Oaktree Capital Management has closed its second European distressed investment fund on roughly €1.8 billion, surpassing its target by about one-third. The firm closed its first Europe-focused fund on $550 million in 2006.
OCM European Principal Opportunities Fund II began marketing roughly a year ago and attracted commitments mainly from existing Oaktree investors.
Europe was visited by the ‘private equity miracle’ and when it turns out not to have been a complete miracle that will create opportunities in distress.
Asked to describe the fundraising climate, firm founder and chairman Howard Marks said: “On the one hand it’s tougher than usual for a variety of well known reasons, but on the other hand, this is a fund that expects to capitalise on distress, which is what people want.”
The global financial crisis has allowed Los Angeles-headquartered Oaktree to attract a significant amount of capital over the last year.
In May, it closed the largest distressed investment fund raised to date on $10.9 billion with $10.6 billion in commitments from heavy-hitting LPs including the Illinois Teachers’ Retirement System, the Oregon Investment Council and the Pennsylvania State Employees' Retirement System.
Earlier in the year it raised $4 billion in just two months for a hung bridge fund, or a fund to invest in LBO debt banks were unable to syndicate, while last year it closed its first Asian distressed investment fund on $577 million.
The European fund will seek opportunities arising from the past cycle’s excesses, with a main focus on private equity deals that were over-leveraged or purchased at high prices, Marks said.
“Europe was visited by the ‘private equity miracle’ and when it turns out not to have been a complete miracle that will create opportunities in distress,” he said.
Debevoise & Plimpton advised Oaktree on the fund formation.
Oaktree has offices in locations including Los Angeles, New York, London, Paris, Frankfurt, Beijing, Singapore, Hong Kong and Tokyo.