Oaktree assets hit $100bn, adjusted net income falls

The alternative investment firm’s assets grew by 16 percent from a year earlier, while adjusted net income fell by 37 percent.  

Oaktree Capital Management’s assets grew to $99.9 billion at the end of the first quarter from $86.2 billion 12 months before, the firm reported in its first quarter earnings report

Adjusted net income (ANI) declined to $155.3 million in the first quarter of 2015 from $246.9 million in the first quarter of 2014, representing a 37 percent drop.  Distributable earnings also declined to $140.5 million in the first quarter of 2015 from $233.1 million at that time last year. Both declines were largely attributable to lower incentive income, primarily driven by annual tax-related incentive distributions, the firm said in its results report.

In addition to ANI, Oaktree calculates economic net income (ENI), which measures incentive income based on market values of the funds’ holdings and is unaffected by tax-related incentive distributions. ENI increased to $228.9 million in the first quarter of 2015 from $18.7 million at the end of 2014, on higher fund-level incentives and investment income.

The firm also shared updates on its fundraising. Closed-end funds that Oaktree is currently marketing include the Oaktree Mezzanine Fund IV, the Oaktree Principal Fund VI, the Oaktree Real Estate Opportunities Fund VII, the Oaktree Opportunities X and Xb funds and the Oaktree Enhanced Income Fund III. Jay Wintrob (pictured), Oaktree’s chief executive said on the firm’s earnings call today (30 April) that the firm has raised a record $11 billion overall in the first quarter, of which $9 billion went to closed-end funds. The distressed Opportunities X funds and the Power Opportunities funds collected the majority of that capital.

Blended together Oaktree’s funds reported blended net IRR of 4 percent, with 49 of its 50 funds recording positive net IRR since inception, Wintrob said, with its European real estate strategy posting some of the highest returns: 6 percent in the quarter and 28 percent for the past twelve months.

 As of March 31, the distressed Opportunities X and Xb funds had raised $7.1 billion. The firm is reportedly approaching closing them to new money at the $10-$11 billion mark. The predecessor Oaktree Opportunities IX fund, which began investing last January and will run through January 2017, posted a net IRR of 1.3 percent so far. This fund was down 3 percent for the past 12 months because of some post-restructuring equity positions and shipping investments, Wintrob said.

There aren’t a lot of places to go for good opportunities in distressed investing at the moment, though Wintrob said he is hopeful that Oaktree will continue to find lucrative investments in some niche areas, such as European NPL portfolio sales, distressed real estate, energy and commodities. The firm’s recent exits of positions in Spanish real estate developer Metrovacesa and Chicago media conglomerate The Tribune Company resulted in high payouts, Wintrob said.

Oaktree will launch its first infrastructure fund next month with a team it brought on from Highstar Capital last year. Immediate future plans also include its third Enhanced Income Fund, which will invest in levered senior loans, he added.