“Either this is the greatest buying opportunity of my career or the world is going to end,” Mr. Karsh told his staff. “And if it ends, our clients will have much bigger problems on their hands.”

With the markets reeling, Mr. Karsh turned aggressive. The steep downslide had produced a long list of great businesses saddled with too much debt. From mid-September through year-end, Mr. Karsh spent more than $6 billion on distressed loans of companies like Clear Channel Communications, Freescale Semiconductor and Univision. It was, by far, the fastest pace at which Oaktree had ever put money to work.

Clients grew anxious. Calls began streaming in to check Oaktree’s performance. In October, Mr. Marks tapped out another memo to assuage them.

“Our assets are declining in value like everything else, but we’re comfortable that we’re doing exactly what you hired us to do,” he wrote. “We’re grabbing at falling knives. The best bargains are always found in frightening environments.”

In some ways, Mr. Karsh was replicating a successful trade from earlier in the decade. In 2002, after the telecom sector cratered, he bought bonds of Lucent, Nortel, Qwest and Corning at fire-sale prices. The companies never missed an interest payment, the bonds recovered and Mr. Karsh racked up huge gains.

But the crisis in the fall of 2008 was on a whole other order of magnitude. For months, Oaktree continued to lose money. Mr. Marks tried to reassure his clients, saying it was inevitable that they would be buying on the way down, that even the most experienced investors couldn’t pinpoint when the market would stop dropping.

Looking back, Mr. Karsh, now 58, said that if had he waited until March 2009, the eventual market nadir, Oaktree would not have been able to invest as much as it did. By then, all of the hysterical selling had run its course, and there were fewer bonds to buy.