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Memo to: Oaktree Clients From: Howard Marks Re: The Complete Collection

This anthology represents the collation of all my public memos, from the first one in 1990 to the latest as of the date of publication. It’s the sole (official) collection of my memos in a single volume. As a body of work, the memos chart the themes I consider to be truly indispensable to understanding the investment world: • Cycles are inevitable, and understanding and mastering them is of great importance. • Patterns in investor behavior rhyme from cycle to cycle, creating profound opportunities at the extremes. • Emotion drives investors to do the wrong thing at the wrong time and must be resisted. • Contrarianism at pivotal moments is much more effective than following the herd, but much more difficult. • Price matters. There’s no such thing as a good investment if the relationship between price and underlying value is unreasonable. • You can’t excel in investing without a knowledge advantage, which is found not in merely possessing data, but in drawing superior inferences and applying “second-level thinking.” • Macro predictions are unlikely to give you an edge. • Certainty has no place in investing, and intellectual humility is essential. • Other investors – and thus the markets – aren’t easy to beat; merely trying harder won’t do it. • Because others are intelligent too, you’re unlikely to come across return windfalls or sure things. • Randomness is ever-present, and it can produce just about any outcome in the short run. That means you mustn’t expect a well-reasoned process to work in anything other than the long term. • Risk is an indispensable aspect of investing; it must be controlled but can’t be eliminated. • Skilled investors achieve “asymmetry,” enjoying returns that are disproportionate to their risk. • One plausible route to asymmetry is via the minimization of losses. I hope this serves as a useful resource for you.

October 12, 2025

1993 1992 1991 1990

Table of Contents The Route to Performance First Quarter Performance Microeconomics 101: Supply, Demand and Convertibles The Value of Predictions, or Where’d All This Rain Come From?

1994

Random Thoughts on the Identification of Investment Opportunities Risk in Today's Markets Risk in Today's Markets Revisited

1996

Are You An Investor or a Speculator? Who Knew?

1999

The Value of Predictions II (or “Give That Man a Cigar”)

1997

How the Game Should Be Played

1998

1995

How Does an Inefficient Market Get That Way?

Will It Be Different This Time?

Genius Isn’t Enough (and Other Lessons from Long-Term Capital Management) How’s the Market?

2000

bubble.com Irrational Exuberance Investment Miscellany We’re Not In 1999 Anymore, Toto Safety First . . . But Where? 2001

What’s It All About, Alpha? Notes from New York What Lies Ahead? You Can’t Predict. You Can Prepare.

Table of Contents (continued) Learning From Enron 2002

The Realist’s Creed Quo Vadis? Etorre’s Wisdom Returns and How They Get That Way Whad’Ya Know? 2003

What’s Going On? The Most Important Thing What’s Your Game Plan? The Feeling’s Mutual Hey, Steward!! 2004

Us and Them

The Happy Medium Hedge Funds: A Case for Caution Risk and Return Today

2005

Oaktree at Ten There They Go Again A Case in Point Hindsight First, Please (or, What Were They Thinking?) Risk It Is What It Is 2006

Returns, Absolute Returns and Risk You Can’t Eat IRR

Dare to Be Great The New Paradigm Pigweed

Table of Contents (continued) The Race to the Bottom

2007

Everyone Knows It’s All Good It’s All Good . . . Really? Now It’s All Bad? No Different This Time – The Lessons of ‘07 Now What? Whodunit The Tide Goes Out

2008

The Aviary Doesn’t Make Sense What Worries Me Nobody Knows Plan B The Limits to Negativism Volatility + Leverage = Dynamite

2009

The Long View Will It Work? So Much That’s False and Nutty Touchstones

Tell Me I’m Wrong I’d Rather Be Wrong 2010

Warning Flags It’s Greek to Me Hemlines Open and Shut All That Glitters

Table of Contents (continued) On Regulation 2011

How Quickly They Forget Down to the Wire What's Behind the Downturn? It's All Very Taxing What Can We Do For You?

2012

Assessing Performance Records A Case Study Déjà Vu All Over Again It's All A Big Mistake On Uncertain Ground A Fresh Start (Hopefully) Ditto 2013

High Yield Bonds Today The Outlook For Equities The Role of Confidence The Race Is On

2014

Getting Lucky Dare to Be Great II

Risk Revisited The Lessons of Oil

2015

Liquidity Risk Revisited Again It’s not Easy Inspiration from the World of Sports

Table of Contents (continued) On the Couch

2016

What Does the Market Know? Economic Reality Political Reality Implications of the Election Go Figure!

