Oaktree Announces Second Quarter 2019 Financial Results

As of June 30, 2019 or for the quarter then ended, and where applicable, per Class A unit:

  • GAAP net income attributable to Oaktree Capital Group, LLC (“OCG”) Class A unitholders was $42.4 million ($0.57 per unit), up from $31.1 million ($0.44) for the second quarter of 2018, primarily reflecting higher incentive income.
  • Distributable earnings were $138.3 million ($0.88 per unit), up from $114.3 million ($0.69) for the second quarter of 2018, driven by higher incentive income.
  • Assets under management were $120.4 billion, up 2% for the quarter and down 1% over the last 12 months. Gross capital raised was $4.3 billion and $13.4 billion for the quarter and last 12 months, respectively. Uncalled capital commitments (“dry powder”) were $18.0 billion, of which $13.2 billion were not yet generating management fees (“shadow AUM”).
  • Management fee-generating assets under management were $101.4 billion, up 1% for both the quarter and the last 12 months.

 

LOS ANGELES--()--Oaktree Capital Group, LLC (NYSE: OAK) today reported its unaudited financial results for the second quarter ended June 30, 2019.

Agreement and Plan of Merger

On March 13, 2019, OCG and Brookfield Asset Management Inc. (“Brookfield”) entered into a definitive merger agreement pursuant to which Brookfield will acquire approximately 62% of Oaktree’s business in a stock and cash transaction. Following the transaction, the remaining 38% of the business will continue to be owned by Oaktree Capital Group Holdings, L.P. (“OCGH”), whose unitholders consist primarily of OCG’s founders and certain other members of management and current and former employees. As part of the transaction, Brookfield will acquire all outstanding OCG Class A units for, at the election of OCG Class A unitholders, either $49.00 in cash or 1.0770 Class A shares of Brookfield per OCG Class A unit (subject to pro-ration to ensure that no more than fifty percent (50%) of the aggregate merger consideration is paid in the form of cash or stock), in each case, without interest and subject to any applicable withholding taxes. In addition, the founders, senior management, and current and former employee-unitholders of OCGH will sell to Brookfield 20% of their OCGH units for the same consideration as the OCG Class A unitholders. On June 25, 2019, OCG received written consent in favor of the adoption of the merger agreement from OCGH, constituting the requisite approval of the transaction by OCG unitholders. The transaction is anticipated to close during the third quarter of 2019, subject to customary closing conditions including certain regulatory approvals.

Class A Unit Distribution

Consistent with the terms of the merger agreement with Brookfield, no quarterly distribution per Class A unit attributable to the second quarter of 2019 will be declared.

Preferred Unit Distributions

A distribution was declared of $0.414063 per Series A preferred unit, which will be paid on September 16, 2019 to Series A preferred unitholders of record at the close of business on September 1, 2019.

A distribution was declared of $0.409375 per Series B preferred unit, which will be paid on September 16, 2019 to Series B preferred unitholders of record at the close of business on September 1, 2019.

About Oaktree

Oaktree is a leader among global investment managers specializing in alternative investments, with $120 billion in assets under management as of June 30, 2019. The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in credit, private equity, real assets and listed equities. The firm has over 950 employees and offices in 18 cities worldwide. For additional information, please visit Oaktree’s website at www.oaktreecapital.com.

The table below presents (a) GAAP results, (b) non-GAAP results for both the Operating Group and per Class A unit, and (c) assets under management and accrued incentives (fund level) data. Please refer to the Glossary for definitions.

 

As of or for the Three Months
Ended June 30,

 

As of or for the Six Months
Ended June 30,

 

2019

 

2018

 

2019

 

2018

GAAP Results:

(in thousands, except per unit data or as otherwise indicated)

 

 

 

 

 

 

 

Revenues

$

313,483

 

 

$

213,283

 

 

$

579,898

 

 

$

550,604

 

Net income-Class A

42,444

 

 

31,121

 

 

89,698

 

 

83,853

 

Net income per Class A unit

0.57

 

 

0.44

 

 

1.23

 

 

1.21

 

 

 

 

 

 

 

 

 

Non-GAAP Results: (1)

 

 

 

 

 

 

 

Distributable earnings revenues

378,375

 

 

287,055

 

 

981,069

 

 

764,319

 

Distributable earnings

138,343

 

 

114,286

 

 

372,235

 

 

308,259

 

Distributable earnings per Class A unit

0.88

 

 

0.69

 

 

2.33

 

 

1.86

 

 

 

 

 

 

 

 

 

Fee revenues

198,037

 

 

195,935

 

 

388,138

 

 

398,882

 

Fee-related earnings

44,360

 

 

50,875

 

 

83,957

 

 

109,362

 

Fee-related earnings per Class A unit

0.28

 

 

0.30

 

 

0.51

 

 

0.66

 

 

 

 

 

 

 

 

 

Weighted Average Units:

 

 

 

 

 

 

 

OCGH

85,269

 

 

86,007

 

 

85,371

 

 

87,133

 

Class A

74,340

 

 

71,177

 

 

72,994

 

 

69,556

 

Total units

159,609

 

 

157,184

 

 

158,365

 

 

156,689

 

 

 

 

 

 

 

 

 

Operating Metrics:

 

 

 

 

 

 

 

Assets under management (in millions):

 

 

 

 

 

 

 

Assets under management

$

120,368

 

 

$

121,584

 

 

$

120,368

 

 

$

121,584

 

Management fee-generating assets under management

101,435

 

 

100,547

 

 

101,435

 

 

100,547

 

Incentive-creating assets under management

36,000

 

 

33,291

 

 

36,000

 

 

33,291

 

Uncalled capital commitments

18,002

 

 

20,325

 

 

18,002

 

 

20,325

 

Accrued incentives (fund level):

 

 

 

 

 

 

 

Incentives created (fund level)

11,342

 

 

119,317

 

 

99,334

 

 

230,502

 

Incentives created (fund level), net of associated incentive income compensation expense

9,471

 

 

60,921

 

 

53,699

 

 

113,219

 

Accrued incentives (fund level)

1,294,866

 

 

1,863,932

 

 

1,294,866

 

 

1,863,932

 

Accrued incentives (fund level), net of associated incentive income compensation expense

620,495

 

 

898,588

 

 

620,495

 

 

898,588

 

 

Note: Oaktree discloses in this earnings release certain revenue and financial measures, including measures that are calculated and presented on a basis other than generally accepted accounting principles in the United States (“non-GAAP”). Examples of such non-GAAP measures are identified in the table above. Such non-GAAP measures should be considered in addition to, and not as a substitute for or superior to, net income, net income per Class A unit or other financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented at Exhibit A. All non-GAAP measures and all interim results presented in this release are unaudited.

(1)

Beginning with the first quarter of 2019, the Company has determined that distributable earnings is the primary financial measure used by management to make operating decisions and assess the performance of our business. In connection with this determination, the definition of distributable earnings was modified to include the deduction for preferred unit distributions and exclude costs related to the Brookfield transaction. For comparability, prior periods have been recast for this change, as applicable.

GAAP Results

Oaktree consolidates entities in which it has a direct or indirect controlling financial interest. Investment vehicles in which we have a significant investment, such as collateralized loan obligation vehicles (“CLOs”) and certain Oaktree funds, are consolidated under GAAP. When a CLO or fund is consolidated, the assets, liabilities, revenues, expenses and cash flows of the consolidated funds are reflected on a gross basis, and the majority of the economic interests in those consolidated funds, which are held by third-party investors, are reflected as debt obligations of CLOs or non-controlling interests. All of the revenues earned by us as investment manager of the consolidated funds are eliminated in consolidation. However, because the eliminated amounts are earned from and funded by third-party investors, the consolidation of a fund does not impact net income or loss attributable to OCG.

Total revenues increased $100.2 million, or 47.0%, to $313.5 million for the second quarter of 2019, from $213.3 million for the second quarter of 2018, reflecting higher incentive income.

Total expenses increased $81.3 million, or 44.0%, to $265.9 million for the second quarter of 2019, from $184.6 million for the second quarter of 2018, primarily reflecting higher incentive income compensation.

Total other income increased $33.9 million, to $75.8 million for the second quarter of 2019, from income of $41.9 million for the second quarter of 2018. The increase primarily reflecting variations in returns on our fund investments between periods.

Net income attributable to OCG Class A unitholders increased $11.3 million, or 36.3%, to $42.4 million for the second quarter of 2019, from $31.1 million for the second quarter of 2018, primarily reflecting higher incentive income.

Operating Metrics

Assets Under Management

Assets under management were $120.4 billion as of June 30, 2019, $118.6 billion as of March 31, 2019 and $121.6 billion as of June 30, 2018. The $1.8 billion increase since March 31, 2019 primarily reflected $3.7 billion of capital commitments to closed-end funds and $2.0 billion attributable to DoubleLine, partially offset by $2.5 billion of distributions to closed-end fund investors and $1.7 billion of net outflows from open-end funds. Commitments to closed-end funds included $1.4 billion for CLOs, $1.0 billion for the Highstar III Successor Funds (“HS III”), and $0.5 billion for Oaktree Special Situations Fund II (“SS II”).

The $1.2 billion decrease in AUM since June 30, 2018 primarily reflected $8.2 billion of distributions to closed-end fund investors and uncalled commitments, $6.9 billion of net outflows from open-end funds, and $0.4 billion of unfavorable foreign-currency translation, partially offset by $8.4 billion of capital commitments to closed-end funds, $4.0 billion attributable to DoubleLine, and $3.0 billion in market-value gains. Commitments to closed-end funds included $2.5 billion for CLOs, $1.4 billion for Oaktree Power Opportunities Fund V (“Power V”), $1.2 billion for SS II, $1.1 billion for our Middle Market Direct Lending strategy, and $1.0 billion for HS III. Distributions to closed-end fund investors included $4.6 billion from Credit funds, $1.6 billion from Real Asset funds and $1.0 billion from Private Equity funds.

Management Fee-generating Assets Under Management

Management fee-generating AUM, a forward-looking metric, was $101.4 billion as of June 30, 2019, $100.3 billion as of March 31, 2019 and $100.5 billion as of June 30, 2018. The $1.1 billion increase since March 31, 2019 primarily reflected $2.1 billion from new CLOs and HS III, $2.0 billion attributable to DoubleLine, $0.8 billion in market-value gains, partially offset by $1.7 billion of net outflows from open-end funds, $1.1 billion change in applicable leverage, and $0.7 billion attributable to closed-end funds in liquidation.

The $0.9 billion increase in management fee-generating AUM since June 30, 2018 reflected $5.1 billion primarily from new CLOs and the start of the investment periods for Oaktree Transportation Infrastructure Fund and Power V, $4.0 billion attributable to DoubleLine, $3.2 billion from capital drawn by closed-end funds that pay fees based on drawn capital, NAV or cost basis, $2.1 billion in market-value gains, and $0.7 billion of net inflows to evergreen funds. These increases were partially offset by $6.9 billion of net outflows from open-end funds, $4.1 billion attributable to closed-end funds in liquidation and uncalled commitments, $1.2 billion of distributions by closed-end funds that pay fees based on NAV, and $0.4 billion in unfavorable foreign-currency translation.

Incentive-creating Assets Under Management

Incentive-creating AUM was $36.0 billion as of June 30, 2019, $34.4 billion as of March 31, 2019 and $33.3 billion as of June 30, 2018. The $1.6 billion increase since March 31, 2019 reflected an aggregate increase of $3.3 billion primarily attributable to drawdowns, contributions and market-value gains, partially offset by an aggregate $1.7 billion of distributions. The $2.7 billion increase since June 30, 2018 reflected an aggregate $9.7 billion in drawdowns, contributions and market-value gains, partially offset by an aggregate decline of $7.0 billion primarily attributable to distributions.

Of the $36.0 billion in incentive-creating AUM as of June 30, 2019, $22.8 billion (or 63%) was generating incentives at the fund level, as compared with $21.0 billion (or 63%) of the $33.3 billion of incentive-creating AUM as of June 30, 2018.

Accrued Incentives (Fund Level) and Incentives Created (Fund Level)

Accrued incentives (fund level) were $1,294.9 million as of June 30, 2019, $1,424.9 million as of March 31, 2019 and $1,863.9 million as of June 30, 2018. The second quarter of 2019 reflected $11.3 million of incentives created (fund level) and $141.4 million of incentive income recognized.

