Oaktree To Liquidate Crisis Fund, Eyes Euro. Opportunities

Mar 7 2011 | 9:26am ET

Oaktree Capital Management is liquidating the hedge fund it launched three years ago to take advantage of the financial crisis with distressed investments.

The Los Angeles-based firm began returning $3 billion from its $11 billion OCM Opportunities VIIb fund in January. Howard Marks, the firm's chairman, told Bloomberg News that there simply aren't the same kinds of opportunities available today for the fund, which has enjoyed annualized returns of 31%.

"People went in to the 2008 fund because we told them that was a great cyclical opportunity to make extremely high returns," he said. "But this kind of opportunity is not there in today's market, so I think we should return the money to investors and they can choose whether to come back into any of our new funds," such as the $1.6 billion U.S. mezzanine fund the firm raised in November.

Oaktree is returning capital from the Opportunities fund before the beginning of its liquidation period rather than reinvesting proceeds from asset sales.

Those investors who do choose to come back to Oaktree will likely be getting a steadier diet of European investments as opposed to U.S. investments, Marks said.

"The better opportunities lie in Europe, because banks have some purification job to do on their portfolios, and in mid-cap deals and also in debt related to commercial real estate," he explained. "We indicated to our investors in 2008 that a return before fees of more than 25% is possible. Today, you can't get that level of returns from traditional U.S. distressed debt."


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