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With $13bn in the bank, Oaktree’s latest distressed fund set to close by June

If Oaktree Opportunities Fund XI meets or surpasses a $15bn target, it will be the second-largest distressed debt vehicle on record.

Oaktree Capital Management’s 11th flagship distressed debt offering will likely wrap up by the end of June, partner Brookfield Asset Management said.

Oaktree Opportunities Fund XI has banked $13 billion in committed capital, Brookfield said in its Q1 2021 financial results report. Accounting for most of this total in 2020’s early months, the fund is now on track to hold a final close during the first half.

Fund XI is targeting $15 billion, Buyouts reported last year. The hard-cap is not known.

If Oaktree’s latest flagship fund meets or surpasses the target, it will be the second-largest distressed debt vehicle on record, according to Buyouts’ data. The largest is Apollo Global Management’s ninth flagship, which closed in 2017 at $24.7 billion, though this fund has the flexibility to invest outside the distressed universe.

Distressed opportunities, expected to accelerate last year with covid-19’s economic fallout, did not materialize substantially outside of certain hard-hit sectors. This owed to massive injections of central bank and government stimulus. Going forward, it is possible that more distressed plays will emerge once the liquidity tap is turned off.

Commitments to private debt pools declined to a six-year low in 2020, Private Debt Investor reported. A total of $149 billion was secured globally, down 25 percent from 2019. The share of capital flowing into distressed funds fell to 16 percent in 2020 from a prior 28 percent.

Brookfield acquired a 62 percent stake in Oaktree two years ago. The deal, completed at an initial consideration of $4.7 billion, allowed the Los Angeles firm’s shareholders to own the remaining 38 percent.

Howard Marks, the legendary co-founder and co-chairman of Oaktree, last year became a Brookfield director.

More closings on the horizon

Brookfield’s Q1 2021 report noted other fund closings in the offing. They include the first close of a debut energy transition offering, expected to be held mid-year.

Part of a planned series of impact initiatives, the fund is targeting more than $7.5 billion, anchored by a $2 billion commitment from the Toronto alternative asset manager. It will seek an attractive return from investments in the build out of renewables, as well as other opportunities that support decarbonizing the global energy grid.

The energy transition vehicle is intended to address growing demand from limited partners, many inspired by freshly-minted ESG policies.

“Every investor in the world, or virtually every investor in the world, is interested in figuring out how they deploy money into this sector smartly,” said Bruce Flatt, CEO of Brookfield. “There is no fund out there like the fund that we have created. It will set a new standard for transition investing globally.”

Brookfield’s private fundraising started this year robustly, bringing in $7 billion between January and March. This was spread across perpetual and long-term strategies, including credit, infrastructure and real estate.

First-quarter activity included an initial $2.4 billion collected by Brookfield’s inaugural special investments fund. It is targeted to raise $5 billion, Buyouts reported this month.