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Fed won't add to high-yield pain yet: Howard Marks

The Federal Reserve's interest rate hike and subsequent increases should not fuel fears of more trouble in the high-yield debt market, widely followed distressed debt investor Howard Marks said Friday.

The U.S. central bank voted to raise the target range for its benchmark federal funds rate by 0.25 percent on Wednesday. The policy tightening comes amid troubles for some high-yield debt funds.

"Twenty-five basis points is not going to stress anybody out. I don't think they're going to move far enough or fast enough to change the equation," Marks said of the Fed's intent to normalize rates gradually.

Howard Marks, chairman and co-founder of Oaktree Capital Management
Victor J. Blue | Bloomberg | Getty Images
Howard Marks, chairman and co-founder of Oaktree Capital Management

Fed Chair Janet Yellen addressed high-yield debt after the central bank's decision, downplaying the significance of Third Avenue. The fund sparked concerns when it put redemptions on hold last week.

Marks, the co-founder of Oaktree Capital Management, noted that many recent high-yield opportunities have emerged in the energy sector amid a plunge in the price of crude oil. But some energy firms have faced difficulties meeting obligations, including dividends, in the low-price environment.

He said that low prices often cure themselves because firms cut investment in more production, therefore reducing supply.

"The great thing for the industry is we're at the level in which people stop investing in capacity," Marks said.