Howard Marks' art of risk management

Howard Marks is a name that needs no introduction. His brilliance and insights are the fundamental drivers behind the success of his investment firm Oaktree Capital, reflected in his memos. In his latest memo, 'Fewer Losers, or More Winners?', Marks highlights the importance of steering clear of the losers to reduce downside risks. The Oaktree Capital philosophy "If we avoid the losers, the winners will take care of themselves" is a line that perfectly captures Marks' thought process, which later became the motto of Oaktree Capital. Along with risk reduction by avoiding losers, Marks stresses the importance of finding winners. "If we invest in a diversified portfolio of bonds and can avoid the ones that default, some of the non-defaulters we buy will benefit from positive events, such as upgrades and takeovers. The winners will materialise without our having explicitly sought them out..." Marks consistently emphasises risk control and evaluating risk rather than just

This article was originally published on September 27, 2023.