Bruce Karsh
Investment partner and co-founder — the creator of Oaktree's distressed debt capabilities
Biography
Bruce Karsh (born 1955) is Co-Founder, Co-Chairman, and Chief Investment Officer of Oaktree Capital Management. He is Howard Marks' most important professional partner — the man who built Oaktree's most consequential investment strategy from nothing and who implemented Marks' investment philosophy at the largest scale.
Karsh earned his law degree from the University of Virginia and joined his brother-in-law Howard Marks at TCW in the mid-1980s. At TCW, while Marks built the high yield bond franchise, Karsh created the distressed debt practice — a new and at the time poorly understood corner of credit markets where companies' defaulted or near-defaulting bonds were available at prices that reflected panic rather than fundamental value.
In 1995, Marks, Karsh, and six colleagues left TCW to found Oaktree Capital Management. Karsh became the portfolio manager of the flagship Opportunities Funds — Oaktree's most storied investment vehicles — while Marks focused on firm strategy and client communication.
Karsh appears in 25 memos with 52 total mentions — the most frequently referenced living colleague, and the person whose investment decisions most directly embody the philosophy Marks articulates in writing.
Marks has been unusually candid about the role of chance in the partnership's origin. In "Getting Lucky" (2014), a memo devoted to cataloguing the luck in his own career, he writes that "I was at my luckiest when I teamed up with my wonderful partners," and singles out Karsh's specific contribution: it was Karsh who "had the idea to organize a fund to invest in “distressed debt” at TCW, the first one from a mainstream financial institution." The candor is characteristic — Marks assigns the founding insight of Oaktree's signature strategy to his partner rather than to himself.
The partnership also has a personal texture that surfaces in the memos at odd moments. Karsh is a chess player — "Few people know that Bruce is a chess player," Marks wrote in "The Indispensability of Risk" (2024), after a Wall Street Journal article Karsh sent him on the power of sacrifice in chess prompted that memo. In "It is What it is" (2006), a lunch the two shared with Charlie Munger becomes the frame for Marks' argument that the market in investment advice had itself become inefficient. These details matter because they reveal the memos' working method: Marks thinks in dialogue, and Karsh is his most constant interlocutor.
Key Stories
Building Distressed Debt from Nothing — When Karsh started the distressed debt practice at TCW in the late 1980s, there was no textbook, no established methodology, and very little institutional precedent. The S&L crisis created the first large wave of distressed assets, and Karsh developed the analytical framework — recovery analysis, capital structure analysis, restructuring scenario modeling — in real time, under conditions of genuine uncertainty. This practice, refined across five cycles, became Oaktree's most identifiable investment capability.
The GFC Opportunity Fund — The most consequential investment decision in Oaktree's history was the aggressive deployment of Opportunity Fund VI during the depths of the 2008-2009 financial crisis. After Marks wrote "Now What?" arguing that credit markets were presenting generational investment opportunities, Karsh executed: deploying billions of dollars into senior secured debt of fundamentally sound businesses that were trading at 40-60 cents on the dollar due to forced selling and panic. The fund generated returns in the high 20s% annually — among the best in Oaktree's history — not through brilliant forecasting but through the disciplined application of the credit analysis methodology Karsh had developed over 20 years.
The Division of Labor — Marks and Karsh have maintained a division of labor across 35 years that is specific and effective: Marks articulates the framework, writes the memos, communicates with clients, and sets the strategic direction. Karsh makes the portfolio decisions, manages the investment teams, and executes the strategy. Neither role is secondary. Oaktree without Karsh's portfolio management would be a philosophy without results; Oaktree without Marks' framework would be results without principled justification.
Consistent Through the Difficult Periods — Every distressed cycle has a middle period — 6 to 18 months after initial investment — when positions have moved against the thesis, the consensus says the analysis was wrong, and the pressure to sell is intense. Karsh has maintained conviction through these periods across multiple cycles, not through stubbornness but through deep confidence in the underlying analytical model. The returns realized when the thesis eventually proved correct in every major cycle have validated this discipline.
The First Fund, 1988 — The origin of the distressed practice is recorded in "Dare to Be Great II" (2014) as a case study in why great investments begin in discomfort: the very idea of buying the debt of companies seemingly at death's door made the first fund hard to raise, and the same aversion that repelled other investors is what made the assets cheap and the subsequent returns consistently high. Marks has returned to the founding moment repeatedly. In "Fewer Losers, or More Winners?" (2023) he marks 1987 as the year he joined up with Karsh and 1988 as the year of their first distressed debt fund — and credits Karsh's record since then as proof that aspiring to returns well above bonds requires finding winners, not merely avoiding losers.
