Oaktree Capital Group, is poised to take advantage of distress brought on by the falling price of oil, said Howard Marks, cofounder of the investment manager.
“It’s our job to catch falling knives,” he said Tuesday December 8 at the Goldman Sachs Financial Services Conference in New York.
“You have to invest in it very gingerly, very carefully.”
Oaktree specialises in so-called distressed debt, or the bonds of companies that have run into trouble.
Distressed-debt investors have struggled to generate returns in the wake of the financial crisis, as an extended period of low interest rates limited the number of companies that have fallen into difficulty. With interest rates set to rise in the near future and the price of oil plummeting, some are betting that more companies will find themselves under pressure.
Marks was joined at the event by Oaktree CEO Jay Wintrob, who spent time talking about the billions in cash the fund has raised. Oaktree executives have said in the past that they can spend billions of dollars buying up cheaper credit in a relatively brief period of time. But the timing is the difficult part.
“Nobody knows where the price of oil is going,” Marks said. “We have bonds that have gone from 90 to 60 in the last couple months.”
Marks said that it’s not just energy companies that are likely to struggle, and he thinks it could get worse.
“I think $37-dollar oil will present a lot of opportunities,” he said Tuesday. “I think $30 will present more.”