NYT Special On Howard Marks: Treasure Hunters of the Financial CrisisVW Staff
Howard Marks is going mainstream!
Five years ago, the global financial system was falling apart. Lehman Brothers had imploded. Banks had stopped lending. Foreclosure signs were as common as weeds on the front lawns of suburban homes.
And Bruce A. Karsh saw the buying opportunity of a lifetime.
Mr. Karsh, a low-key money manager from Los Angeles, had spent his career analyzing and trading the debt of companies. With the world economy buckling, the prices of corporate debt had plunged to levels suggesting that much of American industry was hurtling toward bankruptcy.
So Mr. Karsh, through his Oaktree Capital Managementfirm, plowed money into distressed debt at a torrid pace, investing more than $6 billion over a three-month stretch.
“Unless the second Great Depression lies ahead,” Howard S. Marks, Oaktree’s chairman, wrote to their clients on Oct. 6, 2008, “today’s purchases should produce substantial returns, and in a few years we’ll reminisce together about how easy it was to take advantage of the bargains of 2008-09.”
It paid off. With the help of an extraordinary government bailout and stimulus, the second Great Depression never came and a global recession eventually faded. A half-decade later, Mr. Marks’s prediction has come to pass. Virtually all of the debt bought on the cheap has fully recovered in value. The trade yielded spectacular profits, earning about $6 billion in gains for Oaktree’s investors and $1.5 billion for Mr. Karsh, Mr. Marks and their partners.