Brookfield partner Oaktree raises $12bn for giant distressed fund

Brookfield Asset Management appears to be meeting the ambitious objective it set for the latest flagship distressed offering of partner Oaktree Capital.

Oaktree Opportunities Fund XI, launched earlier this year, brought in initial commitments of $12 billion, Bruce Flatt, CEO of Brookfield, said in a Q2 2020 financial results webcast. That puts the vehicle within striking distance of a $15 billion target, reported by Buyouts in April.

Flatt previously declined to comment on the target. The fund’s hard cap is not known.

In a Q2 2020 statement, Brookfield said marketing for the Oaktree offering will continue throughout the year. Once wrapped up, it is expected to be “one of our largest funds,” the firm said.

Flatt said the fundraising took place “against the backdrop of global economic shutdown, which impacted many businesses, including some of ours.”

Oaktree’s Fund XI is one of the largest of recently unveiled dislocation pools. It anticipates fallout from the economic upheaval created by the health crisis. The shuttering of companies to halt the spread of covid-19 is causing distressed debt to spike, generating opportunities for specialty credit investors to snap up assets cheaply.

Flatt acknowledged this in the webcast, saying the distressed space “appears like it should be over the next 12 months one of the great places to invest capital into.”

Oaktree’s success on the fundraising trail comes roughly a year after Brookfield acquired a 62 percent stake in the Los Angeles firm. The deal, completed at an initial consideration of $4.7 billion, allowed Oaktree shareholders to hold the remaining 38 percent.

Flatt said the deal was intended to “round out” Brookfield’s product offering and lend exposure “across all cycles.” The Toronto alternative asset manager is now seeing “the benefits of this strategy,” he said.

Oaktree’s Fund XI was the highlight of Brookfield’s “largest fundraising period ever,” Flatt said. In all, $23 billion in committed capital was reported for the three months ending in June, with the bulk of the non-Oaktree resources flowing into fixed income-like perpetual vehicles.

Brookfield is looking at a highly attractive deal environment for its distressed debt, infrastructure, private equity, real estate and renewable power pools, Flatt said. With $77 billion in dry powder, he sees the firm’s pace of investing growing over the next 12 months, spurred in part by government offloading of spending and asset sales.

Brookfield’s existing flagship funds are now about 50 percent deployed in aggregate. This, combined with the anticipated deal pipeline, means all flagships are likely to return to market sometime in 2021, Flatt said.

Brookfield collected $9 billion for its fifth PE fund late last year, and $20 billion for its fourth infrastructure fund in early 2020.

Global private debt fundraising, including fundraising for distressed strategies, has been flat in recent years, apart from the peak year of 2017, PEI data showed. Activity remained lacklustre in this year’s first half, with $63 billion secured, down 40 percent from the same time in 2019.

Action item: See Brookfield Asset Management’s Q2 2020 report highlights here.