Oaktree makes first investments from Asia-dedicated fund

Oaktree Capital Management has raised $577 million for its first Asia-dedicated private equity fund. The alternative asset specialist which has been operating in Asia since 1998, expects to deploy 80 percent of the fund in Japan and Greater China.

Oaktree Capital Management, an alternative asset manager, has invested $135 million in three deals from its first-ever Asia-focused private equity fund. It closed on $577 million earlier this year.

Bill Kerins, managing director of Oaktree Capital in Hong Kong told PEO the investment manager decided to raised an Asia-dedicated fund because “the basket of risks and rewards in Asia are very different from the US, for example.”

The political and regulatory risks in Asia are perceived to be greater than in most developed markets like the US but the leverage and valuation are lower in most of Asia, where assets are priced more attractively, he said.

“They are not higher risks, necessarily, just different risks.”

The investors in OCM Asia Principal Opportunities Fund include investors from Oaktree global private equity funds, as well as first-time investors with Oaktree.  

There are about 30 to 40 investors, mostly institutional investors and a few high net worth individuals. The institutional LPs include a state pension funds, corporate funds, university endowments and charitable foundations. Most of the LPs based in North America, with a handful from Asia and Europe.

Oaktree intends to invest 80 percent of the fund in Greater China and Japan, and the remaining portion in parts of Southeast Asia, and opportunistically, South Korea, Kerins said. The fund will focus on traditional sectors such as industrial manufacturing, consumer and retail, petrochemicals, oil and gas, natural resources, media and telecommunications and financial sectors.

Oaktree hopes to distinguishe itself from a growing number of private equity funds operating in Asia with a global private equity team doing cross borders deals in the mid to upper end of the market.

The firm is looking to back companies ready to go global, companies in transition or at an turning point in their development.
It is also not constrained by the size of its fund, Kerins said. Its sweet spot ranges from $50 million to $200 million. The firm has resources to finance a transaction as large as $2 billion.

Kerins deals do not rely on heavy amounts of leverage either.

In its most recent transaction in Taiwan, Oaktree, in partnership with the founding family of the business, bought out Fu Sheng, a golf club maker for $1 billion, of which $670 million was equity, and the remaining was debt.

Prior to the Fu Sheng transaction, Oaktree invested in a small private engineering and construction company in China, and a gaming and entertainment company developing in Macau.