Oaktree Capital Management is a global asset management firm specializing in alternative
investment strategies. Oaktree emphasizes an opportunistic, value-oriented, and risk-controlled
approach to investments in distressed debt, corporate debt, control investing, convertible
securities, real estate and listed equities. As of December 31, 2012, the company managed
$77.1 billion, primarily on behalf of pension funds, foundations, endowments, and sovereign
wealth funds. On April 12, 2012, Oaktree Capital Group LLC became listed on the NYSE: OAK.
The firm was co-founded in 1995 by a group who had formerly worked together at the TCW
Group starting in the 1980s. Oaktree quickly established a reputation in the high-yield
and distressed-debt markets. As of 2012 it has over 700 employees and offices in Los
Angeles, where it is headquartered, London, New York, Hong Kong, Stamford, Tokyo, Luxembourg,
Paris, Frankfurt, Singapore, Seoul, Beijing and Amsterdam.
Firm overview
With headquarters in Los Angeles, the firm has over 700 employees and offices in 13 cities
worldwide, Tokyo, Luxembourg, Paris, Frankfurt, Singapore, Seoul, Beijing and Amsterdam).
Investment philosophy Oaktree has a value-oriented investment philosophy,
emphasizing risk-control, consistency and specialization, with a focus on opportunities
that offer a margin of safety. On November 12, 2011, the Financial Times said of Oaktree’s
approach: “the heart of risk management Oaktree-style, with its emphasis on living
to fight another day, is simple. Oaktree doesn’t use leverage and eschews overly complicated
hedging strategies.” The firm specializes in off-the-beaten-path and contrarian investments,
and favors companies with tangible assets. The firm's motto is “if we avoid the losers,
the winners will take care of themselves.” Investment focus
Oaktree invests across the capital structure, with an emphasis on senior debt in companies
and markets where it has what it calls a “knowledge advantage.” Distressed or otherwise ailing
companies, according to Oaktree, provide such opportunities. The company’s chairman, Howard
Marks, has been described as “one of the savviest investors in the world,” and is
known in the investment community for letters to investors called the "Oaktree memos”.
Since its 1995 formation, Oaktree has become the largest distressed-debt investor in the
world. In 2008, it raised $10.9 billion for what was the largest-ever distressed debt
fund, its Opportunities Fund VIIb. As reported in The Washington Post on June 26, 2011, Oaktree’s
17 distressed-debt funds have averaged annual gains of 19% after fees for the past 22 years.
In addition to credit investments in distressed debt and high-yield bonds, Oaktree also invests
in areas such as private equity, real estate and listed equities. In recent years, the
company has expanded its real estate activities. Investor-base
Oaktree’s investor-base primarily includes pension plans, endowments and foundations,
and sovereign wealth funds. 100 of the 300 largest global pension plans, 75 of the 100
largest U.S. pension plans, 39 state pension plans, 312 endowments and foundations, and
10 sovereign wealth fund nations. According to the Wall Street Journal, Oaktree has “long
been considered a stable repository for pension-fund and endowment money.”
The company’s distressed-debt funds are often over-subscribed, and in 2010 Oaktree
turned down potential investors due to self-imposed limits on fund size. By law, clients are required
to be so-called accredited investors, however, sub-advisory relationships with mutual funds
such as The Vanguard Group and Russell Investment Group provide smaller investors access to
Oaktree’s portfolio managers. History
Early years Oaktree was founded in 1995 by a group of
principals who first joined together at the TCW Group in the mid-1980s to manage high
yield bonds, convertible securities, distressed debt and principal investments. Within three
months of its founding in 1995, “more than 30 TCW clients transferred $1.5 billion in
assets to Oaktree.” Adding to the original asset classes, Oaktree’s investment activities
currently include other complementary strategies. What it refers to as its “synergistic”
investment strategies include specializations in power infrastructure, mezzanine debt, and
senior loans. As of March 31, 2012, its assets under management were $77.9 billion.
Oaktree has formed various sub-advisory relationships since 1995. In 1996, Oaktree was selected
as the sub-advisor for the Vanguard Convertible Securities Fund.
Since 1995, Oaktree has created what it refers to as “step-out” strategies, usually coincident
with the opening of new offices around the world. Its growth in strategies has largely
focused on expanding into European and Asian markets. Between 1998 and 1999, Oaktree created
3 new strategies: Emerging Markets Absolute Return in 1998, European High Yield Bonds
in 1999, Power Opportunities in 1999. Oaktree was one of the first U.S.-headquartered alternative
asset managers with dedicated European investment teams focused on credit.
