The $50 billion Washington State Investment Board has proven its continued faith in Oaktree Capital Management LP through two commitments totaling $400 million to funds managed by the distressed debt specialist.
Oaktree Capital’s OCM Opportunities Fund VIII LP received a pledge from the limited partner of up to $250 million, while Oaktree Principal Fund V LP got up to $150 million, according to pension spokesperson Liz Mendizabal.
OCM Opportunities Fund VIII LP, launched in June to invest in distressed debt opportunities, has proven to be quite popular so far among LPs. The Alaska Permanent Fund Corp., Massachusetts Pension Reserves Investment Management Board (MassPRIM), and the Montana Board of Investments have all pledged to it. Oaktree Capital will use the vehicle to invest globally in the distressed debt of large, overleveraged companies that are still operationally sound. The Los Angeles-based firm raised $10.9 billion for OCM Opportunities Fund VIIb LP, which closed in June 2008.
Pledges to Oaktree Principal Fund V LP, meanwhile, have come from MassPRIM, Oregon Public Employees’ Retirement Fund, the School Employees Retirement System of Ohio, Texas Tech University System and the YMCA Retirement Fund. According to board documents, Oaktree Capital will use a “distress for control” strategy for this fund, purchasing debt in a target company at a discount with the intention of exchanging the debt for a controlling equity stake via a financial restructuring.
Washington State Investment Board has supported Oaktree Capital right from the start, making its first pledge in 1995, when Howard Marks founded the firm. According to the pension system, OCM Opportunities Fund IV, a vintage-2001 vehicle, had an IRR of 28 percent and a total value multiple of 1.6x as of March 31, 2009.
The LP’s actual private equity allocation stood at 22.02 percent as of June 30. Its target allocation is 25 percent, according to Mendizabal.