Oaktree raises $10.9bn distressed fund(2)

The Los Angeles alternative investment firm has raised the largest ever distressed debt fund, more than three times the size of its previous similar vehicle.

Oaktree Capital Management has closed the largest ever distressed debt fund on $10.9 billion (€7 billion). The OCM Opportunities Fund VIIb includes $10.6 billion of limited partner commitments and $300 million from Oaktree executives, according to a source close to the firm.

The Los Angeles-based debt specialist, led by chairman and co-founder Howard Marks, has fully invested the OCM Opportunities Fund VII which closed on $3.5 billion in early 2006.

Marks has traditionally thrived on down markets where there is opportunity to apply his distressed debt expertise.

Howard Marks

In October 2007, following last summer’s credit crisis, Marks told sister publication Private Equity International: “Now, we’re probably going into a period where attitudes are less positive, and capital is not so easily available, prices are not bid up so much and there’s some distress. For us, that’s better times. That’s when we start to smile.”

Limited partners in the mega-fund include state pension funds Illinois Teachers’ Retirement System, Oregon Investment Council and Pennsylvania State Employees' Retirement System and well as private equity investment firm Conversus Capital and Private Equity Holding AG.

Oaktree closed a $4 billion hung bridge fund in October, just two months after deciding to raise the specialised debt vehicle.

The firm is currently raising its second European Principal Opportunities Fund targeting €1.25 billion, according to the Probitas Partners 2008 Private Equity Deskbook.

Oaktree has focused on expanding its operations in Asia of late. Last year the firm opened an office in Beijing and obtained offices in Seoul, Shanghai, Singapore and Tokyo via the acquisition of Pangaea Capital Management. An Asia Real Estate Opportunities strategy was also established.