2017

Expert Opinion Lines in the Sand There They Go Again... Again Yet Again? 2018

Latest Thinking Investing Without People The Seven Worst Words in the World Political Reality Meets Economic Reality 2019

Growing the Pie This Time It's Different On the Other Hand Mysterious You Bet! Nobody Knows II Latest Update Which Way Now?

2020

Calibrating Knowledge of the Future Uncertainty Uncertainty II Not Enough The Anatomy of a Rally Time for Thinking Coming into Focus

Table of Contents (continued)

2021

Something of Value

2020 in Review Thinking About Macro The Winds of Change Selling Out The Pendulum in International Affairs

2022

Bull Market Rhymes Conversation at Panmure House I Beg to Differ The Illusion of Knowledge What Really Matters? Sea Change

2023

Lessons from Silicon Valley Bank Taking the Temperature Fewer Losers, or More Winners? Further Thoughts on Sea Change Easy Money The Indispensability of Risk 2024

The Impact of Debt The Folly of Certainty Mr. Market Miscalculates Shall We Repeal the Laws of Economics? Ruminating on Asset Allocation On Bubble Watch Gimme Credit

2025

Nobody Knows (Yet Again) More on Repealing the Laws of Economics Calculus of Value A Look Under the Hood Cockroaches in the Coal Mine Is It a Bubble?

Addendum to Third Quarter Client Letter From: Howard S. Marks Re: The Route to Performance

We all seek investment performance which is above average, but how to achieve it remains a major question. My views on the subject have come increasingly into focus as the years have gone by, and two events in late September -- and especially their juxtaposition -- made it even clearer how (and how not) to best pursue those superior results. First, there was an article in the Wall Street Journal about a prominent money management firm's lagging performance. Its equity results were 1,840 basis points behind the S&P 500 for the twelve months through August, and as a result its five-year performance had fallen behind the S&P as well. The president of the firm explained that its bold over- and under-weightings weren't wrong, just too early. Here is his explanation, with which I strongly disagree: If you want to be in the top 5% of money managers, you have to be willing to be in the bottom 5%, too. The above calls to mind a convertible mutual fund I discussed in my second quarter 1988 letter to convertible clients. The fund held large amounts of common stock in the first eight months of 1987 and cash after that. As a result, its return was more than 1,600 basis points better than the average convertible fund for the year, and 945 b.p. ahead of the second-place fund. In the next half year, its tactics were equally divergent ... but wrong this time, producing performance which was far enough behind to negate the majority of its 1987 achievement and pull its 18-month results well back into the pack. My observation at that time mirrored the fund manager quoted above, but from a negative viewpoint: . . . in order to strive for performance which is far different from the norm and better, you must do things which expose you to the possibility of being far different from the norm and worse. These cases illustrate that bold steps taken in pursuit of great performance can just as easily be wrong as right. Even worse, a combination of far above-average and far belowaverage years can lead to a long-term record which is characterized by volatility and mediocrity. U

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As an alternative, I would like to cite the approach of a major mid-West pension plan whose director I spoke with last month. The return on the plan's equities over the last

1990 Oaktree Capital Management, L.P.

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fourteen years, under the direction of this man and his predecessors, has been way ahead of the S&P 500. He shared with me what he considered the key: We have never had a year below the 47th percentile over that period or, until 1990, above the 27th percentile. As a result, we are in the fourth percentile for the fourteen year period as a whole. I feel strongly that attempting to achieve a superior long term record by stringing together a run of top-decile years is unlikely to succeed. Rather, striving to do a little better than average every year -- and through discipline to have highly superior relative results in bad times -- is: -

less likely to produce extreme volatility, less likely to produce huge losses which can't be recouped and, most importantly, more likely to work (given the fact that all of us are only human).

Simply put, what the pension fund's record tells me is that, in equities, if you can avoid losers (and losing years), the winners will take care of themselves. I believe most strongly that this holds true in my group's opportunistic niches as well -- that the best foundation for above-average long term performance is an absence of disasters. It is for this reason that a quest for consistency and protection, not single-year greatness, is a common thread underlying all of our investment products: In convertibles , we insist that our call on potential appreciation be accompanied by above average resistance to declines. U

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In high yield bonds , we strive to raise our relative performance by avoiding credit losses, not by reaching for higher (but more uncertain) yields.

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In distressed company debt , we buy only where we believe our cost price is fully covered by asset values. U

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There will always be cases and years in which, when all goes right, those who take on more risk will do better than we do. In the long run, however, I feel strongly that seeking relative performance which is just a little bit above average on a consistent basis -- with protection against poor absolute results in tough times -- will prove more effective than "swinging for the fences."

October 12, 1990

1990 Oaktree Capital Management, L.P.

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