Billionaire Howard Marks’ advice for investors looking to start a hedge fund now: get a time machine

Billionaire Howard Marks’ advice for investors looking to start a hedge fund now: get a time machine


  • Billionaire investor Howard Marks, who co-founded Oaktree Capital in 1995, said it’s gotten increasingly hard to start a hedge fund.
  • Hedge fund managers will see their pay squeezed compared to those of years past due to competition from passive investment products.
  • Hedge fund launcheswere cut nearlyin half between 2018 and 2017, according to data from Preqin.

Billionaire investor Howard Marks first step for aspiring hedge fund managers dying to start their own fund is to find a time machine.

Marks, speaking on Wednesday at the Context Summits conference in Miami, said that those looking to launch a hedge should “start in 1968” — the year the Oaktree Capital co-founder left graduate school.

“The people that start in 2019 arenot going to face the same opportunities that we faced,” he said.

Factors such as passive investing driven by computers have made it more difficult for people to make a career out of investing, he said, noting that most computer-driven strategies can beat as much as 95% of investors.

Hedge fund launcheswere cut nearlyin half between 2018 and 2017, according to data from Preqin.

“The trend toward passive did not take place because the passive returns were so great, it was because the active returns were so bad,” he said.

Read more:It’s not enough to be two guys from Goldman Sachs in a room with $5 million — the bar for launching a hedge fund is rising in 2019

Still, Marks sees room for humans in investing to provide what he called “exceptional insight.”

“I don’t think a computer can sit down with an executive and tell that he’s Steve Jobs,” he said.

But the abundance of computer-driven investing options not only pushes people out of the space, but also cuts down on pay since managers are competing with cheaper passive products. Fees have been cut to where the one-time typical charge of a 2% management fee and 20% performance fee is now only attached to only 30% of funds, according to Hedge Fund Research.

To launch a fund, “you have to do it because you love it, and if that all sounds attractive, then I would do it,” Marks said.

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