Us Distressed-Investor Oaktree Capital Raises Us$16 Billion with Its Biggest Fund Ever

US distressed-investing expert Oaktree Capital Management has raised nearly US$16 billion with its biggest fund ever, as it hunts opportunities in China’s embattled property development market and other parts of Asia.

The Oaktree Opportunities Fund XI, which began operations in July 2020, has committed about 70 per cent of its capital raised to a mix of opportunities in both public and private investments across a mix of geographies and sectors, including investments in out-of-favour industries and capital solutions to companies with limited funding options, the company said.

“Oaktree has a long track record of navigating and investing through economic cycles. This latest oversubscribed fund is further validation of our investors’ confidence in our team,” said Bruce Karsh, Oaktree’s co-chairman and chief investment officer.

Just over a year ago, the Los Angeles-based asset manager became the first foreign distressed debt manager to set up a wholly-owned unit in China.

The company said it expects more global distressed-investment opportunities in the aftermath of the coronavirus pandemic, as companies navigate an uncertain environment with heavy debt loads, including in China.

“The opportunity set in China may continue to grow, as default rates in 2021 for Chinese high-yield bonds and the debts of the country’s real estate sector are expected to top 13 per cent and 20 per cent, respectively,” Oaktree said in its latest insights publication this month. “Additionally, complex and idiosyncratic situations not involving bankruptcies may arise that require creative, well-structured financing solutions.”

Beijing’s measures, implemented last year, have made it more difficult for overleveraged developers to obtain bank loans, cutting off an important source of liquidity for the property sector.

Bond coupon payment deadlines for China Evergrande

Source: Evergrande, SCMP Research

Oaktree’s Opportunities Fund XI has invested about 8 per cent of its investments in China, with the lion’s share in the form of financing to mainland property developers, with downside protections.

“We’re proud to have built a truly global team that is well-positioned to capitalise on a wide array of investment opportunities in the most important economic regions around the world,” said Pedro Urquidi, co-portfolio manager and head of global ex-North America for Oaktree’s global opportunities strategy.

Urquidi relocated to Hong Kong in early 2019 to focus on investment opportunities in Asia.

This article appeared in the South China Morning Post print edition as: Oaktree raises US$16b as it eyes China investments