Oaktree powers up

The Howard Marks-led firm is making power plays with its latest fundraise.

Oaktree Capital Management seems like it’s been in perpetual fundraising mode for the last several years, raising astronomical sums for some of the strategies for which it is best known like distressed debt for control situations.

A recent US pension commitment to an Oaktree-branded fund, however, served as a reminder that loan-to-own is not the only strategy in the global firm’s play book.

Some readers may not realise that Oaktree has been targeting the energy sector since 1999 in partnership with GFI Energy Ventures, a Los Angeles-headquartered private equity firm it quietly absorbed in mid-2009. The pair jointly raised $454 million for power-related deals in 1999, and in 2005 closed their second fund just north of $1 billion.

Howard Marks

GFI’s sale (financial details were not disclosed) was reportedly fuelled by succession planning needs, as co-founders Lawrence Gilson and Richard Landers would have reportedly surpassed retirement age during the investment of Fund III. The two have taken on senior advisory roles for Oaktree’s “Power Opportunities” division, according to a Dow Jones report, while fellow GFI co-founder Ian Schapiro is a managing director. The power division includes four other ex-GFI employees – Andrew Osler, Brad Forth, Chad Van Sweden and Jason Lee – as well six-year Oaktree veteran Mark Harmon. The team is overseen by Bruce Kaplan, head of Oaktree’s private equity activities, which it calls its “principal” strategy.

Now with much of the GFI team fully integrated, Oaktree is in the market for Fund III. It aims to raise $800 million (with a reported $1 billion hard-cap) to back companies that provide equipment, software and services to aid in the generation, transmission, distribution, marketing and consumption of power.

It recently received a large LP seal of approval: The Pennsylvania State Employees’ Retirement System earmarked $25 million for the fund. The commitment was particularly significant because it was one of the few private equity commitments the US pension scheme will make this year as it pulls away from the asset class because of over-allocation issues.

Oaktree declined to comment while GFI did not return calls for comment.