•  
• Tweet
•  
•        Print
•  
•         Track Keywords
•  
• 

B. G., Opalesque Geneva:

According to Howard Marks, chairman of Oaktree Capital Management, we may be in the midst of a sea change which would mean that investment strategies that worked in the past may no longer work in the years ahead.

Marks remembers two instances of a sea change - or profound transformation - in the investment world during his professional life. One is the beginning of investments in high-yield bonds in the 1970s, which allowed the growth of leveraged buyouts and thus the private equity industry. This led to an important shift in investor mentality which went from risk avoidance to risk/returns considerations. The second sea change took place when Paul Volcker brought inflation under control, which allowed the U.S. Fed to reduce the fed funds rates, ushering in a low-interest rate environment that prevailed for four decades.

The combination of low-interest rates and risk/return thinking gave rise to "the rebirth of optimism among investors, the pursuit of profit through aggressive investment vehicles, and an incredible four decades for the stock market."

The effect of the prolonged decline in interest rates was an incredible tailwind for investors. It was akin to walking, rather than standing, on a moving walkway - such as those found in airports.

Post GFC

The period between the end of the Global Financial Crisis (GFC) in late 2009 and the onset of the pandemic in early 2020 was marked by low interest rates and an unusual......................

To view our full article Click here