MW Howard Marks still believes in U.S. exceptionalism - but perhaps not by as much

By Steve Goldstein

Kuwait sovereign wealth fund leader warns about private equity

Howard Marks, the co-chairman of Oaktree Capital Management and one of the pre-eminent investors in the world, said Wednesday the U.S. is still the destination of choice for investors.

"The words 'U.S. exceptionalism' are on everybody's lips these days. And the U.S. has really been pre-eminent in the world for the last 80 to 100 years, based on a dynamic economy, respect for the free-market system, respect for the rule of law, capital markets, spirit of innovation, many things. Those things haven't gone away. I think that the U.S. is still the destination of choice," he said.

Marks, who made his comments at a panel on the 2025 Qatar Economic Forum, did allow for some doubts.

"The question is, is it still as best as it was," said Marks. "And that's a judgment."

"Are we as dependable as we always have been," he asked. "But I can't imagine how a large, globally-oriented fund make a substantial reduction in the U.S. Everything has to go some place. Where would it go? What's better?"

Sheikh Saoud Salem Abdulaziz Al-Sabah, managing director of the $1 trillion sovereign-wealth fund the Kuwait Investment Authority, echoed those remarks on the same panel.

He made very clear that his fund was not about to start selling U.S. assets.

"I would say, very bluntly, underweight America at your own risk. Because people tend to talk about going underweight the U.S. and the question is against what," Al-Sabah asked.

"I think the breadth and depth to sustain its exceptionalism, and it has the rule of law as well," he said. "That still applies."

The S&P 500 SPX fell below 5,000 in April but has rallied to near 6,000 after the Trump administration walked back, at least for a few months, much of its tariffs.

The iShares MSCI All-World ex-U.S. ETF ACWX has gained 14% this year, outperforming the S&P 500's 1% rise.

But he dodged the question of whether Kuwait would be increasing investments into the U.S. the way other Middle East governments have in a high-profile way. "If you are already there, you do not need to be joining," he said.

Where Al-Sabah wasn't confident was in private equity. "Private equity is in trouble because they got away of doing mistakes for the past five, 10 years without paying the price for it. I think their time is coming up," he said.

He cited three worries: poor underwriting, a lack of what he calls exit optionality and size drift.

"We've been seeing private-equity funds grow up in size with the same number of portfolio companies," he said. "You're seeing them coming up at 10, 15, 20 billion dollars in size. If the base case of underwriting is two times your return, it means you have to be realizing $40 billion worth of assets. The question is, who's going to buy them?"

"And the answer is, I don't know," he said. "And the worst part of it is they're approaching the end of their fund life cycle."

-Steve Goldstein

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May 21, 2025 08:43 ET (12:43 GMT)

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