Contrarian Investing Guru: Howard Marks’ Journey and Philosophy

Howard Stanley Marks is an investor and writer from the United States, serving as the co-founder and co-chairman of Oaktree Capital Management. Additionally, he is renowned as the world's largest investor in distressed securities. This article delves into his life, investment style, and notable quotes.

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Howard Marks: life

Marks, born on April 23, 1946, grew up in Queens, New York. He pursued his undergraduate studies at the Wharton School of the University of Pennsylvania, where he was a member of the Pi Kappa Alpha fraternity.

Graduating cum laude in 1967 with a major in finance and a minor in Japanese studies, Marks furthered his education by obtaining a Master's in Business Administration in Accounting and Marketing from the Booth School of Business at the University of Chicago. His academic achievements were acknowledged with the George Hay Brown Award.

In his personal life, Marks experienced a divorce from his first marriage. He has a biological son with his second wife, Nancy, who currently manages Freemark Partners, an investment company of the Marks family.

The following are some key milestones in Howard Marks' career:

  • From 1969 to 1978, Marks served at Citicorp, initially as an equity research analyst, later as the Director of Research, and eventually as a vice president and senior portfolio manager overseeing convertible and high-yield debt.
  • In 1985, Marks joined TCW Group, where he led groups responsible for investments in high-yield debt and convertible securities.
  • In 1988, Marks, alongside Bruce Karsh, organised one of the first distressed debt funds of a major financial institution.
  • In 1992, Marks established the Howard S. Marks Terms Scholarship to provide renewable scholarships to undergraduate students at the University of Pennsylvania.
  • In 1995, Marks, along with other partners, founded Oaktree Capital Management in Los Angeles. The company experienced rapid growth, focusing on high-yield debt, distressed debt, and private equity.
  • In 2019, Brookfield Asset Management acquired 62% of Oaktree. Consequently, Marks and other Oaktree members own 38% of the company and retain full control of Oaktree's daily operations.

Investment style

Howard Marks is highly esteemed in the investment world for his memos, which encapsulate his investment strategies and are regularly published on the Oaktree website. Additionally, he has authored three books on investments. Below, you will discover some of Marks' key investment principles:

  • He places a strong emphasis on risk management and highlights the importance of investors devising a strategy tailored to their individual circumstances. This involves reflecting on whether they are more concerned about the risk of financial loss or the risk of missing out on an opportunity.
  • Marks expresses the view that gaining an investment advantage through research is challenging, given the multitude of intelligent individuals engaged in the process.
  • He advocates for gaining an advantage by deducing implicit consequences from a company's current data, effectively managing investment psychology, and assessing the current stage of the market business cycle.
  • Marks employs market-timing strategies to ensure liquidity for investment during a recession.
  • He stresses the significance of investors acknowledging what they do not know rather than assuming certainty. Marks aims for a “high batting average” over “home runs.”

Famous quotes from Marks

Some of his famous quotes are:

  • “Bubbles occur when the attractive becomes attractive at any price”.
  • “Risk means that more things can happen than will happen”.
  • “Most worst-case analyses are not negative enough”.
  • “Quality does not determine risk – the price paid does”.
  • “The discipline that is most important is not accounting or economics, but psychology. The price of an asset can be almost anywhere in the short term, regardless of its fundamentals”.
  • “Being ahead of your time is indistinguishable from being wrong”.
  • “Risk goes beyond the academic notion of volatility. The risk that matters most is the risk of permanent loss”.
  • “You can't do things that others do and expect to do better”.
  • First-level thinkers conclude the obvious, second-level ones ask “And who doesn't know that?”
  • “Only in investments do people prefer something when its price goes up”.

We hope you have been able to learn a little more about Howard Marks, his biography, investment style, and famous quotes.

In conclusion, Howard Marks stands as a towering figure in the investment world, much like his contemporaries such as Ray Dalio, who emphasizes the importance of understanding economic cycles, and Seth Klarman, known for his value investing approach. Marks, through his insightful memos and the founding of Oaktree Capital Management, has championed the principles of risk assessment, market inefficiencies, and contrarian investment philosophies. His emphasis on the psychological aspects of investing and the cyclical nature of markets has deeply influenced the strategies of institutional and individual investors alike, securing his place alongside other legends in the field of finance for his profound impact on investment philosophy and practice.

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How did Howard Marks contribute to the development of distressed debt funds?

In 1988, Marks, alongside Bruce Karsh, organised one of the first distressed debt funds within a major financial institution, contributing to the evolution of this investment strategy.

What is the significance of Howard Marks' focus on investment psychology?

Marks believes that understanding and managing investment psychology is crucial, asserting that the discipline most important in investments is not accounting or economics but psychology.

Are Howard Marks' investment principles applicable to different market conditions?

Yes, Marks' investment principles, including a focus on risk management and market-timing strategies, are designed to be adaptable and applicable across various market cycles.

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