Howard Marks

Marks calls it second-level thinking. First-level thinking is: "This company has good prospects — I''ll buy the stock." Second-level thinking is: "This company has good prospects, but everyone already knows that.

The stock is priced for perfection. I''ll pass." Being right about fundamentals isn''t enough.

You also have to be right about what the market already knows and what the price already reflects.

His other major concept: risk is not volatility. Risk is the probability of permanent loss of capital.

A bond that drops 30% in price isn''t necessarily risky if the underlying company is sound and will pay the debt back. A bond that barely moves but is issued by a company about to default is extremely risky.

He thinks most investors confuse the two, constantly.

Seth Klarman

Klarman is the most orthodox value investor of his generation. Pure Graham and Dodd — buy things for significantly less than they''re worth, insist on a large margin of safety, and be patient.

Very patient. He specifically hunts for things that other investors have been forced to sell for non-fundamental reasons: bankruptcies, spin-offs, index fund rebalancings, distressed situations where complexity drives away everyone else.

His book Margin of Safety was published in 1991 in an edition of 5,000 copies, went out of print, and now sells for over $1,000 on the secondary market. Harvard Business School uses it as a course text.

Digital copies circulate informally online. The irony of a book about value investing being itself severely mispriced is not lost on anyone who reads it.

Howard Marks

His core ideas, from The Most Important Thing: understand market cycles — everything is cyclical, including investor sentiment, credit availability, and valuations. Recognise where you are in a cycle and position accordingly.

Control risk obsessively — not because you''re afraid, but because avoiding the big losses is the primary driver of long-term returns. Practice second-level thinking — don''t just ask what''s true, ask what''s already priced in.

And be patient. The best opportunities come during crises, when forced sellers are creating discounts that wouldn''t exist in calmer markets.

Seth Klarman

Three rules he returns to constantly. First: always insist on a margin of safety.

The future is uncertain. If you only buy things that look cheap under pessimistic assumptions, you protect yourself from your own mistakes.

Second: be a long-term owner, not a short-term trader. Price converges to value over time — not tomorrow.

Third: hold cash when you can''t find good opportunities. Cash is not idle.

Cash is optionality — it means you can act decisively when panic creates real bargains.

Howard Marks

Marks is deeply conservative about the downside. His framework: focus on risk control, not return maximisation.

Superior long-term returns come from avoiding the big losses, not from hitting the biggest wins. This sounds obvious.

Almost no one actually practises it. He has written extensively about how human psychology — overconfidence in good times, panic in bad times — makes sustained risk control incredibly hard.

He''s comfortable in distressed situations that most investors find too ugly to look at. The apparent ugliness is where the value is.

Seth Klarman

He is the most conservative major hedge fund manager operating today. He has said publicly he would rather earn 6% sitting in cash than take a risk he doesn''t understand.

His view of risk is Graham''s view: the probability of permanent loss of capital. Volatility doesn''t scare him.

Permanent loss does.

He''s also been an outspoken critic of short-term trading culture that treats markets as price-discovery engines rather than ownership stakes in real businesses. He sees most of what passes for investing as speculation dressed up in confident language.

Howard Marks

He lives in Los Angeles, where Oaktree is based. He is still active as co-chairman and still writing memos — he''s written over 100 since 1990.

He donates meaningfully to Penn and other academic institutions. He gives speeches at conferences and academic events.

He is considerably more understated than many hedge fund managers of comparable success — he''s interested in ideas, not attention. His son Andrew Marks worked in the film industry, which Marks has described as a source of pride regardless of the career choice.

Seth Klarman

He lives in the Boston area. He''s a significant political and philanthropic donor — primarily to causes related to Israel, Holocaust education, and academic institutions.

He''s reportedly deeply private, compartmentalising his professional and personal lives completely. He is, by multiple accounts, obsessive about physical fitness.

He does not seek press coverage and actively avoids it.

Howard Marks

2008–2009. When the financial crisis hit, high-yield bond markets froze.

Perfectly sound debt was trading at catastrophic discounts because panic selling created forced sellers. Oaktree, which had been raising a distressed debt fund precisely for this type of environment, deployed capital aggressively through the crisis.

Fund VI, raised in 2008, became one of the most successful distressed debt funds in history. The returns were exceptional because the panic-induced discounts were exceptional.

Marks had been writing about exactly this type of opportunity for years. When it arrived, he was ready for it.

Seth Klarman

His 40-year sustained performance is the win. There''s no single flashy trade that defined his career — which is itself kind of the point.

