Oaktree co-founder: Coolness in markets healthy given the vague future

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Last week's global market swings mean investors are factoring in more risks, said Howard Marks, the co-founder and co-chairman of Oaktree Capital, who believes coolness in markets is healthy.

Markets tend to behave as if something is either hopeless or flawless. "Coolness is healthy, because the truth is we don't know what's going to happen, and the truth is usually somewhere in between," Marks said.

On the Chinese economy

Marks is optimistic about China in the long run, since the fundamentals haven't changed and China is further opening markets to foreign investors. He said that Oaktree Capital has been increasing activities in China over the last decade, and is "highly desirous of being more active here."

"We are optimistic about China in the long run... The Chinese economy is still the fastest growing major economy in the world," he stressed, adding that the Chinese economy is in a period of difficult transition.

"It is in a period of difficult transition -- from the very strong benefits of urbanization and industrialization to a more balanced emphasis on export and consumption," the investment guru explained.

Howard Marks, co-founder and co-chairman of Oaktree Capital. /CGTN Screenshot

From his perspective, China probably has to "adjust to a slower rate of growth," and go through many changes in the next decade.

"By the way, modern China has never had a recession. It will, someday. So these are many changes that China will have to go through in the next decade. I'm a believer in China. I can't document to you that my optimism is warranted. I can't prove to you that it will happen. But that's my bias."

On asset management

"Moderately bigger is better," said Marks on the trend of asset management industry.

"The so-called inefficient markets, (in) which we hope we can find serious superior returns, are not infinitely scalable. There are many cases that they're cheap because they've been overlooked and they can't get massively bigger," he further explained.

"I think that we can all manage more money, but not infinitely more money. And one of the most important things in investing is to have discipline to not accept too much money under management," Marks advised.

VCG Photo

In March, Oaktree Capital announced a partnership with Brookfield Asset Management, which would create one of the world's largest alternative money managers. Brookfield will acquire 62 percent of Oaktree Capital's business in a stock and cash transaction.

"This deal is fundamentally attractive. It's a great deal for Brookfield which helps us gain our credit capability, (that) is great for us. We get liquidity and we continue to run Oaktree, and we get exposure to their resources," he told CGTN.

Marks in his latest memo warned about the anti-capitalist rhetoric behind rising populism.

"In the last half of the 20th century, economic growth in most of the world was very high, and it raised all boats. In this century, economic growth has been slower, and not everybody has benefited. So the bottom line is that the capitalist system is not working the way it used to for everybody," he elaborated.

But how should businesses act to arrest this trend that could stop "growing the pie"? Marks claimed that capitalism needs revision to dispel populism.

"I hope that revisions can be made in the approach so that more people benefit, because a system is not healthy and stable for the long run if there are too many dissidents," Marks said.