"Most great investments begin in discomfort," says Howard Marks of Oaktree Capital Management, in his latest letter to investors.
"The things most people feel good about investments where the underlying premise is widely accepted, the recent performance has been positive and the outlook is rosy are unlikely to be available at bargain prices."
Marks, who co-founded New York-listed Oaktree (US: OAK) 19 years ago, is well known for making these kinds of discomforting investments. One of his preferred strategies is distressed investing buying "the debt of companies seemingly at death's door".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This has paid off well: Oaktree's distressed debt funds which account for around 25% of the $80bn in assets have returned more than 20% per year on average since inception.
Still, this is a style of investing that's littered with pitfalls. For every great opportunity, there will be many traps.
Marks puts Oaktree's consistent success down to several key principles that include scrupulous risk management, rigorous in-depth analysis and building highly specialised expertise in niche areas.
-
Zoopla: Asking price discounts hit a five-year high – is now the time to buy a property?News Zoopla’s October House Price Index shows sellers are accepting discounts of 5.5% on average to secure a sale – we reveal where homeowners are taking the biggest asking price cuts
-
Equity release rates drop – is it worth unlocking cash from your home?
News Lifetime mortgage rates are falling from their record highs - is equity release worth another look?
