Amid the ongoing selloff across various assets classes due to the Covid-19 pandemic, billionaire investor Howard Marks says the ongoing episode has made it clear that there is nothing called ‘magic potion’ in the investment world.
The best risk-parity funds, the world’s greatest algorithmic fund have all suffered losses. Even gold, Bitcoin have failed to stand this wave, Marks said.
At the same time, he pointed out how emotional selling allows investors to access the greatest bargains.
“Asset holders’ ability to hold coolly is evaporating, and motivated selling is picking up,” he wrote in his latest memo to investors, adding that “this is a short, chaotic period, and we can say so far, the evidence of a miracle investing is lacking.”
The co-founder of Oaktree Capital Management said risk-parity funds, which were designed to do well in most environments, experienced double-digit losses in February. Even the world’s greatest algorithmic fund, which sports a fabulous long-term record, suffered a loss of several per cent last month.
Sharing a piece of wisdom for those waiting for market bottoms, he said this is absolutely impossible to know when the bottom has been reached ever. “Oaktree explicitly rejects the notion of waiting for the bottom. We buy when we can access value cheap. Given the price drops and selling we’ve seen so far, I believe this a good time to invest, although of course it may prove to have been not the best time.” he said.
“If you do not mind mark-to-market losses, then you should invest in the market. On the other hand, if you care more about protecting against interim markdowns, you should invest less,” he said.
He said strong action is the need of the hour to flatten the curve of rising trend of coronavirus cases. However, the impact of shutting down businesses and individuals will be painful, he warned.
“You may see news like business closures, job losses, supply-chain disruption, shortage of life’s necessities and challenges to the health system. In all these ways and more, the early news is bound to be bad. I think that’s indisputable,” Marks said.