If you’ve heard of Oaktree Capital Management, L.P., it’s likely because your pension plan is with them. According to the firm’s website, Oaktree Capital counts 71 of the 100 largest U.S. pension plans as clients. Though it says that individual investors can have access to its products, it has zero individuals as clients, as of its most recent filings with the U.S. Securities and Exchange Commision (SEC).
The firm, which specializes in alternative investments, is headquartered in Los Angeles, California and has more offices throughout the U.S. in Brentwood, California; New York, New York; Houston, Texas and Stamford, Connecticut. Across the globe, it also has offices or affiliate offices in Amsterdam, Dublin, Frankfurt, London, Luxembourg, Paris, Dubai, Beijing, Hong Kong, Shanghai, Seoul, Singapore, Sydney and Tokyo.
The large investment manager oversees more than $99 billion in assets. In addition to pension plans, it serves 390 corporations around the world, 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. The minimum investment for what the company calls “managed accounts” (as opposed to its “managed funds”) is $100 million generally. Oaktree may waive the minimum at its discretion.
Oaktree Capital Management Background
The firm is particularly known for its expertise in credit. Its roots go back, in fact, to a group of investors who had been going in together into high yield bonds, convertible securities and distressed debt, among other things. They officially formed the firm in 1995. It now employs more than 870 people around the world, including dozens of portfolio managers.
As of March 2019, Brookfield Asset Management Inc., an even larger alternative investment manager (with $365 billion in assets under management), became the majority owner of Oaktree. Eight senior Oaktree Capital executives have small stakes, including three original founders.
Oaktree Capital Management Client Types and Minimum Account Sizes
As mentioned earlier, Oaktree Capital primarily works with institutional investors and financial professionals. Its website lists individual investors as a client category, but it looks like you have to be ultra high net worth, as the minimum investment is generally $100 million.
Oaktree Capital also offers separately managed accounts to such entities as pension plans, governmental plans, endowments, foundations, charitable organizations, corporations, insurance companies, commingled investment trusts, sovereign wealth funds - and potentially uber wealthy individuals. As just noted above, the minimum investment is generally $100 million.
The firm also provides what it calls “managed funds” to private limited partnerships and other pooled investment vehicles. Their minimum investment varies from $2 million to $10 million, depending on the investment program.
Services Offered by Oaktree Capital Management
As mentioned earlier, Oaktree Capital is an alternative investment manager with an expertise in credit. It invests in four asset classes:
- Credit (high yield bonds, senior and private loans, convertible securities, structured credit, real estate debt and emerging market debt)
- Private equity
- Real assets (real estate and infrastructure)
- Listed equities (emerging markets and value/other)
Oaktree Capital Management Investing Philosophy
With all of its investments, Oaktree Capital has these six aims:
- Prevent losses first and foremost, an objective it pursues above even finding potential profit areas. As the firm states, “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 performance consistency. Instead of having especially good years make up for the bad ones, the firm believes that “a superior record is best built on a high batting average rather than a mix of brilliant successes and dismal failures.”
- Tap less efficient markets. Avoiding efficient markets, where there are many investors with the same knowledge, Oaktree Capital focuses on markets where there is less information and its skill and hard work will pay off.
- Specialize in a single asset type. Each of the firm’s portfolios practices a single, explicitly delineated, investment speciality. The firm believes that this is the “surest path to the results we, and our clients, seek.”
- Take a fundamental, bottom-up approach to securities analysis. Oaktree Capital does not attempt to forecast what’s in store for the economy, markets or interest rates. Instead, it conducts extensive, proprietary research of specific companies and bases decisions on that research.
- Stay fully vested even when others are moving to cash out of concern for the market climate. As the firm states, “Clients hire us to invest in specific market niches, and we must never fail to do our job. Holding investments that decline in price is unpleasant, but missing out on returns because we failed to buy what we were hired to buy is inexcusable.”
Oaktree Capital Management Fees
For managed accounts in its open-end strategies, the fees are typically 0.50% to 0.65% of each account’s net asset value per year, paid quarterly or monthly. For managed accounts in other strategies, Oaktree Capital will negotiate the fee with the client, taking into account such factors as objectives and account size. For asset allocation investment accounts, where multiple strategies are used, the firm may charge a flat fee or negotiate the fee.
|*Estimated investment management fees do not include brokerage, custodial, third-party manager or other fees, which can vary in amount. Fee amounts are based on fee percentage range for managed accounts.|
|Estimated Investment Management Fees at Oaktree Capital Management*|
|Your Assets||Oaktree Capital Management Fee Amount|
|$100MM||$500,000 - $650,000|
What to Watch Out For
The SEC fined and censured Oaktree Capital in 2018. The alleged “pay-to-play” violations involved a personal campaign contribution by an Oaktree “covered associate” to a political candidate who would have the ability to influence the selection of investment advisors for a state or local governmental investor. The alleged violation was not the contribution, but the subsequent three instances (in 2014 and 2016) when Oaktree provided advisory services to the governmental investor. The firm paid a civil penalty of $100,000 within 10 days of the SEC action.
As mentioned earlier, Oaktree Capital is an alternative investment manager that works primarily with institutional, governmental and corporate entities. It does not provide financial planning or wealth management services. It also does not work with small investors. So unless you have $100 million to invest, you may want to look for another firm.
Opening an Account With Oaktree Capital Management
To contact Oaktree Capital, call one of its offices in:
- Los Angeles at (213) 830-6300
- New York at (212) 284-1900
- Houston at (713) 496-9360
- Stamford, CT, at (203) 363-3200
- Brentwood, CA, at (310) 442-0542
All information was accurate as of the writing of this article.
Tips for Finding the Right Financial Advisor
- Don’t quite have $100 million to invest with Oaktree? There are plenty of other professionals who can help you. To start your search for a financial advisor, use SmartAsset’s SmartAdvisor matching tool. Simply answer questions about your financial situation, and the program will match you with up to three suitable advisors.
- One of the most important things to know about prospective advisors is whether they’re fiduciaries. Ideally, you want one who is. Fiduciaries must put their client’s best interests before their own, while advisors who are not bound by fiduciary duty are simply required to make suitable recommendations to their clients.