Oaktree markets fifth mezzanine fund

The credit manager collected $852m for its predecessor vehicle, which began investing in 2014.

Oaktree Capital Management has hit the market with its latest junior debt fund – yet another vehicle launch as it continues to make private credit an area of importance.

The Los Angeles-based firm has formally launched Oaktree Mezzanine Fund V after announcing plans early last year to kick off fundraising for the new vehicle. Fund IV raised $852 million, while Fund III raised $1.59 billion, according to PDI data.

The firm declined to comment.

For its earlier vehicles, Fund IV posted an 8.2 percent net internal rate of return and a 1.2x multiple on drawn capital (MODC); its investment period ends in October. Fund III, which has two separate classes of equity interest, posted a 10.4 percent net IRR for the Class A interests and a 9.2 percent net IRR for the Class B interests. The vehicle posted a 1.4x MODC.

Mezzanine debt fundraising was the strongest strategy last year, according to PDI data. The figure came in at $51.17 billion, only dipping slightly from 2017’s $53.36 billion, a relatively disappointing number in a year when private debt fundraising surged. Last year’s total was buoyed by the final close of Goldman Sachs’ $9.9 billion GS Mezzanine Partners VII, the largest credit fund ever raised.

Oaktree has continued to make the expansion of its private credit platform a priority. On the firm’s fourth quarter earnings call in February, it said it had raised $300 million for a new private business development company and $820 million for its senior debt-focused Oaktree Middle-Market Direct Lending Fund.

In addition, the firm has worked to turn around the BDCs it acquired from Fifth Street Asset Management in October 2017. The firm had largely stabilised and turned around the net asset value per share for the two vehicles: Oaktree Specialty Lending Corporation (OCSL) and Oaktree Strategic Income Corporation (OCSI).

The NAV per share for OCSL rose from $5.81 from the fourth calendar quarter of 2017 – the first period for which Oaktree operated the vehicle – to $6.19 for the three months ending 31 December. OCSI rose from $9.84 in the fourth calendar-quarter of 2017 to $10.04 for the third quarter of last year, before plummeting to $9.43 in the fourth quarter.

Last month, Oaktree entered into an agreement to be acquired by Brookfield Asset Management. The former will sell 62 percent of itself to the latter. Though Brookfield will hold a majority economic stake in the firm, Oaktree’s senior officers and other top members of the firm will still control the voting rights. It managed $120 billion across myriad strategies, including credit, private equity and real assets.