market folly

Howard Marks, chairman of Oaktree Capital, is out with his latest memo.  Entitled, "Dare To Be Great II", the letter is an addendum of sorts to an original piece he penned in 2006 called Dare to Be Great.

In his latest missive, Marks focuses on how investment managers need to define success and outline what risks they're willing to take to achieve it.  Marks devotes several paragraphs to this, stating investors have to:

- Dare to be different
- It isn't easy being different
- Dare to be wrong
- Dare to look wrong
- Looking right can be harder than being right

Marks notes,

"In order to be a superior investor, you need the strength to diverge from the herd, stand by your convictions, and maintain positions until events prove them right.  Investors operating under harsh scrutiny and unstable working conditions can have a harder time doing this than others."

There are numerous aspects that affect how much and what types of risks an investment manager can and will take: emotional stability, career risk (employers and/or clients), etc.  Obviously institutional investors face much of the latter with investors/clients becoming more short-term focused everyday it seems.

The Oaktree chairman concludes that,

"Unconventional behavior is the only road to superior investment results, but it isn't for everyone.  In addition to superior skill, successful investing requires the ability to look wrong for a while and survive some mistakes."


Embedded below is Howard Marks' latest memo: Dare To Be Great II:




You can download a .pdf copy here.

For more on this manager, head to some of Oaktree's recent portfolio activity here.  And for more memos from Marks, head to his previous one on the role of luck in investing.