Accrued incentives (fund level), net of incentive income compensation expense (“net accrued incentives”), were $620.5 million as of June 30, 2019, $678.5 million as of March 31, 2019, and $898.6 million as of June 30, 2018. The portion of net accrued incentives represented by funds that were currently paying incentives as of June 30, 2019, March 31, 2019 and June 30, 2018 was $145.6 million (or 23%), $201.5 million (30%) and $214.6 million (24%), respectively, with the remainder arising from funds that as of that date were not at the stage of their cash distribution waterfall where Oaktree was entitled to receive incentives, other than certain tax-related distributions.

Uncalled Capital Commitments

Uncalled capital commitments were $18.0 billion as of June 30, 2019, $19.5 billion as of December 31, 2018, and $20.3 billion as of June 30, 2018. Invested capital during the quarter and 12 months ended June 30, 2019 aggregated $2.5 billion and $11.2 billion, respectively, as compared with $1.9 billion and $7.9 billion for the comparable prior-year periods.

Non-GAAP Results

Distributable Earnings Revenues

Distributable earnings revenues increased $91.3 million, or 31.8%, to $378.4 million for the second quarter of 2019, from $287.1 million for the second quarter of 2018, as further described below.

Management Fees

Management fees increased $2.1 million, or 1.1%, to $198.0 million for the second quarter of 2019, from $195.9 million for the second quarter of 2018. The increase reflected an aggregate increase of $28.5 million principally from closed-end funds in their investment periods, partially offset by an aggregate decline of $26.4 million primarily attributable to closed-end funds in liquidation and open-end funds.

Incentive Income

Incentive income increased $90.0 million, or 175.1%, to $141.4 million for the second quarter of 2019, from $51.4 million for the second quarter of 2018. The second quarter of 2019 included $118.7 million from Oaktree Opportunities Fund VIII.

Realized Investment Income Proceeds

Realized investment income proceeds decreased $0.8 million, or 2.0%, to $39.0 million for the second quarter of 2019, from $39.8 million for the second quarter of 2018, primarily reflecting lower proceeds from our non-Oaktree and Private Equity investments, largely offset by higher proceeds from our Credit investments.

Adjusted Expenses

Compensation and Benefits

Compensation and benefits expense increased $4.7 million, or 4.5%, to $108.3 million for the second quarter of 2019, from $103.6 million for the second quarter of 2018, primarily driven by growth in headcount.

Incentive Income Compensation

Incentive income compensation expense increased $52.9 million, or 251.9%, to $73.9 million for the second quarter of 2019, from $21.0 million for the second quarter of 2018, reflecting the growth in incentive income.

General and Administrative

General and administrative expense increased $3.9 million, or 10.0%, to $43.0 million for the second quarter of 2019, from $39.1 million for the second quarter of 2018, primarily reflecting higher placement fees associated with fundraising activities.

Depreciation and Amortization

Depreciation and amortization expense increased $0.1 million, or 4.3%, to $2.4 million for the second quarter of 2019, from $2.3 million for the second quarter of 2018.

Interest Expense, Net

Interest expense, net decreased $1.8 million, or 75.0%, to $0.6 million for the second quarter of 2019, from $2.4 million for the second quarter of 2018. The decrease was primarily driven by higher interest income.

Preferred Unit Distributions

The second quarter of 2019 included Series A and Series B preferred unit distributions of $6.8 million in the aggregate, as compared with $0 for the second quarter of 2018, reflecting the issuances of our Series A and Series B preferred units in the second and third quarters of 2018, respectively.

Distributable Earnings

Distributable earnings increased $24.0 million, or 21.0%, to $138.3 million for the second quarter of 2019, from $114.3 million for the second quarter of 2018. The increase reflected $37.1 million in higher net incentive income, partially offset by $6.8 million in higher preferred unit distributions and $6.5 million in lower fee-related earnings. The portion of distributable earnings attributable to our Class A units was $0.88 and $0.69 per unit for the second quarters of 2019 and 2018, respectively, reflecting distributable earnings per Operating Group unit of $0.87 and $0.73, respectively, less costs borne by Class A unitholders for professional fees and other expenses, cash taxes attributable to the Intermediate Holding Companies, and amounts payable pursuant to the tax receivable agreement.

Fee-related Earnings

Fee-related earnings decreased $6.5 million, or 12.8%, to $44.4 million for the second quarter of 2019, from $50.9 million for the second quarter of 2018, primarily reflecting $4.7 million in higher compensation and benefits expense and $3.9 million in higher general and administrative expense, partially offset by an increase of $2.1 million in management fees.

The effective tax rates applicable to fee-related earnings for the second quarters of 2019 and 2018 were (1)% and 5%, respectively, resulting from full-year effective tax rates of 2% and 6%, respectively. The rate used for interim fiscal periods is based on the estimated full-year effective tax rate, which is subject to change as the year progresses. In general, the annual effective tax rate increases as annual fee-related earnings increase, and vice versa.

Capital and Liquidity

As of June 30, 2019, Oaktree and its operating subsidiaries had $1.1 billion of cash and U.S. Treasury and other securities, and $746 million of outstanding debt, which included no borrowings outstanding against its $500 million revolving credit facility. As of June 30, 2019, Oaktree’s investments in funds and companies on a non-GAAP basis had a carrying value of $1.8 billion, with the 20% investment in DoubleLine carried at $24 million based on cost, as adjusted under the equity method of accounting. Net accrued incentives (fund level) represented an additional $620 million as of that date.

Forward-Looking Statements and Information

This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which reflect the current views of OCG, with respect to, among other things, its future results of operations and financial performance. In some cases, you can identify forward-looking statements and information by words such as “anticipate,” “approximately,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “seek,” “should,” “will” and “would” or the negative version of these words or other comparable or similar words. These statements identify prospective information. Important factors could cause actual results to differ, possibly materially, from those indicated in these statements. Forward-looking statements are based on OCG’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. Such forward-looking statements and information are subject to risks and uncertainties and assumptions relating to OCG’s operations, financial results, financial condition, business prospects, growth strategy and liquidity.

In addition to factors previously disclosed in Brookfield’s and OCG’s reports filed with securities regulators in Canada and the United States and those identified elsewhere in this release, the following factors, among others, could cause actual results to differ materially from forward-looking statements and information or historical performance: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of Brookfield and OCG to terminate the definitive merger agreement between Brookfield and OCG; the outcome of any legal proceedings that may be instituted against Brookfield, OCG or their respective unitholders, shareholders or directors; the ability to obtain regulatory approvals and meet other closing conditions to the merger, including the risk that regulatory approvals required for the merger are not obtained or are obtained subject to conditions that are not anticipated or that are material and adverse to Brookfield’s or OCG’s business; a delay in closing the merger; business disruptions from the proposed merger that will harm Brookfield’s or OCG’s business, including current plans and operations; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; certain restrictions during the pendency of the merger that may impact Brookfield’s or OCG’s ability to pursue certain business opportunities or strategic transactions; the ability of Brookfield or OCG to retain and hire key personnel; uncertainty as to the long-term value of the Class A shares of Brookfield following the merger; the continued availability of capital and financing following the merger; the business, economic and political conditions in the markets in which Brookfield and OCG operate; changes in OCG’s or Brookfield’s anticipated revenue and income, which are inherently volatile; changes in the value of OCG’s or Brookfield’s investments; the pace of OCG’s or Brookfield’s raising of new funds; changes in assets under management; the timing and receipt of, and impact of taxes on, carried interest; distributions from and liquidation of OCG’s existing funds; the amount and timing of distributions on OCG’s preferred units and Class A units; changes in OCG’s operating or other expenses; the degree to which OCG or Brookfield encounters competition; and general political, economic and market conditions.

Any forward-looking statements and information speak only as of the date of this release or as of the date they were made, and except as required by law, neither Brookfield nor OCG undertakes any obligation to update forward-looking statements and information. For a more detailed discussion of these factors, also see the information under the captions “Cautionary Information Regarding Forward-Looking Statements” and “Risk Factors” in the consent solicitation statement/prospectus that forms part of the Registration Statement on Form F-4 (No. 333-231335) filed with the SEC by Brookfield in connection with the proposed merger, and the captions “Business Environment and Risks” in Brookfield’s most recent report on Form 40-F for the year ended December 31, 2018, and under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in OCG’s most recent report on Form 10-K for the year ended December 31, 2018, and in each case any material updates to these factors contained in any of Brookfield’s or OCG’s future filings.

As for the forward-looking statements and information that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements and information.

This release and its contents do not constitute and should not be construed as (a) a recommendation to buy, (b) an offer to buy or solicitation of an offer to buy, (c) an offer to sell or (d) advice in relation to, any securities of OCG or securities of any Oaktree investment fund.

Important Additional Information and Where to Find It

In connection with the proposed mergers, Brookfield filed with the SEC a Registration Statement on Form F-4 (No. 333-231335) that includes a consent solicitation statement of OCG and a prospectus of Brookfield, as well as other relevant documents regarding the proposed transactions. The Registration Statement, as amended, was declared effective by the SEC on June 20, 2019. OCG commenced mailing the definitive consent solicitation statement/prospectus to OCG common unitholders on or about June 24, 2019. This release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE CONSENT SOLICITATION STATEMENT/PROSPECTUS REGARDING THE MERGERS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

A free copy of the consent solicitation statement/prospectus, as well as other filings containing information about OCG and Brookfield, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from OCG by accessing OCG’s website at ir.oaktreecapital.com or from Brookfield by accessing Brookfield’s website at bam.Brookfield.com/reports-and-filings. Copies of the consent solicitation statement/prospectus can also be obtained, free of charge, by directing a request to Oaktree Investor Relations at Unitholders – Investor Relations, Oaktree Capital Management, L.P., 333 South Grand Ave., 28th Floor, Los Angeles, CA 90071, by calling (213) 830-6483 or by sending an e-mail to investorrelations@oaktreecapital.com or to Brookfield Investor Relations by calling (416) 359-8647 or by sending an e-mail to linda.northwood@brookfield.com.

Investor Relations Website

Investors and others should note that Oaktree uses the Unitholders – Investor Relations section of its corporate website to announce material information to investors and the marketplace. While not all of the information that Oaktree posts on its corporate website is of a material nature, some information could be deemed to be material. Accordingly, Oaktree encourages investors, the media, and others interested in Oaktree to review the information that it shares on its corporate website at the Unitholders – Investor Relations section of the Oaktree website, ir.oaktreecapital.com. Information contained on, or available through, our website is not incorporated by reference into this document.

