2 2021 hedge fund letters, conferences and more According to a copy of the fund's half-year update, which ValueWalk has been Read More

Oaktree’s 17 distressed-debt funds have averaged annual gains of 19 percent after fees for the past 22 years — about 7 percentage points better than its peers tracked by Boston-based consulting firm Cambridge Associates LLC.

Below is a breakdown of Oaktree’s capital by asset class:

($ Millions)*
Corporate Debt $21,573
Convertible Securities $9,558
Distressed Debt $34,140
Control Investing $15,437
Real Estate $4,140
Listed Equities $843
TOTAL $85,691

Oaktree strategies at a glance


However, recently Marks has been on a bit of a recent publicity tour. The “tour”, which started several months ago proceeded rumors that Oaktree was going to launch an IPO.

Here is a recent interview of Howard Marks on CNBC:

Additionally, Marks just authored a new book-The Most Important Thing: Uncommon Sense for the Thoughtful Investor.

Marks also spoke at the last Value Investing Congress in Pasadena-

Before the launch of an IPO, a firm must file an S-1 with the SEC. Here is a brief definition of an S-1:

Form S-1 requires companies to provide information on the planned use of capital proceeds, detail the current business model and competition, as well provide a a brief prospectus of the planned security itself, offering price methodology, and any dilution that will occur to other listed securities.

With the release of the S-1, we are able to get more insight on Howard Marks and his investment philsophy. There is tons of valuable information even if you have no interest in investing in the soon to be publicly traded company. However, pages 115-150 (not shown below) are among the most insightful. Below are some excerpts from the document.The full link can be found at the bottom.



Our Investment Approach

At our core, we are contrarian, value-oriented investors focused on buying securities and companies at prices below their intrinsic value and selling or exiting those investments when they become fairly or fully valued. We have a long track record of achieving competitive returns in up markets and substantial outperformance in down markets. We believe this approach leads to significant outperformance over the long term.

In our distressed debt strategy, all 15 of our funds have achieved positive gross IRRs as of March 31, 2011, resulting in an aggregate gross IRR of 23.8%.

In our U.S. high yield bond strategy, we have produced a cumulative gross return that has outperformed its Relevant Benchmark by 262 percentage points since its inception.


Our investment results are generally not dependent on the use of leverage to make investments or the strength of the equity capital markets to realize our investments. We invest throughout the capital structure because we seek the security that offers the best return for the risk we elect to bear. Most of our investment strategies focus on debt securities and many of our funds’ investments reside in the senior levels of an issuer’s capital structure, substantially reducing the downside risk of our investments and the volatility of our segment’s revenue and income. Debt securities by their nature require repayment of principal at par, typically generate current cash interest (reducing risk and augmenting investment returns) and, in cases where the issuer restructures, may provide an opportunity for conversion to equity in a company with a deleveraged balance sheet positioned for growth.

Our Approach to Growth

Since March 31, 2006, we have raised more than $60 billion in assets, including over $10 billion in each of the last four calendar years, despite a difficult fundraising environment. In the twelve months ended March 31, 2011, we raised over $11 billion for 15 strategies from more than 300 different clients, reflecting the breadth of our product offerings and the depth of our client base. Our strong fundraising and investment performance have driven the growth of our business. AUM has increased from $35.6 billion as of December 31, 2006, to more than $80 billion as of March 31, 2011.


Ÿ Sizing Funds for the Investment Environment. We neither make nor rely on macro predictions about the economy, interest rates or financial markets. However, we believe it is critical to take into account our view of where we are in the economic cycle and to size our investment capital accordingly. When we believe opportunities are scarce, we limit the amount of capital we raise to avoid jeopardizing returns. When we believe the investment environment offers substantial opportunities, we raise more capital. Our largest closed-end funds in each economic cycle have been among our best performers, demonstrating our success in appropriately sizing our funds to the investment opportunities.


Ÿ Disciplined and Opportunistic Approach to Expansion of Offerings. Our decision to create a new product starts with the identification of a market with the potential for attractive returns, and is dependent on both our conviction that the market can be exploited in a manner consistent with our risk-controlled philosophy and access to an investment team that we believe is capable of producing the results we seek. Because of the high priority we place on these requirements, our

new products usually represent step-outs into related strategies led by senior investment professionals with whom we have had extensive first-hand experience.


Building a Scalable Platform for Global Growth. From our founding, we have built our firm with an eye to the future:


We have reinvested a substantial portion of our profits back into our business.


We have consistently broadened employee ownership to achieve a smooth and gradual transition of ownership and management, such that today we have over 160 employee-owners.


We recognized early on that European and Asian investors were potentially significant sources of capital, hiring our first marketing representative outside the United States in 2001. Our AUM from non-U.S. clients has grown from $753.8 million, or 4.2%, of AUM, as of December 31, 2000, to $25.5 billion, or 30.8%, of AUM as of December 31, 2010.


We have been investing in Europe and Asia for many years. We opened offices in London in 1998 and Tokyo and Singapore in 1999. Since then, we have also established offices in Beijing, Hong Kong, Seoul, Frankfurt and Paris and fund-affiliated offices in Luxembourg and Amsterdam.


Disclosure: None

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