The $64.6 billion Washington State Investment Board has committed up to $400 million to two Oaktree funds.
The pension, which has allocated about $10 billion to private equity, gave up to $250 million to Oaktree Opportunities Fund VIII, and up to $150 million to Oaktree Principal Fund V. Oaktree’s eighth opportunities fund is targeting between $4 billion and $6 billion.
It also is looking to raise $5 billion for its fifth principal fund, which employs a “loan-to-own” strategy, in which investors try to gain control of a troubled company by buying its debt at a discount and then taking control in a bankruptcy process.
Oaktree has used the “loan-to-own” strategy in several recent cases, including that of bankrupt Pierre Foods. Oaktree bought Pierre’s debt for less than $200 million and took control of the company as part of Pierre’s reorganisation plan.
The firm has won several mandates recently. Sovereign wealth fund China Investment Corporation will invest $1 billion with Oaktree, according to the Wall Street Journal. Oaktree also was selected as one of nine fund managers qualified to take part in the US government’s public-private investment program to unfreeze the credit markets.
Several pensions have jumped onboard with Oaktree’s funds in recent months, including the Massachusetts Pension Reserves Investment Management board, which committed up to $200 million to the eighth opportunities fund and the Alaska Permanent Fund, which gave $250 million to the eighth opportunities fund.
The firm uses several types of fund strategies, including real estate, mezzanine and high yield. It closed OCM Opportunities Fund VIIb in May 2008 on $10.9 billion, making it the largest ever distressed debt fund.