(Bloomberg) -- Howard Marks, the billionaire co-founder of Oaktree Capital Group, isn’t a fan of liquid alternatives.

“They’re supposed to deliver performance comparable to other alternative investments without the illiquidity they entail,” Marks wrote in a memo to clients on Wednesday. “To me it sounds like just one more promise of something for nothing.”

Marks, 68, uses his quarterly memos to discuss trends in finance, such as market valuations and investment opportunities. His letter Wednesday focused on liquidity, or the ease of buying and selling assets, and whether recent innovations such as exchange-traded funds and so-called liquid-alternative vehicles can deliver performance comparable to their underlying assets.

Firms including New York Life and Goldman Sachs have sought to expand their liquid-alternative offerings, which allow clients to add or withdraw money daily. Some investors are opting for the lower-fee structure, with the category attracting record net subscriptions of $16.5 billion for 2014, according to Morningstar, raising the total assets to $157.6 billion.

Marks, co-chairman of Los Angeles-based Oaktree, said an investment offering shouldn’t promise more liquidity than its underlying assets can provide. In those cases, the greater ability to buy and sell is “usually illusory, fleeting and unreliable, and it works (like a Ponzi scheme) until markets freeze up,” he wrote.

Oaktree, the world’s biggest distressed-debt investor, oversaw $90.8 billion as of Dec. 31. The firm, started in 1995, also manages private equity holdings, real estate and energy- related assets.

Marks said the impact on liquidity of ETFs, liquid alternatives and new rules designed to stop banks from trading with their own money has yet to be tested. It’s “dangerous” to assume liquidity available in good times will remain when markets turn, he wrote.

“We’ll see what happens in the next serious downturn,” Marks said.

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