Recently, Brookfield Asset Management announced it had spent USD 3.0 billion to complete the acquisition of the remaining shares of Oaktree Capital Management. This transaction concluded the seven-year partnership between the two parties, which began in 2019, and marked the entry into a new stage of full integration. After the completion of the transaction, Howard Marks, the founder of Oaktree Capital, although no longer a shareholder, is able to remain in the company's management.

In terms of scale, Oaktree Capital is not particularly large, with a total of approximately USD 209.0 billion in assets currently. What makes it special is that most of the assets it invests in fall into the category of distressed assets. The investment it undertakes involves lending to other entities when they experience operational difficulties, or buying the debt of companies on the verge of bankruptcy at extremely low prices, and then converting the debt into equity through restructuring, selling the company only after it emerges from its difficulties. Because of this, Marks is known as the "king of distressed debt investing," and this is precisely what makes it unique.

Marks was born in Queens, New York, in 1946. He graduated from the Wharton School of the University of Pennsylvania in 1967, and subsequently obtained an MBA degree with a concentration in accounting and marketing from the University of Chicago Booth School of Business. He began his investment career at Citicorp Investment Management, and in 1985, he joined TCW Group, where he began engaging in and taking charge of work related to distressed debt, high-yield bonds, and convertible securities investments. Building precisely on the experience and market understanding accumulated from this period of work, in 1995, he and five partners founded Oaktree Capital, specializing in the disposal of distressed assets.

Marks believes that there are three elements to investing in distressed assets: first, irrational borrowing by the target company; second, the inability to repay debts; and third, reliable debt restructuring and legal mechanisms. He believes that these three elements are indispensable, though each has a different emphasis. The first looks at the source, i.e., companies that engage in excessive borrowing during periods of loose credit and turn a blind eye to risk are the targets that Oaktree Capital continuously observes. The second is the trigger timing. Once a debt default occurs, institutions holding these debts are often forced to sell in the shortest possible time, and prices are driven down far below intrinsic value, which represents the best buying window. The third is the most complex and critical. Whether the legal framework is clear, the judicial system is efficient, and asset disposal channels are smooth determines whether this investment ultimately makes a lot of money or loses a lot of money.

In 1990, Marks published his memo titled "The Route to Performance", where he put forward a core concept: the success of long-term investment relies not on a few astounding returns, but on consistently good returns and avoiding bad years. He repeatedly emphasized the importance of risk control, with Oaktree Capital placing risk control above all else and emphasizing performance consistency, not exceptionally good performance at once with drastic fluctuations, but very continuous success. In his view, the most important thing is not predicting tomorrow, but buying good things at low prices.

His most famous theories are "cycles" and "second-level thinking". The rise and fall of markets are cyclical, and people cannot accurately predict the market, but they can see clearly where they are in the cycle. The market is like a pendulum, swinging back and forth between optimism and pessimism. What investors actually need to do is not guess where the pendulum will swing, but judge where the pendulum currently is, whether it is greed, fear, euphoria, or despair. "Second-level thinking" is a core concept mentioned by Marks in his book The Most Important Thing. The goal is not to be right, but to make deeper, non-consensus judgments that are superior to the market consensus, thereby obtaining above-average returns.

There are many classic investment cases for Oaktree Capital. Among them, the operations during the 2008 financial crisis are the most representative. Between January 2007 and March 2008, based on long-term market tracking, Marks roughly anticipated the crisis that might arrive due to high leverage, and thus deployed in advance a "reserve fund" with a scale of USD 11.0 billion specifically to deal with the potential crisis. After the bankruptcy of Lehman Brothers, the market fell into extreme panic, and Oaktree Capital also faced a question internally if it should continue investing or not. Marks later recalled that he spoke on the phone with a chief investment officer, and every time he proposed a pessimistic hypothesis, the other party would follow up with an even worse scenario. He later remarked that “I found it impossible to make assumptions negative enough to satisfy some onlookers”. Marks realizes that when the market's pessimism has reached its extreme, when everyone feels that even worse things are going to happen, the worst moment would have actually passed. Therefore, starting on September 18, 2008, Oaktree Capital bought the bonds of distressed companies at an average speed of USD 0.4 billion per week, continuing until the end of the year. In this quarter alone, it invested USD 6.0 billion, bringing the total investment amount to USD 7.5 billion. Throughout the process, they acquired senior secured bonds of highly leveraged companies such as utility companies at prices about 50% below par value. This transaction ultimately earned approximately USD 6.0 billion in profits for Oaktree Capital's investors, and Marks and their partners reaped a return of about USD 1.5 billion.

