Conversations: Walking into the Unknown with Howard Marks, David Rosenberg, and Aman Kumar
Jan 4, 2024
auto_awesome
Howard Marks, David Rosenberg, and Aman Kumar discuss the challenge of resetting one's idea of normal in financial markets. They explore the drivers behind the recent market rally and the potential pivot of the Fed. The speakers also highlight the risks and trends for 2024, including consumer spending and an exciting trade opportunity. They delve into the shifts in the life sciences public equity market, exploring volatile valuations and non-dilutive financing opportunities.
Investors should adapt their strategies to a fundamentally changed environment and not expect the same results in a period of declining and ultra low interest rates.
Flexibility and openness to adjust investment approaches based on evolving circumstances are crucial for successful investing.
In the life sciences sector, there are significant shifts in the market dynamics including an increase in non-dilutive financing opportunities, uptick in mergers and acquisitions, and growing need for need-to-have products.
Deep dives
Challenging the Perception of Normal in Financial Markets
Howard Marks questions the commonly perceived notion of declining and ultra low interest rates as 'normal' in the financial markets. He emphasizes the importance of understanding historical context and recognizing when the current period deviates from the norm. Marks suggests that investors need to adapt their strategies and not expect the same results in a fundamentally changed environment.
The Importance of Openness to Change in Investing
Marks discusses the difficulty investors face in resetting their idea of normal and overcoming cognitive biases. He highlights the need for flexibility and openness to adjust investment approaches when confronted with new information and changing market conditions. Marks emphasizes that changing one's position based on evolving circumstances is crucial for successful investing.
Reflections on Memo Writing and Adaptive Investing
Marks reflects on the key themes covered in his memos throughout the year, which include lessons from Silicon Valley, the concept of winners and losers, and adapting to changing market conditions. He emphasizes the importance of thoughtful investing, defining success, and being aware of the changing economic landscape. He also underscores the significance of revisiting and revising investment philosophies over time.
The Outlook for 2024 and the Implications for Investors
Looking ahead to 2024, Marks considers the market's current status, the prospect of a recession, and the role of interest rates. He cautions that while the market may not appear excessively high or low, investors should be prepared for potential changes in the interest rate environment. Marks suggests that credit strategies could offer attractive returns compared to equities and highlights the importance of seizing compelling opportunities in understanding the shifting dynamics of the investment landscape.
Life Sciences Lending: Capitalizing on Biotech Opportunities
Aman Kumar discusses the significant shifts in the life sciences public equity market, particularly in the biotech sector. He explains the reasons behind the market's volatility, including changes in spending trends, regulatory shifts, the collapse of the SPAC market, and rising interest rates. Kumar highlights the increase in non-dilutive financing opportunities for life sciences companies, leading to a growing pipeline for direct lending. He also identifies an uptick in mergers and acquisitions in specific sub-sectors and the attractiveness of platforms plays and need-based life-saving products for sponsors and pharmaceutical companies.
Managing Risks and Opportunities in Biotech Investing
Kumar discusses the risks faced by private investors in the biotech industry, including regulation, reimbursement, and competition. He emphasizes the importance of careful structuring of credit agreements and selecting companies with post-regulatory approval and innovative, need-to-have products. Kumar expects continued merger and acquisition activity in the biotech space, driven by low valuations and companies seeking alternative financing options. He also highlights the vast and growing opportunities in the life sciences sector, fueled by secular tailwinds and the need for non-dilutive financing solutions.
What is a “normal” investment environment? What might a recession in 2024 mean for liquid credit? What’s happening in life sciences lending today? Find out by listening to the latest episode of The Insight: Conversations with Howard Marks (Co-Chairman), David Rosenberg (Co-Portfolio Manager, Global Credit), and Aman Kumar (Co-Portfolio Manager, Life Sciences Lending). They discuss topics from the December edition of The Roundup: Top Takeaways from Oaktree’s Quarterly Letters and consider what investors should focus on as we enter 2024 – and what remains unknowable.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