The Pace of Deployment, 2008 — The GFC deployment was not serene conviction but managed doubt. Marks records in "Uncertainty" (2020) that during the buying, Karsh came to him on alternating days fearing they were investing too slow, then too fast — and that this grappling produced the right pace: an average of $450 million invested per week over the last fifteen weeks of 2008. In October 2008, with the outcome unknowable, the two co-signed a memo to Opportunities Fund investors promising that "in a few years we’ll reminisce together about how easy it was to take advantage of the bargains of 2008-09." By mid-2009, Karsh's verdict was that "Armageddon is off the table." The reminiscence proved accurate.
Impact on Oaktree
The Distressed Practice: Karsh built and led what became one of the world's leading distressed debt franchises. The practice was the primary driver of Oaktree's most exceptional returns across the S&L crisis, the telecom distress, the GFC, and the energy distress cycles.
The Proof of Philosophy: Every Marks memo is, in some sense, a prospectus for action. Karsh's portfolio management turned the prospectus into results, demonstrating that the philosophy was not merely theoretically sound but practically executable at commercial scale.
The Institutional Model: Oaktree's investment process — conviction-based credit analysis, independent of short-term market noise, executed with genuine patience — is most explicitly embodied in how Karsh manages the Opportunities Funds. His process has become a model that Oaktree replicates across its other strategies.
The Rebuttable Presumption: Karsh's influence on Marks' written framework is occasionally explicit. The formulation of market efficiency as a "rebuttable presumption" — start from the general rule that markets are efficient, but allow the rule to be disproved in individual situations — is one Marks attributes directly to Karsh in "Getting Lucky" (2014). It is the intellectual hinge of Oaktree's entire approach to inefficient markets: presume efficiency, then let the analysis rebut it.
The Case Study in Risk: When Marks needs a concrete demonstration that risk cannot be read off the surface characteristics of an asset, he reaches for Karsh's funds. In "Risk" (2006), he walks through the paradox: the distressed funds look maximally risky — defaulted debt, promises of payment out the window, extremely wide outcome ranges, illiquidity, little diversification — yet in seventeen years had never produced a fund that lost money or a negative aggregate year. The point is foundational to the memo corpus: risk lives in the price paid and the skill applied, not in the label on the asset class.
The Short-Term Skeptic: Karsh's most recent contribution to the memos is a running skepticism about short-term forecasting. His theme, which Marks develops in "What Really Matters" (2022) and "I Beg to Differ" (2022), is that even a correct macro view is not actionable: "It’s very difficult to know which expectations regarding events are already incorporated in security prices." Marks built the closing argument of both memos around that observation — the possibility of a negative event is not itself a reason to reduce risk unless the event is not already reflected in prices, and there is usually no way to know.
Key Passages From Marks' Memos
"During our recent meetings with clients in London, Bruce Karsh and I spent a lot of time discussing the significance of the short-term concerns. Here's how he followed up in a note to me:"
— I Beg to Differ (2022)
"It's important to note, however, that market efficiency shouldn't be considered something that's universally applicable, but rather what Bruce Karsh has taught me to call a 'rebuttable presumption.'"
— Getting Lucky (2014)
"Bruce had the idea to organize a fund to invest in “distressed debt” at TCW, the first one from a mainstream financial institution. And then the five of us left to start Oaktree in 1995."
— Getting Lucky (2014)
"In 1988, when Bruce Karsh and I organized our first fund to invest in the debt of companies seemingly at death’s door, the very idea made it hard to raise money, and investing required conviction – on the clients’ part and our own – that our analysis and approach would mitigate the risk."
— Dare to Be Great II (2014)
"Bruce Karsh and his distressed debt team have averaged returns of roughly 23% per year before fees and 18% after fees for more than 23 years without any use of borrowed capital. All eighteen of their funds have been profitable, and money-losing years have been quite scarce."
— It's All a Big Mistake (2012)
"I consider this record nothing short of aberrant. You’re simply not supposed to be able to make that kind of return for that long, and especially without the use of leverage."
— It's All a Big Mistake (2012)
"But that didn’t keep him from investing an average of $450 million per week over the last 15 weeks of 2008. I think Bruce’s ability to grapple with his doubts helped him arrive at the right pace of investment."
— Uncertainty (2020)
". . . in a few years we’ll reminisce together about how easy it was to take advantage of the bargains of 2008-09."
— The Limits to Negativism (2008)
"In the last several years, a lot of private equity companies have been saddled with capital structures that didn’t anticipate a 400-basis point increase in interest rates."
— What's Going on in Private Credit? (2026)
Referenced In
Source: Howard Marks Knowledge Base — Oaktree Capital Management memos 1990–2025