In 2021, when China's real estate industry was just beginning to show signs of fatigue, the vast majority of foreign capital was avoiding risk, waiting and seeing, and withdrawing. Oaktree Capital went against the trend, providing Evergrande with a total of USD 1.0 billion in secured loans, using two real estate projects of Yuen Long in Hong Kong and Qidong in Jiangsu as collateral. After Evergrande defaulted on its debts in 2022 and the two collateral assets were taken over by Oaktree, the Yuen Long project in Hong Kong was sold in just 10 months at a transaction price of USD 0.637 billion, resulting in a single-transaction profit of USD 0.117 billion for Oaktree Capital. However, the Qidong project in Jiangsu was not so smooth. Due to complex debt structures, owner demands, pre-sale supervision, and other issues, it has not yet fully exited to this day.

Another case is Inter Milan. In May 2021, Oaktree Capital provided Suning with a EUR 0.275 billion three-year loan with an annual interest rate of 12%. When the loan matured in May 2024 and could not be repaid, with the total amount rising to approximately EUR 0.395 billion, Oaktree Capital officially took over Inter Milan Football Club. An American distressed asset investment institution, through a single loan, ultimately captured a century-old Italian football powerhouse. According to the 2021 agreement, if Suning sells Inter Milan, Oaktree Capital can siphon off 20% of the final selling price. Market analysis suggests that the potential return of this transaction could reach fivefold.

These cases actually indicate that Oaktree Capital's investing relies on seeing the position of the cycle earlier, making moves when others dare not take action, buying when assets are undervalued, and then restoring asset value through restructuring. As Marks pointed out, the key to success lies in buying at the right time.

Oaktree Capital officially stepped into China's distressed asset market as one of the first batch of Qualified Domestic Limited Partner (QDLP) institutions back in 2013. It executed its first distressed asset acquisition in 2015. Over the past three years, Oaktree Capital's distressed asset investments in China have exceeded RMB 10.0 billion. Marks has been bullish on the Chinese market for a long time, believing that China already possesses the first two elements, namely irrational borrowing and companies unable to repay their debts.

In fact, China's current distressed asset market is massive in volume. In the first half of 2026, the scale of commercial bank distressed asset disposal was at least over RMB 500.0 billion. Throughout the whole year of 2024, the banking industry's distressed asset disposal scale reached RMB 3.8 trillion, and 2025 also maintained a high level at RMB 3.5 trillion. As China is also disposing of distressed assets through various channels, Oaktree Capital’s philosophy offers some lessons for the country. For instance, the ability to revitalize assets is more important than the ability to acquire them. Having only debt investment capabilities is not enough; one must also have the ability to physically revitalize and operate the assets. In addition, a complete legal and institutional environment is the foundation for the rapid disposal of distressed assets. This is also one of the three elements mentioned by Marks, including reliable debt restructuring and legal mechanisms is the most critical, and this may be a relatively lacking link in the Chinese market.

For China's special asset and distressed asset disposal industry, the significance brought by Oaktree Capital lies not in how large its scale is, but in the fact that it adheres to a unique investment philosophy. In a market where the scale of distressed assets continues to expand, what is truly scarce is not money, but the ability to turn assets into value, or rather, adhering to a distressed asset investment and disposal philosophy that conforms to market laws.

Final analysis conclusion

The thoughts of Oaktree Capital founder Howard Marks, specifically cycles, contrarianism, and risk control, capture the essential characteristics of distressed assets. China’s distressed asset market is massive. What is lacking is not funds or policies, but the professional capabilities that Oaktree Capital possesses, such as the ability to identify cycles, price accurately, and deeply revitalize assets. Relying on administrative orders and policy-driven acquisitions can only solve temporary problems. What can truly digest the existing stock of risks still depends on a market-oriented, professional, and rule-of-law disposal system.