GAAP Consolidated Statements of Operations

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per unit data)

Revenues:

 

 

 

 

 

 

 

Management fees

$

175,103

 

 

$

178,096

 

 

$

345,037

 

 

$

363,511

 

Incentive income

138,380

 

 

35,187

 

 

234,861

 

 

187,093

 

Total revenues

313,483

 

 

213,283

 

 

579,898

 

 

550,604

 

Expenses:

 

 

 

 

 

 

 

Compensation and benefits

(109,115

)

 

(105,073

)

 

(223,638

)

 

(213,827

)

Equity-based compensation

(22,648

)

 

(15,246

)

 

(36,977

)

 

(29,867

)

Incentive income compensation

(73,122

)

 

(15,218

)

 

(125,422

)

 

(100,033

)

Total compensation and benefits expense

(204,885

)

 

(135,537

)

 

(386,037

)

 

(343,727

)

General and administrative

(50,138

)

 

(39,444

)

 

(97,741

)

 

(72,408

)

Depreciation and amortization

(6,566

)

 

(6,551

)

 

(13,130

)

 

(12,953

)

Consolidated fund expenses

(4,299

)

 

(3,074

)

 

(6,454

)

 

(6,554

)

Total expenses

(265,888

)

 

(184,606

)

 

(503,362

)

 

(435,642

)

Other income (loss):

 

 

 

 

 

 

 

Interest expense

(43,995

)

 

(35,469

)

 

(89,760

)

 

(76,048

)

Interest and dividend income

84,648

 

 

67,980

 

 

176,900

 

 

130,599

 

Net realized gain (loss) on consolidated funds’ investments

447

 

 

(17,296

)

 

(5,372

)

 

(2,697

)

Net change in unrealized appreciation (depreciation) on consolidated funds’ investments

1,814

 

 

(31,105

)

 

58,931

 

 

(45,491

)

Investment income

32,835

 

 

56,923

 

 

94,985

 

 

91,486

 

Other income (expense), net

36

 

 

914

 

 

58

 

 

1,611

 

Total other income (loss)

75,785

 

 

41,947

 

 

235,742

 

 

99,460

 

Income before income taxes

123,380

 

 

70,624

 

 

312,278

 

 

214,422

 

Income taxes

(1,852

)

 

(4,867

)

 

(6,350

)

 

(11,264

)

Net income

121,528

 

 

65,757

 

 

305,928

 

 

203,158

 

Less:

 

 

 

 

 

 

 

Net income attributable to non-controlling interests in consolidated funds

(22,240

)

 

7,360

 

 

(86,442

)

 

(3,365

)

Net income attributable to non-controlling interests in consolidated subsidiaries

(50,015

)

 

(41,996

)

 

(116,130

)

 

(115,940

)

Net income attributable to OCG

49,273

 

 

31,121

 

 

103,356

 

 

83,853

 

Net income attributable to preferred unitholders

(6,829

)

 

 

 

(13,658

)

 

 

Net income attributable to OCG Class A unitholders

$

42,444

 

 

$

31,121

 

 

$

89,698

 

 

$

83,853

 

 

 

 

 

 

 

 

 

Distributions declared per Class A unit

$

1.05

 

 

$

0.96

 

 

$

1.80

 

 

$

1.72

 

Net income per Class A unit (basic and diluted):

 

 

 

 

 

 

 

Net income per Class A unit

$

0.57

 

 

$

0.44

 

 

$

1.23

 

 

$

1.21

 

Weighted average number of Class A units outstanding

74,340

 

 

71,177

 

 

72,994

 

 

69,556

 

Operating Metrics

We monitor certain operating metrics that are either common to the alternative asset management industry or that we believe provide important data regarding our business. As described below, these operating metrics include AUM, management fee-generating AUM, incentive-creating AUM, incentives created (fund level), accrued incentives (fund level) and uncalled capital commitments.

Assets Under Management

 

 

As of

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

 

(in millions)

Assets Under Management:

 

 

 

 

 

 

 

Closed-end funds

$

55,718

 

 

$

55,083

 

 

$

56,294

 

Open-end funds

27,359

 

 

28,420

 

 

32,824

 

Evergreen funds

9,284

 

 

9,140

 

 

8,426

 

DoubleLine (1)

28,007

 

 

25,966

 

 

24,040

 

Total

$

120,368

 

 

$

118,609

 

 

$

121,584

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Twelve Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in millions)

Change in Assets Under Management:

 

 

 

 

 

 

 

Beginning balance

$

118,609

 

 

$

121,394

 

 

$

121,584

 

 

$

121,053

 

Closed-end funds:

 

 

 

 

 

 

 

Capital commitments/other (2)

3,698

 

 

2,410

 

 

8,366

 

 

4,387

 

Distributions for a realization event / other (3)

(2,542

)

 

(1,901

)

 

(7,197

)

 

(8,840

)

Change in uncalled capital commitments for funds entering or in liquidation (4)

158

 

 

74

 

 

(962

)

 

(361

)

Foreign-currency translation

120

 

 

(444

)

 

(203

)

 

221

 

Change in market value (5)

358

 

 

525

 

 

1,037

 

 

2,615

 

Change in applicable leverage

(1,157

)

 

(52

)

 

(1,617

)

 

(51

)

Open-end funds:

 

 

 

 

 

 

 

Contributions

495

 

 

724

 

 

3,936

 

 

4,017

 

Redemptions

(2,188

)

 

(1,056

)

 

(10,871

)

 

(7,591

)

Foreign-currency translation

(1

)

 

(373

)

 

(190

)

 

147

 

Change in market value (5)

633

 

 

(174

)

 

1,660

 

 

623

 

Evergreen funds:

 

 

 

 

 

 

 

Contributions or new capital commitments (6)

130

 

 

140

 

 

1,086

 

 

1,203

 

Acquisition (BDCs)

 

 

 

 

 

 

2,110

 

Redemptions or distributions (7)

(77

)

 

(270

)

 

(558

)

 

(880

)

Foreign-currency translation

 

 

2

 

 

 

 

(1

)

Change in market value (5)

91

 

 

327

 

 

330

 

 

685

 

DoubleLine:

 

 

 

 

 

 

 

Net change in DoubleLine

2,041

 

 

258

 

 

3,967

 

 

2,247

 

Ending balance

$

120,368

 

 

$

121,584

 

 

$

120,368

 

 

$

121,584

 

 

(1)

DoubleLine AUM reflects our pro-rata portion (based on our 20% ownership stake) of DoubleLine’s total AUM.

(2)

These amounts include capital commitments, as well as the aggregate par value of collateral assets and principal cash related to new CLO formations.

(3)

These amounts include distributions for a realization event, tax-related distributions, reductions in the par value of collateral assets and principal cash resulting from the repayment of debt as return of principal by CLOs, and recallable distributions at the end of the investment period.

(4)

The change in uncalled capital commitments generally reflects declines attributable to funds entering their liquidation periods, as well as capital contributions to funds in their liquidation periods for deferred purchase obligations or other reasons.

(5)

The change in market value reflects the change in NAV of our funds, less management fees and other fund expenses, as well as changes in the aggregate par value of collateral assets and principal cash held by CLOs and other levered funds.

(6)

These amounts include contributions and capital commitments, and for our publicly-traded BDCs, issuances of equity or debt capital.

(7)

These amounts include redemptions and distributions, and for our publicly-traded BDCs, dividends, repurchases of equity capital or repayment of debt.

Management Fee-generating AUM

 

 

As of

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Management Fee-generating AUM:

 

(in millions)

Closed-end funds:

 

 

 

 

 

Senior Loans

$

7,525

 

 

$

8,179

 

 

$

7,896

 

Other closed-end funds

30,440

 

 

29,792

 

 

28,754

 

Open-end funds

27,106

 

 

28,152

 

 

32,520

 

Evergreen funds

8,357

 

 

8,175

 

 

7,337

 

DoubleLine

28,007

 

 

25,966

 

 

24,040

 

Total

$

101,435

 

 

$

100,264

 

 

$

100,547

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Twelve Months Ended June 30,

2019

 

2018

 

2019

 

2018

Change in Management Fee-generating AUM:

(in millions)

 

 

 

 

 

 

 

Beginning balance

$

100,264

 

 

$

102,043

 

 

$

100,547

 

 

$

101,600

 

Closed-end funds:

 

 

 

 

 

 

 

Capital commitments to funds that pay fees based on committed capital / other (1)

2,067

 

 

 

 

5,082

 

 

926

 

Capital drawn by funds that pay fees based on drawn capital, NAV or cost basis

514

 

 

385

 

 

3,222

 

 

1,831

 

Change attributable to funds in liquidation (2)

(725

)

 

(981

)

 

(3,343

)

 

(5,489

)

Change in uncalled capital commitments for funds entering or in liquidation that pay fees based on committed capital (3)

 

 

 

 

(766

)

 

 

Distributions by funds that pay fees based on NAV / other (4)

(921

)

 

(161

)

 

(1,211

)

 

(857

)

Foreign-currency translation

103

 

 

(380

)

 

(163

)

 

150

 

Change in market value (5)

70

 

 

(1

)

 

51

 

 

147

 

Change in applicable leverage

(1,114

)

 

(50

)

 

(1,557

)

 

(49

)

Open-end funds:

 

 

 

 

 

 

 

Contributions

493

 

 

674

 

 

3,875

 

 

3,920

 

Redemptions

(2,166

)

 

(1,056

)

 

(10,796

)

 

(7,591

)

Foreign-currency translation

 

 

(373

)

 

(189

)

 

147

 

Change in market value

627

 

 

(173

)

 

1,696

 

 

615

 

Evergreen funds:

 

 

 

 

 

 

 

Contributions or capital drawn by funds that pay fees based on drawn capital or NAV (6)

199

 

 

227

 

 

1,222

 

 

1,040

 

Acquisition (BDCs)

 

 

 

 

 

 

2,110

 

Redemptions or distributions (7)

(98

)

 

(205

)

 

(545

)

 

(855

)

Change in market value (5)

81

 

 

340

 

 

343

 

 

655

 

DoubleLine:

 

 

 

 

 

 

 

Net change in DoubleLine

2,041

 

 

258

 

 

3,967

 

 

2,247

 

Ending balance

$

101,435

 

 

$

100,547

 

 

$

101,435

 

 

$

100,547

 

 
(1)

These amounts include capital commitments to funds that pay fees based on committed capital, as well as the aggregate par value of collateral assets and principal cash related to new CLO formations.

(2)

These amounts include the change for funds that pay fees based on the lesser of funded capital or cost basis during the liquidation period, as well as recallable distributions at the end of the investment period. For most closed-end funds, management fees are charged during the liquidation period on the lesser of (a) total funded capital or (b) the cost basis of assets remaining in the fund, with the cost basis of assets generally calculated by excluding cash balances. Thus, changes in fee basis during the liquidation period are not dependent on distributions made from the fund; rather, they are tied to the cost basis of the fund’s investments, which typically declines as the fund sells assets.

(3)

The change in uncalled capital commitments reflects declines attributable to funds entering their liquidation periods, as well as capital contributions to funds in their liquidation periods for deferred purchase obligations or other reasons.

(4)

These amounts include distributions by funds that pay fees based on NAV, as well as reductions in the par value of collateral assets and principal cash resulting from the repayment of debt as return of principal by CLOs.

(5)

The change in market value reflects certain funds that pay management fees based on NAV and leverage, as applicable, as well as changes in the aggregate par value of collateral assets and principal cash held by CLOs and other levered funds.

(6)

These amounts include contributions and capital commitments, and for our publicly-traded BDCs, issuances of equity or debt capital.

(7)

These amounts include redemptions and distributions, and for our publicly-traded BDCs, dividends, repurchases of equity capital or repayment of debt.

 

As of

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Reconciliation of AUM to Management Fee-generating AUM:

(in millions)

Assets under management

$

120,368

 

 

$

118,609

 

 

$

121,584

 

Difference between assets under management and committed capital or the lesser of funded capital or cost basis for applicable closed-end funds (1)

(1,601

)

 

(1,826

)

 

(2,326

)

Undrawn capital commitments to closed-end funds that have not yet commenced their investment periods

(9,133

)

 

(8,532

)

 

(10,092

)

Undrawn capital commitments to funds for which management fees are based on drawn capital, NAV or cost basis

(4,081

)

 

(4,075

)

 

(4,042

)

Oaktree’s general partner investments in management fee-generating funds

(1,598

)

 

(1,535

)

 

(1,724

)

Funds that pay no management fees (2)

(2,520

)

 

(2,377

)

 

(2,853

)

Management fee-generating assets under management

$

101,435

 

 

$

100,264

 

 

$

100,547

 

 
(1)

This difference is not applicable to closed-end funds that pay management fees based on NAV or leverage.

(2)

This includes funds that are no longer paying management fees, co-investments that pay no management fees, certain accounts that pay administrative fees intended to offset Oaktree’s costs related to the accounts and CLOs in the warehouse stage that pay no management fees.

The period-end weighted average annual management fee rates applicable to the closed-end, open-end and evergreen management fee-generating AUM balances above are set forth below.

 

As of

Weighted Average Annual Management Fee Rates:

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Closed-end funds:

 

 

 

 

 

Senior Loans

0.47

%

 

0.49

%

 

0.50

%

Other closed-end funds

1.41

 

 

1.43

 

 

1.47

 

Open-end funds

0.45

 

 

0.45

 

 

0.45

 

Evergreen funds (1)

1.17

 

 

1.17

 

 

1.20

 

All Oaktree funds (2)

0.93

 

 

0.93

 

 

0.91

 

 

(1)

Fee rates reflect the applicable asset-based management fee rates, exclusive of quarterly incentive fees on investment income that are included in management fees.

(2)

Excludes DoubleLine funds.

