Capital Allocators – Top 5 of 2025: #1: Howard Marks

Podcast: Capital Allocators
Host: Ted Seides
Guest: Howard Marks (Co-Chairman & Co-Founder, Oaktree Capital Management)
Release Date: December 29, 2025

Overview

In the most popular Capital Allocators episode of 2025, host Ted Seides sits down with the legendary Howard Marks, co-founder and co-chairman of Oaktree Capital Management. Their in-depth conversation covers Howard’s formative experiences, the evolution of credit markets—especially the rise of private credit—insights from his influential memo "Gimme Credit," and foundational investing principles. Further, Howard shares candid perspectives on risk, market cycles, private equity, asset manager M&A, and life as both public and private entities, all colored by his signature blend of caution, logic, and humor.

Key Discussion Points & Insights

Howard Marks’ Early Life & Investment Beginnings

• Influence of Upbringing ([06:10])
  • Parents were adults during the Great Depression, instilling caution and frugality.
  • “If your parents were adults during the Depression, they were traumatized. And you grew up hearing things like, don't put all your eggs in one basket and save for a rainy day. I think if nothing else, that may be a rather...cautious person.” (Howard Marks, 06:10)
• Education’s Impact ([06:10-07:14])
  • Public school system offered exposure to business, law, and accounting.
  • Developed an early liking for accounting, which spurred application to Wharton; later shifted major to finance.

Lessons from Early Career: The Nifty Fifty & High Yield Bonds

• Nifty Fifty Bubble ([07:46])
  • 1969: Major banks chased “can’t-lose” stocks regardless of price.
  • “The real lesson I learned was that there's always a price that's too high...Successful investing is not a matter of buying good things, but buying things well.” (Howard Marks, 08:21)
• Move to Fixed Income ([09:20])
  • Transitioned to bond department post-Nifty Fifty, which was then viewed as "Siberia."
• Launching High Yield at Citibank ([09:30])
  • Developed first mainstream high yield bond fund in 1978.
  • Struck by the certainty and clarity of fixed income math and contracts.
  • “I just thought that fixed income was so much easier. When I started buying high yield bonds, the yield to maturity was 12.25. That's better than you can do in the S and P on average, contractually. So it was really eye opening for me.” (Howard Marks, 10:06)

The Marks Memo Process

• Genesis of Ideas ([10:31-11:32])
  • Draws inspiration from client questions or pressing market topics.
  • Memo must offer a unique or under-discussed perspective: “The basic thing is, I have to think I have something to write which not everybody else has been writing or talking about or I have to see something differently from everybody else. The last thing I want to do is put out a memo that says me too.” (Howard Marks, 11:16)

Credit Market Evolution: From Junk Bonds to Private Credit

• Historical Narrative ([12:32–17:05])
  • Traces the progression: high yield/junk bonds → LBO boom and bust → senior loans → alternatives/hedge funds/private equity → global financial crisis → explosion of private credit.
  • “In 07, I think [private credit] was a quarter of a trillion. So it's up more than 6x in 17 years. But this is the equivalent of senior loans, but issued privately without the benefit of registration, SEC oversight, et cetera. And that leads us to where we are now.” (Howard Marks, 16:40)

The Private Credit Pendulum & Investor Sentiment

• Cycle of Opportunity and Risk ([17:05–21:42])

  • Alpha often available in assets people initially shun; risk increases as herd floods in.
  • “...what the wise man does in the beginning, the fool does in the end.” (Howard Marks, quoting Buffett, 18:35)
  • Current state: private credit is well-known and fairly priced; "unloved" days are over.
  • “It's a reasonable thing to do if you do it carefully. But I don't think it's a special strategy.” (Howard Marks, 19:06)

• On Current Underwriting Standards ([20:24])

  • Standards “somewhat to the undemanding side, not terribly.” Not a repeat of the pre-GFC “giving money away” era, but competition is eroding discipline.

Risk Management and Oaktree’s Core Philosophy

• Institutionalizing Discipline ([21:56])
  • Six core tenets: risk control, consistency, targeting less efficient markets, specialization, non-reliance on macro forecasting, non-reliance on market timing.
  • “If we avoid the losers, the winners take care of themselves. That's our official motto. And that's the right way to think about fixed income.” (Howard Marks, 23:32)
  • Fixed income as a “negative art”—the focus is on excluding mistakes, not chasing stars.

Comparing Private and Public Credit

• Liquidity and Mark-to-Market Tensions ([24:59–27:59])

  • “There’s no eraser on the pencil...When you go through a tough period and high yield bonds are down 10% and private credit is down 2%, I think that’s the explanation. Which one of those is right? Hard to say.” (Howard Marks, 25:38)
  • Raises questions about the meaning of valuation, investor perception, and potential for “extend and pretend.”

• On “Paper Losses” and Psychological Comfort ([28:10])

  • Cites the “if a tree falls in the forest” analogy; investors may ignore pain by not opening the envelope—applies to both public and private credit.

