Oaktree grows management fees with four new funds

The US firm has increased its management fee-related assets after commencing the investment periods on four new closed-end funds that were raised in the last year and a half.  

Oaktree Capital Management has seen a 6 percent rise in management fee-generating assets as some of its newer funds have switched on their investment periods. These include Oaktree Opportunities Fund Xa, Power Fund IV, Principal Fund VI and Real Estate Opportunities Fund VII. The Opportunities Fund Xa is part of a $3 billion distressed pool that Oaktree raised to be deployed immediately. The Xb part is a $7 billion reserve pool that will start investing at a later date.

Management fee-related assets grew to $80 billion at 31 March. This time period also saw a 25 percent increase in fee-related earnings to $62.4 million. Total assets under management were at $96.9 billion at the end of the quarter, a 3 percent rise from a year ago.

The firm has kept its US distressed Opps X platform open to new capital, even though it has already collected more than its original $10 billion target. The strategy raised another $500 million in the first quarter. Oaktree expects additional closes for Opportunities Xb, its Real Estate Opportunities Fund VII and European Capital Solutions, a European direct lending fund, within the year.

Management also said the firm is expected to hold first closes soon on European Principal Opportunities Fund IV, a European distressed-for-control strategy, Infrastructure Fund I, as well as Real Estate Debt Fund II. Oaktree will also be seeking money via separate accounts for a new real estate value-add strategy.

Management said the firm benefited from increased distressed opportunities in the quarter. “Oaktree funds capitalized on the meaningful buying opportunity in the first six weeks of 2016. Specifically, in our distressed debt funds we invested in a diversified set of high-quality public debt opportunities in sectors such as telecom, media, chemicals, E&P, midstream MLPs, metals and mining,” said co-chairman Bruce Karsh, speaking on the first quarter earnings call on 28 April.

Total capital deployed in Q1 stood at about $2 billion, with Opps Xa putting about 15 percent of its capital to work so far.

Oaktree’s closed–end funds taken together posted a blended gross return of 2 percent. Distressed debt also had a 2 percent gross return for Q1. The strongest returns were in Power Opportunities at 6 percent and Emerging Market Opportunities at 15 percent.

Investment income fell to $15 million from $53 million year-over-year. “The biggest reason for the drop was energy-related holdings in certain CLOs, underlying a $23 million impairment charge we took on our CLO stakes in the first quarter,” said chief financial officer David Kirchheimer.

Adjusted net income (ANI) also fell to $105 million at the end of Q1 2016 from $150 million in the same quarter last year. The firm attributed the ANI drop to lower investment income stemming from CLOs and energy holdings.

Asked where the firm is seeing increased interest from LPs, chief executive Jay Wintrob said he wouldn’t single out any specific segment, though he mentioned Oaktree is adding marketing resources outside the US, particularly in Asia. “We continue to see good relationships and opportunities with sovereign wealth funds,” he said.