Incentive-creating AUM

 

As of

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Incentive-creating AUM:

(in millions)

Closed-end funds

$

28,521

 

 

$

27,174

 

 

$

26,677

 

Evergreen funds

6,822

 

 

6,633

 

 

6,006

 

DoubleLine

657

 

 

606

 

 

608

 

Total

$

36,000

 

 

$

34,413

 

 

$

33,291

 

Accrued Incentives (Fund Level) and Incentives Created (Fund Level)

 

As of or for the Three Months
Ended June 30,

 

As of or for the Six Months
Ended June 30,

 

2019

 

2018

 

2019

 

2018

Accrued Incentives (Fund Level):

(in thousands)

Beginning balance

$

1,424,904

 

 

$

1,795,967

 

 

$

1,722,120

 

 

$

1,920,339

 

Incentives created (fund level):

 

 

 

 

 

 

 

Closed-end funds

(2,461

)

 

102,850

 

 

57,098

 

 

200,156

 

Evergreen funds

12,303

 

 

16,367

 

 

38,685

 

 

30,246

 

DoubleLine

1,500

 

 

100

 

 

3,551

 

 

100

 

Total incentives created (fund level)

11,342

 

 

119,317

 

 

99,334

 

 

230,502

 

Less: incentive income recognized by us

(141,380

)

 

(51,352

)

 

(526,588

)

 

(286,909

)

Ending balance

$

1,294,866

 

 

$

1,863,932

 

 

$

1,294,866

 

 

$

1,863,932

 

Accrued incentives (fund level), net of associated incentive income compensation expense

$

620,495

 

 

$

898,588

 

 

$

620,495

 

 

$

898,588

 

Non-GAAP Results

Our business is comprised of one segment, our investment management business, which consists of the investment management services that we provide to our clients. Management makes operating decisions and assesses the performance of our business based on financial data that are presented without the consolidation of our funds. The data most important to management in assessing our performance are distributable earnings and fee-related earnings, each for both the Operating Group and per Class A unit. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented at Exhibit A.

Distributable Earnings

The following schedules set forth the components of distributable earnings:

Distributable Earnings Revenues

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Revenues:

 

 

 

 

 

 

 

Management fees

$

198,037

 

 

$

195,935

 

 

$

388,138

 

 

$

398,882

 

Incentive income

141,380

 

 

51,352

 

 

526,588

 

 

286,909

 

Realized investment income proceeds

38,958

 

 

39,768

 

 

66,343

 

 

78,528

 

Total distributable earnings revenues

$

378,375

 

 

$

287,055

 

 

$

981,069

 

 

$

764,319

 

Adjusted Expenses

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Expenses:

 

 

 

 

 

 

 

Compensation and benefits

$

(108,262

)

 

$

(103,642

)

 

$

(221,457

)

 

$

(208,412

)

Incentive income compensation

(73,887

)

 

(20,984

)

 

(281,588

)

 

(151,426

)

General and administrative

(43,044

)

 

(39,108

)

 

(77,984

)

 

(76,545

)

Depreciation and amortization

(2,371

)

 

(2,310

)

 

(4,740

)

 

(4,563

)

Total adjusted expenses

$

(227,564

)

 

$

(166,044

)

 

$

(585,769

)

 

$

(440,946

)

Distributable Earnings

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

 

 

 

 

 

 

 

 

Interest expense, net of interest income (1)

$

(643

)

 

$

(2,399

)

 

$

(1,552

)

 

$

(5,809

)

Preferred unit distributions

(6,829

)

 

 

 

(13,658

)

 

 

Operating Group income taxes

(1,904

)

 

(2,140

)

 

(2,433

)

 

(4,886

)

Other income (expense), net

(3,092

)

 

(2,186

)

 

(5,422

)

 

(4,419

)

Distributable earnings (2)

$

138,343

 

 

$

114,286

 

 

$

372,235

 

 

$

308,259

 

 

(1)

Interest income was $5.5 million and $10.8 million for the three and six months ended June 30, 2019, respectively, and $3.6 million and $6.0 million for the three and six months ended June 30, 2018, respectively.

(2)

Reflects the sum of total distributable earnings revenues, adjusted expenses, net interest expense, preferred unit distributions, Operating Group income taxes and other income (expense).

Distribution Calculation

The calculation of distributions is set forth below:

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per unit data)

 

 

 

 

 

 

 

 

Distributable earnings

$

138,343

 

 

$

114,286

 

 

$

372,235

 

 

$

308,259

 

 

 

 

 

 

 

 

 

Distribution Calculation:

 

 

 

 

 

 

 

Operating Group distribution with respect to the period

$

 

 

$

97,438

 

 

$

177,221

 

 

$

262,483

 

Distribution per Operating Group unit

$

 

 

$

0.62

 

 

$

1.11

 

 

$

1.67

 

Adjustments per Class A unit:

 

 

 

 

 

 

 

Distributable earnings-Class A income taxes

 

 

(0.01

)

 

 

 

(0.03

)

Tax receivable agreement

 

 

(0.06

)

 

(0.06

)

 

(0.12

)

Non-Operating Group expenses

 

 

 

 

 

 

(0.01

)

Distribution per Class A unit (1)

$

 

 

$

0.55

 

 

$

1.05

 

 

$

1.51

 

 

(1)

With respect to the quarter ended June 30, 2019, no quarterly distribution per Class A and OCGH units will be paid in accordance with the OCG and Brookfield merger agreement.

Units Outstanding

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Weighted Average Units:

 

 

 

 

 

 

 

OCGH

85,269

 

 

86,007

 

 

85,371

 

 

87,133

 

Class A

74,340

 

 

71,177

 

 

72,994

 

 

69,556

 

Total units

159,609

 

 

157,184

 

 

158,365

 

 

156,689

 

Units Eligible for Fiscal Period Distribution:

 

 

 

 

 

 

 

OCGH

84,001

 

 

85,998

 

 

 

 

 

Class A

75,649

 

 

71,160

 

 

 

 

 

Total units

159,650

 

 

157,158

 

 

 

 

 

Additional Detail

Management Fees

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Management fees:

 

 

 

 

 

 

 

Closed-end funds

$

118,561

 

 

$

116,776

 

 

$

231,611

 

 

$

238,482

 

Open-end funds

30,140

 

 

37,086

 

 

62,892

 

 

75,198

 

Evergreen funds

31,136

 

 

24,573

 

 

60,375

 

 

49,489

 

DoubleLine

18,200

 

 

17,500

 

 

33,260

 

 

35,713

 

Total management fees

$

198,037

 

 

$

195,935

 

 

$

388,138

 

 

$

398,882

 

Realized Investment Income Proceeds

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Oaktree funds:

 

 

 

 

 

 

 

Credit

$

27,412

 

 

$

12,569

 

 

$

43,960

 

 

$

28,241

 

Private Equity

(1,390

)

 

8,935

 

 

(1,110

)

 

19,895

 

Real Assets

3,662

 

 

2,486

 

 

7,580

 

 

8,268

 

Listed Equities

3,516

 

 

 

 

7,798

 

 

5,551

 

Non-Oaktree

5,758

 

 

15,778

 

 

8,115

 

 

16,573

 

Total realized investment income proceeds

$

38,958

 

 

$

39,768

 

 

$

66,343

 

 

$

78,528

 

Investment Income

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Oaktree funds:

 

 

 

 

 

 

 

Credit

$

27,258

 

 

$

22,917

 

 

$

66,147

 

 

$

37,801

 

Private Equity

(2,483

)

 

8,264

 

 

(2,479

)

 

7,452

 

Real Assets

6,353

 

 

8,702

 

 

14,623

 

 

13,652

 

Listed Equities

2,051

 

 

(14,672

)

 

12,684

 

 

(22,084

)

Non-Oaktree

1,082

 

 

1,027

 

 

6,498

 

 

2,069

 

Total investment income

$

34,261

 

 

$

26,238

 

 

$

97,473

 

 

$

38,890

 

GAAP Statement of Financial Condition (Unaudited)

 

As of June 30, 2019

 

Oaktree and
Operating Subsidiaries

 

Consolidated
Funds

 

Eliminations

 

Consolidated

 

(in thousands)

Assets:

 

 

 

 

 

 

 

Cash and cash-equivalents

$

699,429

 

 

$

 

 

$

 

 

$

699,429

 

U.S. Treasury and other securities

387,585

 

 

 

 

 

 

387,585

 

Corporate investments

1,803,617

 

 

 

 

(649,164

)

 

1,154,453

 

Deferred tax assets

229,330

 

 

 

 

 

 

229,330

 

Operating lease assets

105,767

 

 

 

 

 

 

105,767

 

Receivables and other assets

663,568

 

 

 

 

(2,871

)

 

660,697

 

Assets of consolidated funds

 

 

7,441,760

 

 

 

 

7,441,760

 

Total assets

$

3,889,296

 

 

$

7,441,760

 

 

$

(652,035

)

 

$

10,679,021

 

Liabilities and Capital:

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

395,339

 

 

$

 

 

$

1,010

 

 

$

396,349

 

Due to affiliates

188,991

 

 

 

 

 

 

188,991

 

Debt obligations

746,210

 

 

 

 

 

 

746,210

 

Operating lease liabilities

135,093

 

 

 

 

 

 

135,093

 

Liabilities of consolidated funds

 

 

5,756,274

 

 

(84,552

)

 

5,671,722

 

Total liabilities

1,465,633

 

 

5,756,274

 

 

(83,542

)

 

7,138,365

 

Non-controlling redeemable interests in consolidated funds

 

 

 

 

1,116,993

 

 

1,116,993

 

Capital:

 

 

 

 

 

 

 

Capital attributable to OCG preferred unitholders

400,584

 

 

 

 

 

 

400,584

 

Capital attributable to OCG Class A unitholders

1,000,340

 

 

269,352

 

 

(269,352

)

 

1,000,340

 

Non-controlling interest in consolidated subsidiaries

1,022,739

 

 

299,141

 

 

(299,141

)

 

1,022,739

 

Non-controlling interest in consolidated funds

 

 

1,116,993

 

 

(1,116,993

)

 

 

Total capital

2,423,663

 

 

1,685,486

 

 

(1,685,486

)

 

2,423,663

 

Total liabilities and capital

$

3,889,296

 

 

$

7,441,760

 

 

$

(652,035

)

 

$

10,679,021

 

Corporate Investments

 

As of

 

June 30,
2019

 

March 31,
2019

 

June 30,
2018

 

(in thousands)

Oaktree funds:

 

 

 

 

 

Credit

$

1,014,918

 

 

$

1,004,646

 

 

$

925,539

 

Private Equity

283,377

 

 

239,285

 

 

299,961

 

Real Assets

366,615

 

 

307,128

 

 

189,109

 

Listed Equities

65,700

 

 

83,524

 

 

117,939

 

Non-Oaktree

65,618

 

 

80,446

 

 

62,037

 

Total corporate investments – Non-GAAP

1,796,228

 

 

1,715,029

 

 

1,594,585

 

Adjustments (1)

7,389

 

 

17,392

 

 

29,010

 

Total corporate investments – Oaktree and operating subsidiaries

1,803,617

 

 

1,732,421

 

 

1,623,595

 

Eliminations

(649,164

)

 

(575,212

)

 

(611,749

)

Total corporate investments – Consolidated

$

1,154,453

 

 

$

1,157,209

 

 

$

1,011,846

 

 

(1)

This adjusts CLO investments carried at amortized cost to fair value for GAAP reporting.

Fund Data

Information regarding our closed-end, open-end and evergreen funds, together with benchmark data where applicable, is set forth below. For our closed-end and evergreen funds, no benchmarks are presented in the tables as there are no known comparable benchmarks for these funds’ investment philosophy, strategy and implementation.

