Howard Marks Gives Passing Grade To Oaktree’s Investment Performance In China
Co-founder of the $78-billion-under-management Oaktree Capital Management says its China fund may not get fully invested in China Money Podcast's anniversary episode
Beijing, China (July 13, 2011) /ChinaNewswire.com/ — Howard Marks, co-founder and chairman of Los Angeles-based Oaktree Capital Management, says the firm's China fund's performance is mediocre. The 66-year-old King of Distressed Debt gives a barely passing grade to Oaktree's China fund.
"I would say [the fund's performance] has been about a C+ in absolute terms," Marks says. "We haven't lost money, but I don't know how others have done. So maybe the answer is: as good as anyone.
Marks made the comment while talking to Nina Xiang, host of China Money Podcast (www.ChinaMoneyPodcast.com), a highly ranked new media show focused exclusively on investing in China, in the podcast’s one-year anniversary special episode.
During its first year of operations, China Money Podcast has quickly expanded its viewership with its free weekly audio and video podcasts, available at www.chinamoneypodcast.com, on iTunes, and other online destinations. The podcast has featured guests including legendary investor Jim Rogers and Mr. China, Jack Perkowski, among other prominent China-focused investors. The anniversary special program featuring Howard Marks provides a rare opportunity to look into Mr. Marks’ views on China and investing.
Howard Marks co-founded Oaktree Capital Management in 1995, and have built the firm into a distressed debt powerhouse with $78 billion under management. Oaktree's 17 distressed debt funds have averaged annual gains of 19 percent after fees for the past 22 years, beating its peers by about 7 percentage points, according to consulting firm Cambridge associates.
But Oaktree's performance in China – its Beijing office was established in 2007 and focuses on private equity – is less than stellar. Marks says that the firm is cautiously moving ahead in the Chinese market.
"We invested slowly. It's not fully invested yet, and probably won't get fully invested," he says. "It did not invest in distress-for –control or loan-to-own situations."
Known as an "eternal worrier," Marks sees a number of concerns in China's future. He says in the interview: "China's customers – the U.S. and Europe – have been growing very slowly themselves. So that will have a retardant effect on China's economy as well. The combination of the two suggests that China will go into a slow period."
Marks also points outs that the shaky foundation of China's legal system could pose unexpected risks to investors in China. "The world has yet to see how it is to do business in China dealing with issues such as property rights: whether foreign private investors can do well as owner of businesses. It's important that people do not assume that business-as-usual in China is the same with business-as-usual elsewhere."
He explains that it is part of the reason that Oaktree's China operations have stayed away from its traditional distress-for –control strategy in China.
"In our distressed debt investing, we often invest in the debt of the companies that fail to pay for their debts because we have creditor rights that can give us access to the value of the company. We don't know how creditor rights will be treated in China, so we probably won't invest in (it).
But Marks also noted that the correction in valuations in China is a positive in its investment outlook: "Valuations in China have corrected quite a bit from two or three years ago when everybody assumed China's outlook was flawless for eternity. Prices have come down considerably both relative to other countries and in absolute terms. That's very healthy for the investment outlook."
Marks made the comments to China Money Podcast after promoting in China the Chinese version of his book, The Most Important Thing.
About China Money Podcast
China Money Podcast is a highly ranked new media show focused exclusively on investing in China. With prominent guests ranging from China-focused fund managers, economists to analysts, the podcast is widely followed by the investment community in and outside of China.
Hosted by Nina Xiang, a veteran financial journalist, the podcast is the source of local knowledge and insights – on-the-go – for investors interested in China. The podcast is available on its website, in iTunes, and other podcast syndication platforms.