Oaktree Capital Management Review
The Company Background
Oaktree Capital Management is an asset management company founded in April 1995. The company provides asset management services with an emphasis on credit strategies. Its headquarter office is located in Los Angeles, California.
The Company has other US office locations as below:
- Brentwood, California;
- New York, New York;
- Houston, Texas;
- Stamford, Connecticut.
Outside of the US, Oaktree has company offices in Dublin, Frankfurt, London, Amsterdam, Luxembourg, Paris, Beijing, Hong Kong, Shanghai, Dubai, Seoul, Singapore, Sydney, and Tokyo.
Oaktree utilizes a value-oriented investment approach that takes various long term denominators in the calculation. The company is focused on keeping the risk under control while working to maximize potential profitability at the highest.
Obviously, this is not as easy as it is said. Hence the company prioritizes using opportunities that may offer a good margin of safety.
The company’s motto is:
“if we avoid the losers, the winners will take care of themselves.”
In my opinion, a very smart approach to use since the number one objective they rely on is not to lose any investment in the first place.
The company is popularly preferred to invest in retirement accounts in the US. According to the company’s website, Oaktree Capital counts 71 of the 100 largest U.S. pension plans as clients.
Although Oaktree claims individual investors can benefit from their investment products, they don’t have individuals as their clients, as of the company's most recent filing with the U.S. Securities and Exchange Commission (SEC).
The company serves 390 corporations around the world, and 38 of the 50 primary state retirement plans in the U.S., 330-plus endowments and foundations globally and more than 15 sovereign wealth funds.
In general, the minimum investment for managed accounts is $100 million. Being said that Oaktree may, at its discretion, waive the minimum required investment amount.
The company is best known for its credit experience. In fact, its origins go back to a group of investors who, among other items, had entered together into high-yield bonds, convertible securities, and distressed debt.
As of March 2019, Oaktree became the controlling owner of Brookfield Asset Management Inc., an even bigger alternative investment firm (with $365 billion in assets under management). Eight senior executives of Oaktree Capital have small stakes, including three early investors.
What type of clients the company serves?
Oaktree Capital Management works with the investors that have the following profiles.
- Institutional Investors
- Financial Professionals
- Individual Investors
- Public Unitholders
As we have earlier mentioned, Oaktree Capital works primarily with institutional investors and financial professionals. Its list includes individual investors as a group of clients, but it looks as if you need to be of super high net worth, as the minimum required investment amount is $100 million.
What is the minimum required account size?
Oaktree Capital provides individually managed accounts to groups such as pension plans, government plans, endowments, foundations, charitable organizations, corporations, insurance companies, commingled investment trusts, sovereign wealth funds, and potentially very rich people.
The company also offers “managed funds“ to private limited partnerships and other pooled investment instruments. A minimum investment ranges between $2 million to $10 million depending on the selected investment program.
Offered Services
Below is a list of services offered by the company.
- Private equity
- Credit (high yield bonds, senior and private loans, convertible securities, structured credit, real estate debt and emerging market debt)
- Real assets (real estate and infrastructure)
- Listed equities (emerging markets and value/other)
Investing Philosophy
The most respected investing philosophy they apply us avoiding losses. It is an objective which the company pursues to identify potential future profit areas.
As the firm says, “It is our overriding belief that, especially in the opportunistic markets in which we work, ‘if we avoid the losers, the winners will take care of themselves.'”
Seek consistency in results. Instead of having exceptionally good years to make up for the poor ones, the company suggests that it is best to build a superior record on a high batting average, rather than a combination of great achievements and miserable losses.
Tap markets which are less competitive. Eviting competitive markets, where other investors have the same expertise, Oaktree Capital focuses on markets where less information is available, and its skills and hard work can pay off.
Specialize on one form of asset. Every portfolio of the company exercises a single investment speciality, clearly delineated. The firm claims this is the “surest road to the performance we and our customers are expecting.”
Take a bottom-up approach to analyzing securities. Oaktree Capital does not try to predict how the economy, markets or interest rates will be in the future. It carries out comprehensive, proprietary research on individual companies and bases its decisions on its fundamental analysis.
Remain fully committed even as others move to cash out of market climate concern. As the firm states,
“Customers pay us to invest in unique niches in the industry, so we will never fail to do our job. It's unpleasant to keep assets that fall in size, but losing out on returns because we failed to invest what we were hired to purchase is inexcusable.”
The fees are usually %0.50 to %0.65 of the net asset value of each account each year, paid quarterly or monthly, for managed accounts in its open-end strategies. Oaktree Capital can negotiate the fee with the customer for controlled accounts in other schemes, taking into account such considerations as goals and account size.
The firm can charge a flat fee or negotiate the fee for the asset allocation investment accounts where multiple strategies are used.
Fees applied by Oaktree Capital Management
For managed accounts in its open-ended strategies, fees are typically 0.50% to 0.65% of the net asset value of each account paid on a quarterly or monthly basis.
In the case of managed accounts in other strategies, Oaktree Capital may negotiate the fee with the customer, taking into account factors such as objectives and size of the account.
For investment asset allocation accounts, where several approaches are used, the firm may charge a fixed fee or negotiate the fee.
Final Verdict
Oaktree Capital, as stated earlier, is an alternative investment manager working primarily with governmental, and large corporations. It does not offer services for financial management services. Although the company works with small investors, its primary focus on large corporations. So if you don't have to invest $100 million you might want to search for another company.