Closed-end Funds

 

 

 

 

 

As of June 30, 2019

 

Investment Period

 

Total Committed Capital

 

%

Invested (1)

 

%

Drawn (2)

 

Fund Net Income Since Inception

 

Distri-

butions Since Inception

 

Net Asset Value

 

Manage-

ment Fee-gener-

ating AUM

 

Incentive Income Recog-

nized (Non-GAAP)

 

Accrued Incentives (Fund Level) (3)

 

Unreturned Drawn Capital Plus Accrued Preferred Return (4)

 

IRR Since Inception (5)

 

Multiple of Drawn Capital (6)

 

Start Date

 

End Date

 

Gross

 

Net

Credit

(in millions)

Distressed Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Opportunities Fund Xb (7)(13)

TBD

 

 

$8,872

 

35%

 

13%

 

$(61)

 

$—

 

$1,120

 

$1,160

 

$—

 

$—

 

$1,249

 

nm

 

nm

 

1.0x

Oaktree Opportunities Fund X (7)

Jan. 2016

 

Jan. 2019

 

3,603

 

86

 

86

 

1,109

 

614

 

3,576

 

2,936

 

72

 

142

 

3,049

 

22.3%

 

13.5%

 

1.4

Oaktree Opportunities Fund IX

Jan. 2014

 

Jan. 2017

 

5,066

 

nm

 

100

 

1,002

 

2,178

 

3,890

 

3,573

 

 

 

5,089

 

6.4

 

4.0

 

1.3

Oaktree Opportunities Fund VIIIb

Aug. 2011

 

Aug. 2014

 

2,692

 

nm

 

100

 

996

 

2,669

 

1,018

 

1,200

 

52

 

 

1,392

 

8.9

 

6.1

 

1.5

Special Account B

Nov. 2009

 

Nov. 2012

 

1,031

 

nm

 

100

 

616

 

1,660

 

67

 

65

 

16

 

2

 

 

13.5

 

11.1

 

1.6

Oaktree Opportunities Fund VIII

Oct. 2009

 

Oct. 2012

 

4,507

 

nm

 

100

 

2,559

 

6,771

 

295

 

368

 

438

 

60

 

 

12.8

 

9.0

 

1.7

OCM Opportunities Fund VIIb

May 2008

 

May 2011

 

10,940

 

nm

 

90

 

9,041

 

18,581

 

304

 

 

1,696

 

60

 

 

21.8

 

16.5

 

2.0

OCM Opportunities Fund VII

Mar. 2007

 

Mar. 2010

 

3,598

 

nm

 

100

 

1,488

 

4,907

 

179

 

 

87

 

 

377

 

10.2

 

7.4

 

1.5

Legacy funds (8)

Various

 

Various

 

12,748

 

nm

 

100

 

10,773

 

23,500

 

22

 

 

1,626

 

 

 

23.6

 

18.5

 

1.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21.9%

 

16.0%

 

 

Private/Alternative Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree European Capital Solutions Fund (7)(9)(10)

Dec. 2015

 

Dec. 2018

 

€703

 

97%

 

90%

 

€84

 

€251

 

€468

 

€414

 

€5

 

€7

 

€431

 

14.8%

 

10.1%

 

1.2x

Oaktree European Dislocation Fund (10)

Oct. 2013

 

Oct. 2016

 

€294

 

nm

 

62

 

€39

 

€203

 

€18

 

€17

 

€3

 

€3

 

€—

 

18.7

 

13.2

 

1.3

Special Account E (10)

Oct. 2013

 

Apr. 2015

 

€379

 

nm

 

69

 

€64

 

€321

 

€4

 

€3

 

€9

 

€1

 

€—

 

14.2

 

11.0

 

1.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.2%

 

10.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Mezzanine Fund IV (9)

Oct. 2014

 

Oct. 2019

 

$852

 

88%

 

83%

 

$147

 

$339

 

$512

 

$505

 

$6

 

$13

 

$494

 

11.3%

 

8.3%

 

1.2x

Oaktree Mezzanine Fund III (11)

Dec. 2009

 

Dec. 2014

 

1,592

 

nm

 

89

 

481

 

1,837

 

67

 

51

 

34

 

17

 

 

15.4

 

10.4 / 9.4

 

1.4

OCM Mezzanine Fund II

Jun. 2005

 

Jun. 2010

 

1,251

 

nm

 

88

 

494

 

1,694

 

51

 

 

 

 

136

 

10.9

 

7.4

 

1.6

OCM Mezzanine Fund (12)

Oct. 2001

 

Oct. 2006

 

808

 

nm

 

96

 

302

 

1,075

 

 

 

38

 

 

 

15.4

 

10.8 / 10.5

 

1.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13.0%

 

8.7%

 

 

Emerging Markets Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special Account H

TBD

 

 

$351

 

37%

 

37%

 

$8

 

$—

 

$139

 

$134

 

$—

 

$1

 

$135

 

nm

 

nm

 

1.1x

Oaktree Emerging Markets Opportunities Fund II (13)

TBD

 

 

344

 

27

 

27

 

4

 

 

96

 

87

 

 

 

95

 

nm

 

nm

 

1.1

Oaktree Emerging Market Opportunities Fund

Sep. 2013

 

Sep. 2017

 

384

 

nm

 

78

 

134

 

341

 

91

 

70

 

9

 

15

 

37

 

16.4%

 

11.3%

 

1.5

Special Account F

Jan. 2014

 

Sep. 2017

 

253

 

nm

 

96

 

87

 

275

 

54

 

54

 

7

 

10

 

19

 

16.0

 

11.5

 

1.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16.3%

 

11.4%

 

 

Private Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Private Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree European Principal Fund IV (7)(10)(13)

Jul. 2017

 

Jul. 2022

 

€1,119

 

100%

 

97%

 

€248

 

€110

 

€1,222

 

€1,096

 

€—

 

€48

 

€1,073

 

nm

 

nm

 

1.3x

Oaktree European Principal Fund III (10)

Nov. 2011

 

Nov. 2016

 

€3,164

 

nm

 

87

 

€2,532

 

€2,391

 

€2,891

 

€2,542

 

€154

 

€340

 

€1,692

 

17.6%

 

12.1%

 

2.1

OCM European Principal Opportunities Fund II (10)

Dec. 2007

 

Dec. 2012

 

€1,759

 

nm

 

100

 

€205

 

€1,913

 

€22

 

€—

 

€29

 

€—

 

€754

 

6.7

 

2.2

 

1.3

OCM European Principal Opportunities Fund

Mar. 2006

 

Mar. 2009

 

$495

 

nm

 

96

 

$454

 

$927

 

$—

 

$—

 

$87

 

$—

 

$—

 

11.7

 

8.9

 

2.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13.1%

 

8.6%

 

 

 

 

 

 

 

As of June 30, 2019

 

Investment Period

 

Total Committed Capital

 

%

Invested (1)

 

%

Drawn (2)

 

Fund Net Income Since Inception

 

Distri-

butions Since Inception

 

Net Asset Value

 

Manage-

ment Fee-gener-

ating AUM

 

Incentive Income Recog-

nized (Non-GAAP)

 

Accrued Incentives (Fund Level) (3)

 

Unreturned Drawn Capital Plus Accrued Preferred Return (4)

 

IRR Since

Inception (5)

 

Multiple of Drawn Capital (6)

 

Start Date

 

End Date

 

Gross

 

Net

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Power Opportunities Fund V

Apr. 2019

 

Apr. 2024

 

$1,400

 

12%

 

10%

 

$(11)

 

$—

 

$125

 

$1,390

 

$—

 

$—

 

$141

 

nm

 

nm

 

1.0x

Oaktree Power Opportunities Fund IV

Nov. 2015

 

Nov. 2020

 

1,106

 

94

 

94

 

111

 

1

 

1,154

 

1,078

 

 

 

1,227

 

8.3%

 

4.9%

 

1.2

Oaktree Power Opportunities Fund III

Apr. 2010

 

Apr. 2015

 

1,062

 

nm

 

69

 

472

 

980

 

228

 

360

 

50

 

40

 

 

20.0

 

12.7

 

1.8

Legacy funds (8)

Various

 

Various

 

1,470

 

nm

 

63

 

1,688

 

2,615

 

(3)

 

 

123

 

 

 

35.1

 

27.4

 

2.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34.2%

 

25.7%

 

 

Special Situations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Special Situations Fund II (7)

TBD

 

 

$1,877

 

14%

 

2%

 

$6

 

$4

 

$46

 

$173

 

$—

 

$—

 

$42

 

nm

 

nm

 

1.x

Oaktree Special Situations Fund (7)

Nov. 2015

 

Nov. 2018

 

1,377

 

100

 

83

 

141

 

175

 

1,110

 

1,089

 

 

4

 

1,125

 

14.1%

 

7.8%

 

1.2x

Other funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Principal Fund V

Feb. 2009

 

Feb. 2015

 

$2,827

 

nm

 

91%

 

$437

 

$1,760

 

$1,263

 

$1,258

 

$50

 

$—

 

$2,264

 

6.7%

 

2.8%

 

1.3x

Special Account C

Dec. 2008

 

Feb. 2014

 

505

 

nm

 

91

 

156

 

423

 

193

 

235

 

21

 

 

289

 

8.8

 

5.4

 

1.5

OCM Principal Opportunities Fund IV

Oct. 2006

 

Oct. 2011

 

3,328

 

nm

 

100

 

2,887

 

6,166

 

49

 

 

554

 

9

 

 

12.2

 

8.8

 

2.0

Legacy funds (8)

Various

 

Various

 

3,701

 

nm

 

100

 

2,718

 

6,404

 

15

 

 

407

 

 

 

14.4

 

11.1

 

1.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.8%

 

9.0%

 

 

Real Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Real Estate Opportunities Fund VII (13)(14)

Jan. 2016

 

Jan. 2020

 

$2,921

 

86%

 

86%

 

$632

 

$250

 

$2,903

 

$2,754

 

$—

 

$122

 

$2,393

 

nm

 

nm

 

1.3x

Oaktree Real Estate Opportunities Fund VI

Aug. 2012

 

Aug. 2016

 

2,677

 

nm

 

100

 

1,440

 

2,836

 

1,281

 

1,061

 

90

 

188

 

846

 

14.6%

 

9.7%

 

1.7

Oaktree Real Estate Opportunities Fund V

Mar. 2011

 

Mar. 2015

 

1,283

 

nm

 

100

 

974

 

2,106

 

151

 

95

 

157

 

29

 

 

16.9

 

12.5

 

1.9

Special Account D

Nov. 2009

 

Nov. 2012

 

256

 

nm

 

100

 

207

 

435

 

36

 

 

17

 

4

 

 

14.7

 

12.7

 

1.8

Oaktree Real Estate Opportunities Fund IV

Dec. 2007

 

Dec. 2011

 

450

 

nm

 

100

 

391

 

797

 

44

 

 

65

 

9

 

 

15.7

 

10.6

 

2.0

Legacy funds (8)

Various

 

Various

 

2,341

 

nm

 

99

 

2,010

 

4,326

 

 

 

232

 

 

 

15.2

 

11.9

 

1.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.5%

 

11.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Real Estate Debt Fund II (9)(13)

Mar. 2017

 

Mar. 2020

 

$2,087

 

69%

 

39%

 

$83

 

$84

 

$813

 

$1,395

 

$—

 

$12

 

$770

 

nm

 

nm

 

1.1x

Oaktree Real Estate Debt Fund

Sep. 2013

 

Oct. 2016

 

1,112

 

nm

 

83

 

206

 

909

 

221

 

299

 

12

 

17

 

91

 

18.8%

 

14.0%

 

1.3

Oaktree PPIP Fund (15)

Dec. 2009

 

Dec. 2012

 

2,322

 

nm

 

48

 

457

 

1,570

 

 

 

47

 

 

 

28.2

 

n/a

 

1.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special Account G (Real Estate Income) (9)(13)

Oct. 2016

 

Oct. 2020

 

$615

 

99%

 

99%

 

$136

 

$91

 

$653

 

$574

 

$—

 

$26

 

$600

 

nm

 

nm

 

1.3x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infrastructure

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oaktree Transportation Infrastructure Fund

Dec. 2018

 

Dec. 2023

 

$1,097

 

19%

 

19%

 

$(11)

 

$—

 

$202

 

$837

 

$—

 

$—

 

$221

 

nm

 

nm

 

1.0x

Highstar III Successor Funds (13)

 

 

1,016

 

86

 

86

 

(5)

 

 

864

 

880

 

 

 

1,584

 

nm

 

nm

 

1.0

Highstar Capital IV (16)

Nov. 2010

 

Nov. 2016

 

2,000

 

nm

 

100

 

(25)

 

1,512

 

870

 

1,155

 

 

 

1,613

 

4.0%

 

0.1%

 

1.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,472

(10)

 

1,234

(10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (17)

 

8,400

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total (18)

 

$37,872

 

 

 

$1,243

 

 

 

 

 

 

 

 

(1)

For our incentive-creating closed-end funds in their investment periods, this percentage equals invested capital divided by committed capital. Invested capital for this purpose is the sum of capital drawn from fund investors plus net borrowings outstanding under a fund-level credit facility (if any), where such borrowings were made in lieu of drawing capital from fund investors.

