Oaktree’s Howard Marks Sees Opening in Private Equity, Real Estate Pain
Struggling under the weight of interest rates, highly-levered assets within private equity and real estate are promising distressed investors some of the best opportunities in more than a decade, according to Howard Marks, co-chairman and co-founder of Oaktree Capital Management.
“The use of debt to amplify your returns has been the lifeblood of these two asset classes and they’ve done extremely well as a result,” he said in an interview on Bloomberg Television Monday. “But that’s where the pain will come in the future.”
Risky corporate borrowers, especially those backed by private equity, have seen a jump in borrowing costs as a result of rate hikes from the Federal Reserve. In the property market, the value of commercial real estate has fallen while a slow-rolling wave of maturities is underway, setting the stage for lender losses.
That’s an opening for firms, like Oaktree, which specialize in distressed lending and bargain-hunting. Roughly $199 billion of corporate debt in the US is trading in distressed territory, according to data tracked by Bloomberg.
