Howard Marks of Oaktree Capital, whatever his merits as a hedge-fund manager, is a spectacularly good memo-writer. And his latest makes a particularly germane point:
Once you decide to lever a fund, “risk management” becomes more important than “portfolio management.” Many more people know how to pick securities than know how to restrict a levered fund’s risk to the amount that can be withstood. And the ability to pick securities for an unlevered fund isn’t nearly as critical as the ability to manage risk in a levered fund.