During the 2008 financial crisis, Baupost deployed significant capital into distressed mortgage securities and bank debt, buying things that were trading at catastrophic discounts because forced sellers had to liquidate. The returns on those positions were exceptional.

He was ready because he''d been holding cash waiting for exactly this type of opportunity.

Howard Marks

By his own account, he''s avoided most of the disasters. His framework is explicitly designed to prevent catastrophic errors.

The closest thing to a meaningful mistake: being too early warning about the dot-com bubble — he published a memo in January 2000 laying out why tech valuations were unsustainable. He was right, but the bubble ran for another three months before collapsing.

Being early is expensive. He''s also honest that avoiding spectacular losses sometimes means missing spectacular gains — that''s the trade-off he''s consciously made.

Seth Klarman

By his own account, his biggest mistakes have been not buying enough when he was confident. He''s written about passing on things he understood and believed in because he was waiting for a slightly better price that never came.

The classic value investor error of omission.

He''s also been early — and expensive — on some macro concerns. He has been warning about Federal Reserve policy and deficit spending for over a decade.

He''s probably right about the underlying risks. The timing has cost him relative returns.

Howard Marks

Howard Marks grew up in Flushing, Queens. He studied finance at the Wharton School of the University of Pennsylvania and got his MBA from the University of Chicago Booth School of Business.

He started his career at Citibank, where he ran their bond department and later their convertible securities and high-yield debt portfolios. He moved to TCW Group in Los Angeles in 1985 to manage distressed debt and high-yield bonds.

In 1995, he co-founded Oaktree Capital Management with six colleagues from TCW. The idea: focus specifically on alternative and distressed investments — high-yield bonds, distressed debt, convertible securities, private credit.

Oaktree went public in 2012 and was acquired by Brookfield Asset Management in 2019 for $4.7 billion. Marks stayed on as co-chairman.

Through all of it — from 1990 to today — he was writing the memos.

Seth Klarman

Seth Klarman grew up in Baltimore, Maryland. He studied economics at Cornell, then got his MBA from Harvard Business School in 1982.

He went straight from Harvard to work for Max Heine and Michael Price at Mutual Series Fund — two of the best value investors of that era. After two years he co-founded Baupost Group in 1983 with $27 million from four Harvard endowment families.

He was 25. He has been running it ever since.

Baupost is based in Boston and has consistently avoided the publicity-seeking behaviour of most large hedge funds. Klarman doesn''t do television.

He doesn''t do conferences. He gives very few interviews.

His annual letters to investors circulate informally because investors share them despite the confidentiality agreements. He has been compared to Warren Buffett more than almost any other living investor — in both style and the quality of his thinking.

Howard Marks

Oaktree Capital Management, co-founded in 1995, manages roughly $170 billion across credit strategies. The firm specialises in high-yield bonds, distressed debt, senior loans, convertible securities, and real estate credit.

Distressed debt, in plain English, works like this: when a company gets into trouble, its bonds get cheap. If the company recovers — or even partially recovers — those bonds can multiply in value.

The skill is telling the difference between a company that''s temporarily distressed and one that''s actually going bankrupt. Marks has been making that call for 50 years.

Oaktree was acquired by Brookfield in 2019 for $4.7 billion — a reasonable indicator that the track record speaks for itself.

Seth Klarman

Baupost Group is the whole story. Founded in 1983 with $27 million, it now manages around $30 billion.

The fund focuses on distressed securities, special situations, bankruptcies, and assets where other investors can''t or won''t participate — either because of regulatory constraints, illiquidity, or sheer complexity.

He''s famously kept 30–50% of the portfolio in cash during periods when he can''t find attractively priced opportunities. Most fund managers feel pressure to be fully invested at all times.

Klarman has explicitly said that holding cash is an active decision — not a failure to deploy, but a choice to wait for real value.

Howard Marks

Wharton School of the University of Pennsylvania, BS in Finance summa cum laude, Phi Beta Kappa, 1967. University of Chicago Booth School of Business, MBA, 1969.

He has said that Chicago — where the efficient market hypothesis was gospel — taught him exactly what the prevailing wisdom was, which made it easier to know when to disagree with it.

Seth Klarman

Cornell University, BA in Economics, 1979. Harvard Business School, MBA, 1982.

Went straight from Harvard to join Max Heine and Michael Price at Mutual Series Fund — two of the most important value investors of that generation. That two-year apprenticeship shaped everything.