Oaktree seeks $1.75bn for latest control-oriented investment fund

The distressed debt behemoth’s previous vehicle reported a net IRR of 29.4% and 1.4x return multiple.

Oaktree Capital Management is in market for its eighth special situations fund, seeking over $550 million more than the predecessor vehicle, according to pension fund documents.

The Los Angeles-based asset manager is seeking $1.75 billion for Oaktree Special Situations Fund II, a follow-on to 2014-vintage SSF I, a vehicle that raised $1.2 billion with a three-year investment period that ends in November, according to meeting materials from the Minnesota State Board of Investment. SBI committed $100 million to the fund.

An Oaktree spokeswoman declined to comment.

SSF II will invest in distress-for-control situations as well as structured and direct equity investments. Oaktree will make a $20 million to $100 million general partner commitment.

During the investment period, limited partners will pay a management fee of 1.6 percent on committed capital and a 20 percent carried interest over an 8 percent hurdle rate. The 10-year fund will have a three-year investment period and a seven-year harvest period, subject to an additional six one-year extensions.

The firm’s chief investment officer, Bruce Karsh, and the special situations group co-portfolio managers, Jordon Kruse and Matthew Wilson, are each part of the vehicle’s key-person clause, according to the document.

Oaktree’s special situations group has been through several iterations of fund names, partly because of a rebranding, changing the Global Principal strategy name to Special Situations strategy. Oaktree’s initial such fund launched in 1994, and the first six vehicles were part of the Principal series, while the seventh was named Oaktree Special Situations Fund I after the rebranding.

SSF I so far had posted a net internal rate of return of 29.4 percent and a 1.4x multiple on drawn capital, as of 30 September, according to Oaktree’s third-quarter earnings results released on 26 October. Returns for the 2009-vintage $3.3 billion Principal Fund V stood at 3.4 percent and 1.3x, respectively.

Oaktree’s flagship product, its Opportunities Fund series, also focuses on distressed investing, but does not target control-oriented investments, unlike the Special Situations strategy. The Opportunities’ latest fundraise garnered $12.48 billion across two vehicles, Fund X and Fund Xb, which also have a 1.6 percent management fee and a 20 percent carried interest over an 8 percent hurdle.

Founded in 1995, Oaktree manages $99.5 billion in assets, of which some $3.91 billion is in the special situations vertical. The firm invests in myriad other strategies including private debt, real estate, infrastructure and high yield bonds.