NEW YORK (Reuters) – Emerging market equities and real-estate debt remain attractive at a time when most of the year’s gains in the S&P 500 have already been realized, billionaire investor Howard Marks said on Wednesday at the CNBC Institutional Investor Delivering Alpha conference in New York.
Emerging markets, in particular, have been “significantly hit” this year, he noted.
“How many things can you find today that are down?” Marks said.
The MSCI International Emerging Markets index, for instance, is down 7.6 percent year-to-date, compared with a 5.2 percent gain in the U.S. benchmark S&P 500 index.
Marks, the co-chairman of Los Angeles-based Oaktree Capital, said that the U.S. bull market is nearing its later innings, though he noted that the corporate tax cuts passed in December have helped push valuations lower by increasing earnings growth.
As a result, his firm is “trying to be fully invested but we are emphasizing caution,” he said, and remains focused on single-B rated debt in the high-yield market.
Marks also cautioned that the popularity of exchanged-traded funds has helped push up the share prices of so-called FAANG stocks like Amazon.com Inc and Netflix Inc, and may leave investors exposed during a market downturn.
In a tough market environment, the liquidity of ETFs “will be shown to be illusory,” he said. “No investment vehicle can be liquid than the underlying” securities on which it is based, Marks said about ETFs.
Reporting by David Randall; Editing by Jennifer Ablan and Nick Zieminski