Howard Marks: How To Generate Consistently Good Returns

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During this Q&A session with KKP Wealth Management, Howard Marks talks about the consistency of good returns rather than chasing ‘elephants’ (exceptional single investments). He uses the analogy of dining at his favorite Italian restaurant – always good, sometimes great, never terrible. Your objective should be not top performance every year, but consistently in the good-to-great range, avoiding poor years.

His key points include:

  • Risk control: Emphasis on mitigating downside risk, leading to outperformances in bad times
  • Consistency: Focus on regular solid returns rather than erratic highs and lows
  • Long-term approach: Accumulating strong performance over decades, leading to a potentially great overall record
  • Outcome: A reliable and resilient investment strategy with the potential for exceptional gains in challenging times.

Here’s an excerpt from the Q&A session:

Marks: We don’t go out hunting for elephants, we just go out… we want to have a large number of good investments.

In fact the Financial Times has a column on Saturdays called lunch with the FT, and they took me to lunch in December at my favorite Italian restaurant in New York.

And I said to the reporter, I said eating in this restaurant is like investing at Oaktree, always good, sometimes great, never terrible.

And this is really one way for me to describe my goals. It would be great to say we’re always going to be terrific but it’s not true, nobody can produce that.

But if you can just do… you don’t even have to be good all the time, be good almost all the time, great some of the time, but never terrible.

And if you do that for a few decades you’ll have one of the greatest records in history.

So risk control, consistency, not top decile, bottom decile, top decile, bottom… but around the middle all the time.

And then in our experience we pop up to the top in the bad times when things go wrong because of our emphasis on risk control.

We’re better prepared than most. So I think that’s extremely important.

You can watch the entire discussion here:

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