(Bloomberg) -- Oaktree Capital Management co-founder Howard Marks said he expects more companies to default on their debt as higher interest rates make it harder for struggling companies to raise capital. 

“When you go through a period when it’s super easy to raise money for any purpose or no purpose, and you go into a period when it’s difficult to raise money, even for a good purpose, clearly many more companies are going to founder,” Marks said in an interview taped for an upcoming episode of Bloomberg Wealth with David Rubenstein. 

Oaktree, founded in 1995 as a distressed-debt specialist, now manages roughly $180 billion in assets. Marks made his name in distressed debt, having spent 10 years at TCW leading teams that invested in the asset class. Over the years he’s gained a wide following for his investment memos, which cover the markets, international affairs and other topics. 

When asked whether he expects more defaults in the buyouts or real estate industries in the next three years, Marks told Rubenstein that the combination of having less money and a higher cost of capital will leave a “hole” that some firms can’t fill. 

Read More: Landlords With $1.2 Trillion of Debt Face Rising Default Risks

Asset managers and real estate investors are contending with the toughest borrowing environment since the 2008 global financial crisis. A sharp rise in interest rates starting in March 2022 has made it costlier to refinance existing loans or fund acquisitions. 

This partly contributed to an increase in defaults on commercial real estate among large players such as Blackstone Inc., Brookfield Corp. and Goldman Sachs Group Inc. this year. 

The Fed funds rate was roughly zero for much of the period between 2009 to 2021, which Marks said is an “inappropriate” level because it subsidizes borrowers and punishes lenders and savers. He thinks the US Federal Reserve will keep rates between 2% and 4% once inflation abates, which he views as a suitable range. 

“You can’t live on a shot of adrenaline every morning for 13 years,” he said. “I would like to see the Fed get to a neutral position, which is neither stimulative nor restrictive.” 

Investment giant Brookfield bought a majority stake in Oaktree more than three years ago, but the co-founders of the Los Angeles-based firm “are still running the show,” according to Marks.   

For the full interview with Marks, watch Bloomberg Wealth with David Rubenstein on Oct. 3 at 9 p.m. in New York.

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