(2)

Represents capital drawn from fund investors, net of distributions to such investors of uninvested capital, divided by committed capital. The aggregate change in drawn capital for the three months ended June 30, 2019 was $3.8 billion.

(3)

Accrued incentives (fund level) exclude non-GAAP incentive income previously recognized.

(4)

Unreturned drawn capital plus accrued preferred return reflects the amount the fund needs to distribute to its investors as a return of capital and a preferred return (as applicable) before Oaktree is entitled to receive incentive income (other than tax distributions) from the fund.

(5)

The internal rate of return (“IRR”) is the annualized implied discount rate calculated from a series of cash flows. It is the return that equates the present value of all capital invested in an investment to the present value of all returns of capital, or the discount rate that will provide a net present value of all cash flows equal to zero. Fund-level IRRs are calculated based upon the actual timing of cash contributions/distributions to investors and the residual value of such investor’s capital accounts at the end of the applicable period being measured. Gross IRRs reflect returns before allocation of management fees, expenses and any incentive allocation to the fund’s general partner. To the extent material, gross returns include certain transaction, advisory, directors or other ancillary fees (“fee income”) paid directly to us in connection with our funds’ activities (we credit all such fee income back to the respective fund(s) so that our funds’ investors share pro rata in the fee income’s economic benefit). Net IRRs reflect returns to non-affiliated investors after allocation of management fees, expenses and any incentive allocation to the fund’s general partner.

(6)

Multiple of drawn capital is calculated as drawn capital plus gross income and, if applicable, fee income before fees and expenses divided by drawn capital.

(7)

Fund data include the performance of the main fund and any associated fund-of-one accounts, except the gross and net IRRs presented reflect only the performance of the main fund. Certain fund-of-one accounts pay management fees based on cost basis, rather than committed capital.

(8)

Legacy funds represent certain predecessor funds within the relevant strategy or product that have substantially or completely liquidated their assets, including funds managed by certain Oaktree investment professionals while employed at the Trust Company of the West prior to Oaktree’s founding in 1995. When these employees joined Oaktree upon, or shortly after, its founding, they continued to manage the fund through the end of its term pursuant to a sub-advisory relationship between the Trust Company of the West and Oaktree.

(9)

Management fees during the investment period are calculated on drawn capital or cost basis, rather than committed capital. As a result, as of June 30, 2019 management fee-generating AUM included only that portion of committed capital that had been drawn.

(10)

Aggregate IRRs or totals are based on the conversion of cash flows or amounts, respectively, from euros to USD using the June 30, 2019 spot rate of $1.14.

(11)

The fund’s partnership interests are divided into Class A and Class B interests, with the Class A interests having priority with respect to the distribution of current income and disposition proceeds. The net IRR for Class A interests was 10.4% and Class B interests was 9.4%. The combined net IRR for Class A and Class B interests was 9.9%.

(12)

The fund’s partnership interests are divided into Class A and Class B interests, with the Class A interests having priority with respect to the distribution of current income and disposition proceeds. The net IRR for Class A interests was 10.8% and Class B interests was 10.5%. The combined net IRR for the Class A and Class B interests was 10.6%.

(13)

The IRR is not considered meaningful (“nm”) as the period from the initial capital contribution through June 30, 2019 was less than 36 months.

(14)

A portion of this fund pays management fees based on drawn, rather than committed, capital.

(15)

Due to differences in the allocation of income and expenses to this fund’s two primary limited partners, the U.S. Treasury and Oaktree PPIP Private Fund, a combined net IRR is not presented. Of the $2,322 million in capital commitments, $1,161 million related to the Oaktree PPIP Private Fund, whose gross and net IRR were 24.7% and 18.6%, respectively.

(16)

The fund follows the American-style distribution waterfall, whereby the general partner may receive an incentive allocation as soon as it has returned the drawn capital and paid a preferred return on the fund’s realized investments (i.e., on a deal-by-deal basis). However, such cash distributions of incentives may be subject to repayment, or clawback. As of June 30, 2019, Oaktree had not recognized any incentive income from this fund. The accrued incentives (fund level) for this fund represents Oaktree’s effective 8% of the potential incentives generated by this fund in accordance with the terms of the Highstar acquisition.

(17)

This includes our closed-end Senior Loan funds, CLOs, a non-Oaktree fund and certain separate accounts and co-investments.

(18)

The total excludes one closed-end fund with management fee-generating AUM of $93 million as of June 30, 2019, which has been included as part of the Strategic Credit strategy within the evergreen funds table.

Open-end Funds

 

 

 

Manage-

ment Fee-gener-

ating AUM

as of

June 30, 2019

 

Twelve Months Ended

June 30, 2019

 

Since Inception through June 30, 2019

 

Strategy Inception

 

 

Rates of Return (1)

 

Annualized Rates of Return (1)

 

Sharpe Ratio

 

Oaktree

 

Rele-

vant Bench-

mark

 

Oaktree

 

Rele-

vant Bench-

mark

 

Oaktree Gross

 

Rele-

vant Bench-

mark

 

Gross

 

Net

 

 

Gross

 

Net

 

 

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High Yield Bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. High Yield Bonds

1986

 

$

11,495

 

 

6.6

%

 

6.1

%

 

7.1

%

 

9.0

%

 

8.5

%

 

8.2

%

 

0.78

 

0.57

Global High Yield Bonds

2010

 

3,114

 

 

6.6

 

 

6.1

 

 

7.6

 

 

6.8

 

 

6.3

 

 

6.7

 

 

1.05

 

1.06

European High Yield Bonds

1999

 

448

 

 

10.0

 

 

9.4

 

 

8.1

 

 

8.0

 

 

7.4

 

 

6.3

 

 

0.73

 

0.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High Income Convertibles

1989

 

1,055

 

 

4.5

 

 

3.9

 

 

7.2

 

 

10.9

 

 

10.1

 

 

8.0

 

 

1.05

 

0.61

Non-U.S. Convertibles

1994

 

614

 

 

1.7

 

 

1.2

 

 

2.9

 

 

7.9

 

 

7.4

 

 

5.3

 

 

0.75

 

0.39

U.S. Convertibles

1987

 

308

 

 

3.7

 

 

3.2

 

 

7.9

 

 

9.2

 

 

8.6

 

 

8.3

 

 

0.49

 

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

European Senior Loans

2009

 

1,125

 

 

3.6

 

 

3.1

 

 

2.7

 

 

7.0

 

 

6.5

 

 

7.6

 

 

1.62

 

1.61

U.S. Senior Loans

2008

 

639

 

 

4.1

 

 

3.6

 

 

4.1

 

 

5.8

 

 

5.3

 

 

5.1

 

 

1.07

 

0.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-Strategy Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-Strategy Credit (2)

Various

 

2,810

 

 

nm

 

nm

 

nm

 

nm

 

nm

 

nm

 

nm

 

nm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Listed Equities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerging Markets Equities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerging Markets Equities

2011

 

5,498

 

 

8.7

 

 

7.8

 

 

1.2

 

 

2.9

 

 

2.0

 

 

1.4

 

 

0.13

 

0.05

 

Total

 

$

27,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Returns represent time-weighted rates of return, including reinvestment of income, net of commissions and transaction costs. The returns for Relevant Benchmarks are presented on a gross basis.

(2)

Includes Global Credit Fund and individual accounts across various strategies with different investment mandates. As such, a combined performance measure is not considered meaningful (“nm”).

Evergreen Funds

 

 

 

As of June 30, 2019

 

Twelve Months Ended June 30, 2019

 

Since Inception through June 30, 2019

 

 

 

AUM

 

Manage-

ment

Fee-gener-

ating AUM

 

Accrued Incen-

tives (Fund Level)

 

 

 

Strategy Inception

 

 

 

 

Rates of Return (1)

 

Annualized Rates

of Return (1)

 

 

 

Gross

 

Net

 

Gross

 

Net

 

 

 

(in millions)

 

 

 

 

 

 

 

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private/Alternative Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strategic Credit (2)

2012

 

$

5,538

 

 

$

5,222

 

 

$

11

 

 

4.9

%

 

3.6

%

 

9.0

%

 

6.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distressed Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value Opportunities

2007

 

1,038

 

 

962

 

 

7

 

 

7.3

 

 

4.6

 

 

9.7

 

 

6.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerging Markets Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emerging Markets Debt (3)

2015

 

1,314

 

 

871

 

 

6

 

 

10.6

 

 

8.0

 

 

13.4

 

 

10.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Listed Equities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value/Other Equities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value Equities (4)

2012

 

542

 

 

517

 

 

8

 

 

12.8

 

 

8.9

 

 

19.1

 

 

13.8

 

 

 

 

 

 

7,572

 

 

32

 

 

 

 

 

 

 

 

 

Other (5)

 

878

 

 

16

 

 

 

 

 

 

 

 

 

Restructured funds

 

 

 

4

 

 

 

 

 

 

 

 

 

Total (2)

 

$

8,450

 

 

$

52

 

 

 

 

 

 

 

 

 

 

(1)

Returns represent time-weighted rates of return.

(2)

Includes our publicly-traded BDCs and one closed-end fund with $65 million and $93 million of AUM and management fee-generating AUM, respectively. The rates of return reflect the performance of a composite of certain evergreen accounts and exclude our publicly-traded BDCs.

(3)

Includes the Emerging Markets Debt Total Return and Emerging Markets Opportunities strategies. The rates of return reflect the performance of a composite of accounts for the Emerging Markets Debt Total Return strategy, including a single account with a December 2014 inception date.

(4)

Includes performance of a proprietary fund with an initial capital commitment of $25 million since its inception in May 2012.

(5)

Includes certain Real Estate and Multi-Strategy Credit accounts.

GLOSSARY

Accrued incentives (fund level) represents the incentive income that would be paid to us if the funds were liquidated at their reported values as of the date of the financial statements. Incentives created (fund level) refers to the gross amount of potential incentives generated by the funds during the period, and includes our pro-rata portion of performance fees attributable to our minority interest in DoubleLine earned in the period. We refer to the amount of accrued incentives recognized as revenue by us as incentive income. Amounts recognized by us as incentive income are no longer included in accrued incentives (fund level), the term we use for remaining fund-level accruals. Incentives created (fund level), incentive income and accrued incentives (fund level) are presented gross, without deduction for direct compensation expense that is owed to our investment professionals associated with the particular fund when we earn the incentive income. We call that charge “incentive income compensation expense.” Incentive income compensation expense varies by the investment strategy and vintage of the particular fund, among many factors.

Assets under management (“AUM”) generally refers to the assets we manage and equals the NAV of the assets we manage, the leverage on which management fees are charged, the undrawn capital that we are entitled to call from investors in our funds pursuant to their capital commitments, and our pro-rata portion of AUM managed by DoubleLine in which we hold a minority ownership interest. For our CLOs, AUM represents the aggregate par value of collateral assets and principal cash, for our publicly-traded BDCs, gross assets (including assets acquired with leverage), net of cash, and for DoubleLine funds, NAV. Our AUM includes amounts for which we charge no management fees.

  • Management fee-generating assets under management (“management fee-generating AUM”) is a forward-looking metric and generally reflects the beginning AUM on which we will earn management fees in the following quarter, as well as our pro-rata portion of the fee basis of DoubleLine’s AUM. Our closed-end funds typically pay management fees based on committed capital, drawn capital or cost basis during the investment period, without regard to changes in NAV, and during the liquidation period on the lesser of (a) total funded capital or (b) the cost basis of assets remaining in the fund. The annual management fee rate generally remains unchanged from the investment period through the liquidation period. Our open-end and evergreen funds typically pay management fees based on their NAV, our CLOs pay management fees based on the aggregate par value of collateral assets and principal cash, as defined in the applicable CLO indentures, our publicly-traded BDCs pay management fees based on gross assets (including assets acquired with leverage), net of cash, and DoubleLine funds typically pay management fees based on NAV. As compared with AUM, management fee-generating AUM generally excludes the following:
    • Differences between AUM and either committed capital or cost basis for most closed-end funds, other than for closed-end funds that pay management fees based on NAV and leverage, as applicable;
    • Undrawn capital commitments to closed-end funds that have not yet commenced their investment periods;
    • Undrawn capital commitments to funds for which management fees are based on drawn capital, NAV or cost basis;
    • Oaktree’s general partner investments in management fee-generating funds; and
    • Funds that pay no management fees.
  • Incentive-creating assets under management (“incentive-creating AUM”) refers to the AUM that may eventually produce incentive income. It generally represents the NAV of our funds for which we are entitled to receive an incentive allocation, excluding CLOs and investments made by us and our employees and directors (which are not subject to an incentive allocation), gross assets (including assets acquired with leverage), net of cash, for our publicly-traded BDCs, and our pro-rata portion of DoubleLine’s incentive-creating AUM. All funds for which we are entitled to receive an incentive allocation are included in incentive-creating AUM, regardless of whether or not they are currently above their preferred return or high-water mark and therefore generating incentives. Incentive-creating AUM does not include undrawn capital commitments.