Expansion In 2001 Oaktree continued to introduce new
"step-out" strategies, starting with Mezzanine Finance. Asia Principal Opportunities and
Asia Special Situations followed, along with European Principal Opportunities, European
Senior Loans, U.S. Senior Loans and Value Opportunities, and Emerging Markets Equities
in 2011. In 2005 the Securities And Exchange Commission
ordered Oaktree to pay a fine, interest, and disgorge profits after the SEC ruled they
had "sold securities short" before the five legal business days after a public offering
pricing had gone public. Oaktree was required to put in place policies and procedures to
prevent violations in the future. In 2008, the firm raised 11bn for their distressed
debt fund. In 2009, Oaktree was selected by the U.S. Treasury, along with eight other
managers to participate in the government’s Public-Private Investment Program. At the
time of Oaktree’s inclusion in the PPIP program, The New York Times reported: “Howard
S. Marks is the sort of financier who Washington hopes will help fix the nation’s tumbledown
banks.” Partnering with Oaktree in PPIP are the Inupiat Eskimos of Alaska’s North
Slope, whose Arctic Slope Regional Corporation invested some $10 million alongside Oaktree’s
PPIP fund. As of December 31, 2011, the Oaktree PPIP Fund, L.P. had a gross return of 17.8%.
Recent years Relationship expansion
In recent years, the company has formed several strategic relationships. In 2009, Oaktree
acquired a 22% stake in DoubleLine Capital, a Los Angeles-based investment firm specializing
in mortgage-backed fixed income portfolios. In 2011 Oaktree partnered with Sabal Financial
Group, a company focusing on the acquisition and valuation of portfolios of real estate
loans. Oaktree had been an investor in Sabal’s portfolios since 2009 prior to acquiring a
non-controlling equity stake in the company. Its relationship with Vanguard was expanded
in 2011, when Oaktree was selected as one of four firms to manage Vanguard’s Emerging
Markets Select Stock Fund. In 2010, Oaktree was named one of three advisors to the Russell
Global Opportunistic Credit Fund and was selected as a manager for the Credit Suisse I Fund
in 2011. European sovereign-debt crisis
Seeking investment opportunities created by the European sovereign-debt crisis, Oaktree
started its European Principal Fund III in November 2011 with committed capital of some
€3 billion. Other recent funds
According to the company’s published financial results, during the quarter ended March 31,
2012, Oaktree held a first closing for Oaktree Opportunities Fund IX, LP with $1.2 billion.
Like its other Opportunities funds, Fund IX will focus on “market pricing inefficiencies
resulting from company reorganizations and restructurings, and the senior and secured
debt of operationally sound, overleveraged companies in the United States and Western
Europe.” NYSE listing
On April 12, 2012, Oaktree became a publicly traded partnership with shares listed on the
NYSE. The company was previously listed on GSTrUE, a private over-the-counter exchange
run by Goldman Sachs which officially ceased operations in 2012 after Oaktree, along with
Apollo Global Management, de-listed and moved to the NYSE.
Investment funds Oaktree’s current investment activities
are divided across six main asset classes: distressed debt, corporate debt, control investing,
convertible securities, real estate and listed equities. Fund structures within each asset
class vary, and are organized into closed-end, open-end, or so-called “evergreen” fund
types. Oaktree’s fund offerings are organized into
three broad categories based on liquidity and lock-up period:
Closed-End Funds: Closed-end funds are structured as limited partnerships that have a 10- or
11-year term and have a specified period during which clients can subscribe for limited partnership
interests in the fund. Closed-end funds have a three-, four- or five-year investment period.
Open-End Funds: Commingled open-end funds are structured as limited partnerships that
admit clients as new limited partners on an ongoing basis. Unlike close-end funds, these
funds do not have an investment period. Capital may be committed to new investments at any
time during the fund’s life. Evergreen Funds: “Evergreen funds” invest
in marketable securities on a long and short basis. Like open-end funds, Oaktree’s evergreen
funds accept new capital on an ongoing basis. Clients in evergreen funds are generally subject
to a lock-up period of between one and three years.
The following tables list the company’s strategies and funds since inception:
Closed-End Funds Open-End Funds
Evergreen Funds Assets
Current as of December 31, 2012: Current investments
General Maritime - Oil tanker line utilizing foreign vessels and crews headquartered in
New York R&R Ice Cream — a European ice cream producer
based in the UK Sky Holding — jet airplane ownership
Verreries de l’Orne à Ecouché — glass etching firm — 1 April 2010
Campofrío Food Group — European food industry Conbipel — Italian fashion industry
Aluminum manufacturing Aleris International — acquired 1 May 2010
Almatis Group — acquired 2010 Media
Triton Media Group — media group managed by Oaktree Capital
Townsquare Media — broadcast station and local media company owned by Oaktree Capital
— acquired 1 April 2010 Cumulus Media — An October 20, 2011, SEC
filing by Oaktree Capital shows that it has purchased 3,985,983 shares of Cumulus Media
stock, giving Oaktree Capital a position currently valued at $11,320,192 in the radio operator.
Tribune Company — acquired jointly with JPMorgan Chase and Angelo, Gordon & Co.; acquisition
completed July 2012. Manufacturing
AdvancePierre Foods — a food manufacturing company with facilities in Iowa, Oklahoma,
Ohio, North Carolina, Maine, & South Carolina. See also
Category:Oaktree Capital Management References
Further reading 2011: The Most Important Thing: Uncommon Sense
for the Thoughtful Investor by Howard Marks External links
Official website