Oaktree prepared for eventual distressed markets

Oaktree Capital Group brought in $1.8 billion in the second quarter, of $6.4 billion of raised, for two distressed debt funds, which positions the company well for the eventual distressed phase of the credit cycle.

At the beginning of the year, amid market turmoil, many distressed investors were licking their lips at potential opportunities that largely have not come to fruition yet. As PDI noted earlier this month, timing matters in the distressed markets, and Oaktree arguably will be well prepared once the credit markets encounter choppier waters.

Co-chairman and chief investment officer Bruce Karsh (pictured) said on the Thursday (28 July) second-quarter earnings call that the firm may not begin tapping the Oaktree Opportunities Fund Xb, a reserve fund, until 2017. There were fewer opportunities in distressed investing in the wake of the Brexit vote at the end of June as some expected, Karsh said.

The Oaktree Opportunities Fund X distressed fund has drawn 15 percent of its committed capital, some $486 million of its $3.2 billion, while Oaktree also has a current reserve pool of $8 billion in committed capital in its Opportunities Fund Xb.

In the second quarter, the Los Angeles-based firm raised $1.8 billion between the two Opportunities funds. Oaktree is currently still raising money for the Opportunities Xb fund.

The company also reported bringing in $1.1 billion for its Oaktree Real Estate Opportunities Fund VII along with $900 million for the Oaktree European Principal Fund IV, both funds for which Oaktree is still fundraising. The firm also is seeking investor commitments for its Oaktree Infrastructure Fund, Oaktree European Capital Solutions Fund and Oaktree Real Estate Debt Fund II.

Of the $2.4 billion in capital it invested, most of the money went toward energy and power companies alongside emerging market debt, Karsh said.

Oaktree raised $332.8 million in revenue for the three months ending June 30, which broke down to $197.5 million from management fees, $87.6 million from incentive income and $47.7 million in investment income. Its total uncommitted capital, or dry powder, stood at a firm record of $22.8 billion.

Editor’s note: This article has been updated to reflect that the Oaktree European Principal Fund IV raised $900 million, not $900,000 as originally reported.