- Two-part distressed debt pool
- Sees opportunity due to ”diminished lending standards”
- Former AIG exec Jay Wintrab takes over as CEO
The firm said its flagship Oaktree Opportunities Fund X will be poised for a potential turn in the credit cycle down the road.
“We believe investors’ search for yield, together with an excess of liquidity and risk tolerance, has diminished lending standards and laid the kindling for the next distress cycle,” Oaktree Vice Chairman John Frank said on a third-quarter conference call with Wall Street analysts. “We don’t know what will trigger the next cycle or when it will occur, but we do believe it is coming and we’re determined to be ready.”
All told, Oaktree Opportunities Fund X may take in $3 billion, while Oaktree Opportunities Fund Xb, a standby fund, will target about $7 billion, Frank said. The standby fund will be available whenever a significant opportunity arises, either simultaneously with the investment period of Fund X or subsequently, he added.
The a/b fund structure will allow Oaktree to better match its capital to current opportunities. The firm has deployed the same structure in past funds, most most notably in 2008 and 2009, Frank said.
Other funds in works
Along with Oaktree Opportunities Fund X, Oaktree plans to raise Principal Fund VI, a distress-for-control fund, Mezzanine Fund IV, Real Estate Opportunities Fund VII, and Power Opportunities Fund IV. The predecessors of these funds raised billions (see table).
In a new fund line for Oaktree, the firm plans to launch its first Oaktree Infrastructure Fund with Highstar Capital, a group it acquired over the summer. As part of the deal with Highstar, Oaktree became the manager of Highstar Capital IV, which has $2.3 billion in assets under management.
“It is unprecedented for us to have so many closed-end funds in the market simultaneously, but we anticipate a good response to our offerings and thus significant additions to AUM over the next 12 to 18 months,” Frank said.
Excluding the Highstar acquisition, Oaktree raised $4.1 billion of capital in the third quarter, reflecting “strong” inflows across its open-end funds.
Oaktree Mezzanine Fund IV held its first close in the third quarter with $299 million in capital commitments. In October, the firm priced a $511 million collateralized loan obligation, which is expected to close later this year.
In another development for the firm, Oaktree named Jay Wintrob as its first chief executive officer, effective Nov 1. Wintrob, 57, was formerly head of the life insurance and retirement division at insurance giant AIG, which he joined in 1999. “It’s time for us to turn to a world-class financial services executive to take our business to the next level,” Marks said in a prepared statement about Wintrob.
Bruce Karsh, president and a co-founder of Oaktree, joined Howard Marks in the role of co-chairman. Karsh continues as Oaktree’s chief investment officer and as portfolio manager for the firm’s distressed opportunities and value opportunities strategies. Frank, Oaktree’s managing principal since 2006, was named vice chairman.
|New Oaktree funds|
|Name||Focus||Target||Predesessor||Size of predecessor|
|Oaktree Opportunities X and Xb||Flagship distressed debt||$3 bln for Fund X, $7 bln for Fund Xb||Oaktree Opportunites Fund IX||$5.1 bln|
|Oaktree Prinicpal Fund VI||Distress for control||n/a||Oaktree Principal Fund V||$2.8 bln|
|Mezzanine Fund IV||Mezzanine debt||n/a||Mezzanine Fund III||$1.6 bln|
|Real Estate Opportunities Fund VII||Real estate||n/a||Real Estate Opportunities Fund VI||$2.7 bln|
|Power Opportunities Fund IV||Electricity, natural gas||n/a||Power Opportunities Fund III||$1.1 bln|
|Oaktree Infrastructure Fund||Infrastructure||n/a||None||None|
|Source: Oaktree Capital|