Class A units refer to the common units of OCG designated as Class A units.

Consolidated funds refers to the funds and CLOs that Oaktree is required to consolidate as of the respective reporting date.

Distributable earnings (“DE”) is a non-GAAP performance measure of profitability for our investment management business. DE reflects our realized earnings, after deducting preferred unit distributions, at the Operating Group level without the effects of the consolidated funds for the purpose of, among other things, assisting in the determination of equity distributions from the Operating Group. However, the declaration, payment and determination of the amount of equity distributions, if any, is at the sole discretion of our board of directors, which may change our distribution policy at any time. DE revenues include the portion of the earnings from management fees and performance fees attributable to our 20% ownership interest in DoubleLine, which are reflected as investment income in our GAAP statements of operations. DE excludes (a) unrealized incentive income and the associated incentive income compensation expense, (b) unrealized gains and losses resulting from foreign-currency transactions and hedging activities, and (c) excludes investment income or loss, which is largely non-cash in nature, and includes the portion of income or loss on distributions received from funds and companies. DE also excludes (a) non-cash equity-based compensation expense, (b) acquisition-related items, including amortization of intangibles, changes in the contingent consideration liability and costs related to the Brookfield transaction, (c) income taxes and other income or expense applicable to OCG or its Intermediate Holding Companies, and (d) non-controlling interests. In addition, any make-whole premium charges related to the repayment of debt are, for DE purposes, amortized through the original maturity date of the repaid debt.

Distributable earnings-Class A, or distributable earnings per Class A unit, is a non-GAAP performance measure calculated to provide Class A unitholders with a measure that shows the portion of DE attributable to their ownership. Distributable earnings-Class A represents DE, including the effect of (a) the OCGH non-controlling interest, (b) expenses such as current income tax expense applicable to OCG or its Intermediate Holding Companies, and (c) amounts payable under a tax receivable agreement. The income tax expense included in distributable earnings-Class A represents the implied current provision for income taxes calculated using an approach similar to that which is used in calculating the income tax provision for GAAP.

Fee-related earnings (“FRE”) is a non-GAAP performance measure that we use to monitor the baseline earnings of our business. FRE is a component of DE and is comprised of management fees (“fee revenues”) less operating expenses other than incentive income compensation expense and non-cash equity-based compensation expense. FRE is considered baseline because it excludes all non-management fee revenue sources and applies all cash compensation and benefits other than incentive income compensation expense, as well as all general and administrative expenses, to management fees, even though those expenses also support the generation of incentive and realized investment income proceeds. FRE is presented before income taxes.

Fee-related earnings-Class A, or fee-related earnings per Class A unit, is a non-GAAP performance measure calculated to provide Class A unitholders with a measure that shows the portion of FRE attributable to their ownership. Fee-related earnings-Class A represents FRE including the effect of (a) the OCGH non-controlling interest, (b) other income or expenses, such as income tax expense, applicable to OCG or its Intermediate Holding Companies and (c) any Operating Group income taxes attributable to OCG. Fee-related earnings-Class A income taxes is calculated excluding any incentive income or investment income (loss).

Incentive income is generally recognized for our closed-end funds only after the fund has distributed all contributed capital plus an annual preferred return (commonly referred to as the European-style waterfall) and, for our evergreen funds, on an annual basis up to 20% of the year’s profits, subject to a high-water mark or hurdle rate. For non-GAAP reporting, incentive income also includes the portion of the performance fees attributable to our minority equity interest in DoubleLine earned in the period.

Intermediate Holding Companies collectively refers to the subsidiaries wholly owned by us.

Invested capital reflects deployed capital, whether involving drawn or recycled equity capital, or borrowings from fund-level credit facilities. This metric is used in connection with incentive-creating closed-end funds and certain evergreen funds.

Management fees are recognized over the period in which our investment advisory services are performed and for non-GAAP reporting include the portion of the earnings from management fees attributable to our minority equity interest in DoubleLine.

Net asset value (“NAV”) refers to the value of all the assets of a fund (including cash and accrued interest and dividends) less all liabilities of the fund (including accrued expenses and any reserves established by us, in our discretion, for contingent liabilities) without reduction for accrued incentives (fund level) because they are reflected in the partners’ capital of the fund.

Oaktree, OCG, we, us, our or the Company refers to Oaktree Capital Group, LLC and, where applicable, its subsidiaries and affiliates.

Oaktree Operating Group (“Operating Group”) refers collectively to the entities in which we have a minority economic interest and indirect control that either (i) act as or control the general partners and investment advisers of our funds or (ii) hold interests in other entities or investments generating income for us.

Preferred units or preferred unitholders refer to the Series A and Series B preferred units of OCG or Series A and Series B preferred unitholders, respectively, unless otherwise specified.

Relevant Benchmark refers, with respect to:

  • our U.S. High Yield Bond product, to the FTSE US High-Yield Cash-Pay Capped Index;
  • our Global High Yield Bond product, to an Oaktree custom global high yield index that represents 60% ICE BofAML High Yield Master II Constrained Index and 40% ICE BofAML Global Non-Financial High Yield European Issuers 3% Constrained, ex-Russia Index – USD Hedged from inception through December 31, 2012, and the ICE BofAML Non-Financial Developed Markets High Yield Constrained Index – USD Hedged thereafter;
  • our European High Yield Bond product, to the ICE BofAML Global Non-Financial High Yield European Issuers excluding Russia 3% Constrained Index (USD Hedged);
  • our U.S. Senior Loan product (with the exception of the closed-end funds), to the Credit Suisse Leveraged Loan Index;
  • our European Senior Loan product, to the Credit Suisse Western European Leveraged Loan Index (EUR Hedged);
  • our U.S. Convertible Securities product, to an Oaktree custom convertible index that represents the Credit Suisse Convertible Securities Index from inception through December 31, 1999, the Goldman Sachs/Bloomberg Convertible 100 Index from January 1, 2000 through June 30, 2004, and the ICE BofAML All U.S. Convertibles Index thereafter;
  • our non-U.S. Convertible Securities product, to an Oaktree custom non-U.S. convertible index that represents the JACI Global ex-U.S. (Local) Index from inception through December 31, 2014 and the Thomson Reuters Global Focus ex-U.S. (USD hedged) Index thereafter;
  • our High Income Convertible Securities product, to the FTSE US High-Yield Market Index; and
  • our Emerging Markets Equities product, to the Morgan Stanley Capital International Emerging Markets Index (Net).

Sharpe Ratio refers to a metric used to calculate risk-adjusted return. The Sharpe Ratio is the ratio of excess return to volatility, with excess return defined as the return above that of a riskless asset (based on the three-month U.S. Treasury bill, or for our European Senior Loan product, the Euro Overnight Index Average) divided by the standard deviation of such return. A higher Sharpe Ratio indicates a return that is higher than would be expected for the level of risk compared to the risk-free rate.

Uncalled capital commitments represent undrawn capital commitments by partners (including Oaktree as general partner) of our closed-end funds through their investment periods and certain evergreen funds. If a fund distributes capital during its investment period, that capital is typically subject to possible recall, in which case it is included in uncalled capital commitments.

EXHIBIT A

Use of Non-GAAP Financial Information

Oaktree discloses certain non-GAAP financial measures in this earnings release. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are presented below. Management makes operating decisions and assesses the performance of Oaktree’s business based on these non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, net income, net income per Class A unit or other financial measures presented in accordance with GAAP.

Reconciliation of GAAP to Non-GAAP Results

The following table reconciles net income attributable to Oaktree Capital Group, LLC Class A unitholders to distributable earnings and fee-related earnings.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Net income attributable to OCG Class A unitholders

$

42,444

 

 

$

31,121

 

 

$

89,698

 

 

$

83,853

 

Incentive income (1)

1,500

 

 

16,065

 

 

288,176

 

 

99,646

 

Incentive income compensation (1)

(765

)

 

(5,766

)

 

(156,166

)

 

(51,393

)

Investment income

(23,068

)

 

(19,632

)

 

(90,967

)

 

(42,771

)

Realized investment income proceeds (2)

38,958

 

 

39,768

 

 

66,343

 

 

78,528

 

Equity-based compensation (3)

22,648

 

 

15,246

 

 

36,977

 

 

29,867

 

Foreign-currency hedging (4)

1,482

 

 

(741

)

 

109

 

 

(2,863

)

Acquisition-related items (5)

8,881

 

 

(2,834

)

 

25,702

 

 

(1,260

)

Other expense, net (6)

(2,745

)

 

(2,745

)

 

(5,490

)

 

(5,490

)

Income taxes

(52

)

 

2,727

 

 

3,917

 

 

6,378

 

Non-Operating Group (income) expenses (7)

210

 

 

328

 

 

158

 

 

308

 

Non-controlling interests (7)

48,850

 

 

40,749

 

 

113,778

 

 

113,456

 

Distributable earnings (8)

138,343

 

 

114,286

 

 

372,235

 

 

308,259

 

Incentive income

(141,380

)

 

(51,352

)

 

(526,588

)

 

(286,909

)

Incentive income compensation

73,887

 

 

20,984

 

 

281,588

 

 

151,426

 

Realized investment income proceeds

(38,958

)

 

(39,768

)

 

(66,343

)

 

(78,528

)

Interest expense, net of interest income

643

 

 

2,399

 

 

1,552

 

 

5,809

 

Preferred unit distributions

6,829

 

 

 

 

13,658

 

 

 

Other expense, net

3,092

 

 

2,186

 

 

5,422

 

 

4,419

 

Operating Group income taxes

1,904

 

 

2,140

 

 

2,433

 

 

4,886

 

Fee-related earnings (8)

$

44,360

 

 

$

50,875

 

 

$

83,957

 

 

$

109,362

 

 
(1)

This adjustment relates to unrealized incentive income which is excluded from distributable earnings revenues and incentive income compensation expense.

(2)

This adjustment reflects the portion of distributions received from funds characterized as realized investment income or loss. In general, the income or loss component of a distribution from a fund is calculated by multiplying the amount of the distribution by the ratio of our investment’s undistributed income or loss to our remaining investment balance. In addition, if the distribution is made during the investment period, it is generally not reflected in distributable earnings until after the investment period ends.

(3)

This adjustment adds back the effect of equity-based compensation expense, which is excluded from distributable earnings because it is a non-cash charge that does not affect our financial position.

(4)

This adjustment removes the effect of unrealized gains and losses related to foreign-currency hedging activities.

(5)

This adjustment adds back the effect of acquisition-related items associated with the amortization of intangibles, changes in the contingent consideration liability and costs related to the Brookfield transaction, which are excluded from distributable earnings.

(6)

For distributable earnings, the $22 million make-whole premium charge that was included in net income attributable to OCG Class A unitholders in the fourth quarter of 2017 in connection with the early repayment of our 2019 Notes is amortized through the original maturity date of December 2019.

(7)

Because distributable earnings is calculated at the Operating Group level, this adjustment adds back the effect of items applicable to OCG, its Intermediate Holding Companies or non-controlling interests.