What Happens in a Downturn? Unanswered Questions for Private Credit

• Anticipating the Next Cycle ([29:59])
  • We will see another recession and default cycle; questions remain about how private credit will weather a true storm.
  • “So we don't really know what's going to happen. That's the key, I think. What if these things were bought in funds that have a 10 year life and stuff hits the fan right around year 10 and they can't raise the money to liquidate the fund and give the investors their money back and it stretches on a couple of years. What will happen then? We just don't know.” (Howard Marks, 31:49)
  • “It’s only when the tide goes out that you find out who’s swimming naked.” (Howard Marks quoting Buffett, 32:28)

The Shifting Private Equity Landscape

• Interest Rate Sea Change ([32:55–36:53])
  • Easy borrowing and “silver bullet” status (2009–2021) gave way to a rapidly tightening Fed and drying liquidity.
  • “Leverage became more expensive and harder to get...Leveraged acquisition is not some miracle.” (Howard Marks, 35:17)
  • Slower exits, more PE-to-PE sales, and less new capital formation as investor distributions dwindle.
  • Dry powder piling up, but deployment remains challenging.

The Eternal Quest: “What Else?”

• Searching for the Next Big Thing ([36:53–38:08])
  • Howard doubts there are truly new asset classes beyond “ownership and debt.”
  • “Wall street has a very good record of accommodating People's desires to put money to work.” (Howard Marks, 37:51)

Sustaining Excellence and Culture at Oaktree

• Managing through Boring Markets ([38:08–42:23])
  • Advocates patience; “don’t just do something, sit there.”
  • “What really matters is can you buy interests in companies that grow and can you lend money to companies to pay you back? It's not always something exciting to do.” (Howard Marks, 39:15)
  • Oaktree focused on preserving philosophy and rewarding steady hands over risky behavior, especially in flat/low-yield environments.

Asset Manager M&A and Public vs. Private Ownership

• Selling to Brookfield ([42:52])
  • Oaktree remains autonomous but benefits from Brookfield’s diversification needs.
  • Reflects increased asset manager M&A; questions whether value is always created post-merger.
• Reflections on Public Ownership ([44:48])
  • “Every day you get a report card from somebody who doesn’t know your business that well, called the market.” (Howard Marks, 44:51)
  • Appreciates liquidity but happy to have retreated from public markets.

Enduring Wisdom: Markets, Cycles, and Timeless Human Nature

• Continuous Study ([45:51–46:28])
  • Still excited by ongoing study of psychology, cycles, and investor behavior: “These phenomena rhyme from cycle to cycle every day.”
• Humility About the Future
  • “One of my favorite oxymorons, Ted, is that we're not expecting any surprises. Surprises are, by definition, unexpected.” (Howard Marks, 37:23)

Notable Quotes & Memorable Moments

• “There is no asset so good that it can't become overpriced and dangerous, and very few assets which are so bad that if it's cheap enough, it can't be a good idea.” (Howard Marks, 08:47)
• "If we avoid the losers, the winners take care of themselves." (Howard Marks, 23:32)
• "Without the downs, you're unlikely to have the ups." (Howard Marks, 26:30)
• “It’s only when the tide goes out that you find out who’s swimming naked.” (Howard Marks, quoting Buffett, 32:28)
• “History doesn’t repeat, but it rhymes.” (Howard Marks quoting Mark Twain, 45:56)
• “[Investors] mistake high levels of activity for accomplishment.” (Howard Marks, 40:25)

Timestamps for Important Segments

• Early Life and Parental Influence: [06:10]
• Origins of Investment Career & Philosophy: [07:46–10:21]
• Marks’ Memo Process: [10:31–11:32]
• Credit Market Evolution (“Travelog”): [12:32–17:05]
• Pendulum of Risk & Opportunity in Private Credit: [17:22–21:42]
• Oaktree’s Investment Philosophy: [21:56–24:47]
• Liquidity & Mark-to-Market vs. Private Credit: [24:59–27:59]
• Anticipating Next Default Cycle: [29:59–32:38]
• Private Equity’s Recent Challenges: [32:55–36:53]
• Where to from Here (“What Else?”): [36:53–38:08]
• Sustaining Oaktree’s Culture & Approach: [38:08–42:23]
• Asset Manager M&A & Public Company Reflections: [42:52–45:48]
• Howard’s Ongoing Curiosity & Closing Reflections: [45:51–49:10]
• Personal Fun Questions: [47:19–49:40]

Tone and Style

The episode is deeply reflective, analytical, and delivered with Howard's signature blend of cautious wisdom, humility, and dry wit. Ted Seides skillfully draws out both technical insight and personal anecdote, making the conversation accessible and engaging for sophisticated investors and students alike.

For those seeking a masterclass in cycles, risk, and the enduring human drivers behind markets, this episode is a must-listen and a timeless reference.