(8)

Per Class A unit amounts are calculated to evaluate the portion of distributable earnings and fee-related earnings attributable to Class A unitholders. Reconciliations of distributable earnings to distributable earnings per Class A unit and fee-related earnings to fee-related earnings per Class A unit are presented below.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per unit data)

Distributable earnings

$

138,343

 

 

$

114,286

 

 

$

372,235

 

 

$

308,259

 

OCGH non-controlling interest

(73,908

)

 

(62,534

)

 

(201,157

)

 

(172,158

)

Non-Operating Group income (expense)

(210

)

 

(328

)

 

(158

)

 

(308

)

Distributable earnings-Class A income taxes

5,152

 

 

1,973

 

 

6,851

 

 

1,640

 

Tax receivable agreement

(3,829

)

 

(4,008

)

 

(7,654

)

 

(7,866

)

Distributable earnings-Class A

$

65,548

 

 

$

49,389

 

 

$

170,117

 

 

$

129,567

 

Distributable earnings per Class A unit

$

0.88

 

 

$

0.69

 

 

$

2.33

 

 

$

1.86

 

Weighted average number of Class A units outstanding

74,340

 

 

71,177

 

 

72,994

 

 

69,556

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per unit data)

Fee-related earnings

$

44,360

 

 

$

50,875

 

 

$

83,957

 

 

$

109,362

 

OCGH non-controlling interest

(23,700

)

 

(27,837

)

 

(45,243

)

 

(60,891

)

Non-Operating Group expense

(475

)

 

(538

)

 

(670

)

 

(745

)

Fee-related earnings-Class A income taxes

265

 

 

(1,197

)

 

(734

)

 

(2,154

)

Fee-related earnings-Class A

$

20,450

 

 

$

21,303

 

 

$

37,310

 

 

$

45,572

 

Fee-related earnings per unit

$

0.28

 

 

$

0.30

 

 

$

0.51

 

 

$

0.66

 

Weighted average number of total units outstanding

74,340

 

 

71,177

 

 

72,994

 

 

69,556

 

The following table reconciles GAAP revenues to distributable earnings revenues and fee-related earnings revenues.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

GAAP revenues

$

313,483

 

 

$

213,283

 

 

$

579,898

 

 

$

550,604

 

Consolidated funds (1)

4,734

 

 

339

 

 

9,841

 

 

(272

)

Management fees (2)

18,200

 

 

17,500

 

 

33,260

 

 

35,713

 

Incentive income (3)

3,000

 

 

16,165

 

 

291,727

 

 

99,746

 

Realized investment income proceeds

38,958

 

 

39,768

 

 

66,343

 

 

78,528

 

Distributable earnings revenues

378,375

 

 

287,055

 

 

981,069

 

 

764,319

 

Incentive income

(141,380

)

 

(51,352

)

 

(526,588

)

 

(286,909

)

Realized investment income proceeds

(38,958

)

 

(39,768

)

 

(66,343

)

 

(78,528

)

Fee revenues

$

198,037

 

 

$

195,935

 

 

$

388,138

 

 

$

398,882

 

 

(1)

This adjustment represents amounts attributable to the consolidated funds that were eliminated in consolidation, the reclassification of gains and losses related to foreign-currency hedging activities from general and administrative expense to revenues, the elimination of non-controlling interests from adjusted revenues, and certain compensation and administrative related expense reimbursements netted with expenses.

(2)

This adjustment reclassifies the portion of the earnings from the management fees attributable to our 20% ownership interest in DoubleLine, which is included in consolidated investment income in our GAAP statements of operations to revenues.

(3)

This adjustment relates to unrealized incentive income which is excluded from distributable earnings revenues and reclassifies the portion of the earnings from the performance fees attributable to our 20% ownership interest in DoubleLine, which is included in consolidated investment income in our GAAP statements of operations to revenues.

The following tables reconcile GAAP consolidated financial data to non-GAAP data:

 

For the Three Months Ended June 30, 2019

 

Consolidated

 

Adjustments

 

Distributable
Earnings

 

(in thousands)

Management fees (1)

$

175,103

 

 

$

22,934

 

 

$

198,037

 

Incentive income (1)

138,380

 

 

3,000

 

 

141,380

 

Realized investment income proceeds (2)

 

 

38,958

 

 

38,958

 

Total expenses (3)

(265,888

)

 

38,324

 

 

(227,564

)

Interest expense, net (4)

(43,995

)

 

43,352

 

 

(643

)

Investment income (2)

32,835

 

 

(32,835

)

 

 

Other income (expense), net (5)

36

 

 

(3,128

)

 

(3,092

)

Other income of consolidated funds (6)

86,909

 

 

(86,909

)

 

 

Income taxes

(1,852

)

 

(52

)

 

(1,904

)

Net income attributable to non-controlling interests in consolidated funds

(22,240

)

 

22,240

 

 

 

Net income attributable to non-controlling interests in consolidated subsidiaries

(50,015

)

 

50,015

 

 

 

Net income attributable to preferred unitholders

(6,829

)

 

 

 

(6,829

)

Net income attributable to OCG Class A unitholders / Distributable earnings

$

42,444

 

 

$

95,899

 

 

$

138,343

 

 
(1)

The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $18,200 to management fees and $1,500 to incentive income, (c) for management fees, reclassifies $639 of net gains related to foreign-currency hedging activities from general and administrative expense and $2,496 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings, and (d) adds back the effect of $1,500 related to unrealized incentive income.

(2)

Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies.

(3)

The expense adjustment consists of (a) equity-based compensation expense of $22,648, (b) consolidated fund expenses of $3,363, (c) expenses incurred by the Intermediate Holding Companies of $475, (d) incentive income compensation expense related to unrealized incentive income of $765, (e) $5,028 of acquisition-related items, (f) $3,853 related to the Brookfield transaction, (g) $1,226 of net gains related to foreign-currency hedging activities, and (h) $2,496 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings.

(4)

The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds.

(5)

The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $383 in net losses related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses.

(6)

The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net.

 

For the Three Months Ended June 30, 2018

 

Consolidated

 

Adjustments

 

Distributable
Earnings

 

(in thousands)

Management fees (1)

$

178,096

 

 

$

17,839

 

 

$

195,935

 

Incentive income (1)

35,187

 

 

16,165

 

 

51,352

 

Realized investment income proceeds (2)

 

 

39,768

 

 

39,768

 

Total expenses (3)

(184,606

)

 

18,562

 

 

(166,044

)

Interest expense, net (4)

(35,469

)

 

33,070

 

 

(2,399

)

Investment income (2)

56,923

 

 

(56,923

)

 

 

Other income (expense), net (5)

914

 

 

(3,100

)

 

(2,186

)

Other income of consolidated funds (6)

19,579

 

 

(19,579

)

 

 

Income taxes

(4,867

)

 

2,727

 

 

(2,140

)

Net income attributable to non-controlling interests in consolidated funds

7,360

 

 

(7,360

)

 

 

Net income attributable to non-controlling interests in consolidated subsidiaries

(41,996

)

 

41,996

 

 

 

Net income attributable to OCG Class A unitholders / Distributable earnings

$

31,121

 

 

$

83,165

 

 

$

114,286

 

 
(1)

The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $17,500 to management fees and $100 to incentive income, (c) for management fees, reclassifies $2,368 of net losses related to foreign-currency hedging activities from general and administrative expense and $2,468 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings, and (d) adds back the effect of $16,065 related to unrealized incentive income.

(2)

Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies.

(3)

The expense adjustment consists of (a) equity-based compensation expense of $15,246, (b) consolidated fund expenses of $6,928, (c) expenses incurred by the Intermediate Holding Companies of $538, (d) incentive income compensation expense related to unrealized incentive income of $5,766, (e) $2,834 of acquisition-related items, (f) $1,982 of net gains related to foreign-currency hedging activities, and (g) $2,468 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings.

(4)

The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds.

(5)

The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $355 in net losses related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses.

(6)

The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net.

 

For the Six Months Ended June 30, 2019

 

Consolidated

 

Adjustments

 

Distributable
Earnings

 

(in thousands)

Management fees (1)

$

345,037

 

 

$

43,101

 

 

$

388,138

 

Incentive income (1)

234,861

 

 

291,727

 

 

526,588

 

Realized investment income proceeds (2)

 

 

66,343

 

 

66,343

 

Total expenses (3)

(503,362

)

 

(82,407

)

 

(585,769

)

Interest expense, net (4)

(89,760

)

 

88,208

 

 

(1,552

)

Investment income (2)

94,985

 

 

(94,985

)

 

 

Other income (expense), net (5)

58

 

 

(5,480

)

 

(5,422

)

Other income of consolidated funds (6)

230,459

 

 

(230,459

)

 

 

Income taxes

(6,350

)

 

3,917

 

 

(2,433

)

Net income attributable to non-controlling interests in consolidated funds

(86,442

)

 

86,442

 

 

 

Net income attributable to non-controlling interests in consolidated subsidiaries

(116,130

)

 

116,130

 

 

 

Net income attributable to preferred unitholders

(13,658

)

 

 

 

(13,658

)

Net income attributable to OCG Class A unitholders / Distributable earnings

$

89,698

 

 

$

282,537

 

 

$

372,235

 

 

(1)

The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $33,260 to management fees and $3,551 to incentive income, (c) for management fees, reclassifies $1,717 of net gains related to foreign-currency hedging activities from general and administrative expense and $4,964 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings, and (d) adds back the effect of $288,176 related to unrealized incentive income.

(2)

Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies.

(3)

The expense adjustment consists of (a) equity-based compensation expense of $36,977, (b) consolidated fund expenses of $7,063 (c) expenses incurred by the Intermediate Holding Companies of $670, (d) incentive income compensation expense related to unrealized incentive income of $156,166, (e) $8,919 of acquisition-related items, (f) $16,783 related to the Brookfield transaction, (g) $1,618 of net losses related to foreign-currency hedging activities, and (h) $4,964 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings.

(4)

The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds.

(5)

The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $10 in net gains related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses.

(6)

The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net.

 

For the Six Months Ended June 30, 2018

 

Consolidated

 

Adjustments

 

Distributable
Earnings

 

(in thousands)

Management fees (1)

$

363,511

 

 

$

35,371

 

 

$

398,882

 

Incentive income (1)

187,093

 

 

99,816

 

 

286,909

 

Realized investment income proceeds (2)

 

 

78,528

 

 

78,528

 

Total expenses (3)

(435,642

)

 

(5,304

)

 

(440,946

)

Interest expense, net (4)

(76,048

)

 

70,239

 

 

(5,809

)

Investment income (2)

91,486

 

 

(91,486

)

 

 

Other income (expense), net (5)

1,611

 

 

(6,030

)

 

(4,419

)

Other income of consolidated funds (6)

82,411

 

 

(82,411

)

 

 

Income taxes

(11,264

)

 

6,378

 

 

(4,886

)

Net income attributable to non-controlling interests in consolidated funds

(3,365

)

 

3,365

 

 

 

Net income attributable to non-controlling interests in consolidated subsidiaries

(115,940

)

 

115,940

 

 

 

Net income attributable to OCG Class A unitholders / Distributable earnings

$

83,853

 

 

$

224,406

 

 

$

308,259

 

 
(1)

The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $35,713 to management fees and $100 to incentive income, (c) for management fees, reclassifies $4,188 of net losses related to foreign-currency hedging activities from general and administrative expense and $6,673 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings, and (d) adds back the effect of $99,646 related to unrealized incentive income.

(2)

Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies.

(3)

The expense adjustment consists of (a) equity-based compensation expense of $29,701, (b) consolidated fund expenses of $8,199, (c) expenses incurred by the Intermediate Holding Companies of $745, (d) incentive income compensation expense related to unrealized incentive income of $51,393, (e) $1,260 of acquisition-related items, (f) $1,865 of net losses related to foreign-currency hedging activities, and (g) $6,673 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings.

(4)

The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds.

(5)

The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $540 in net losses related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses.

(6)

The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net.

 

Contacts

Investor Relations:
Oaktree Capital Group, LLC
Andrea D. Williams
(213) 830-6483
investorrelations@oaktreecapital.com

Press Relations:
Sard Verbinnen & Co
John Christiansen
(415) 618-8750
jchristiansen@sardverb.com

Sard Verbinnen & Co
Alyssa Linn
(310) 201-2040
alinn@sardverb.com

Contacts

Investor Relations:
Oaktree Capital Group, LLC
Andrea D. Williams
(213) 830-6483
investorrelations@oaktreecapital.com

Press Relations:
Sard Verbinnen & Co
John Christiansen
(415) 618-8750
jchristiansen@sardverb.com

Sard Verbinnen & Co
Alyssa Linn
(310) 201-2040
alinn@sardverb.com