We Asked Hedge Fund Professionals What They Are Betting On In 2015

Dec 16 2014 | 6:59am ET

With a new year just around the corner, we asked some hedge fund professionals what they are betting on in 2015. Here is what they had to say:

Daniel Johnson
Co-Portfolio Manager, Aston/River Road Long-Short Fund
Twitter: @AstonFunds

What are you bullish on for 2015?

Entering 2015, we are bullish on OakTree Capital Group, a leading global alternative investment management firm with particular expertise in credit strategies. We believe OAK is mispriced, and should not trade for a significantly lower multiple than traditional asset managers. Traditional asset managers typically collect a management fee and offer daily liquidity. OAK also collects a management fee (55% of OAK’s average five-year revenues), but nearly 75% of its management fees are “locked-up” for 10 to 11 year periods. We also think investors discount the value of OAK’s opportunity to earn incentive fees (32%) due to their perceived lumpiness. Incentives are consistently paid—OAK has earned incentive fees each quarter for more than 10 years—and they grow over time.  OAK also earns income from its investments (13%), which includes income from its own funds and an interesting 20% stake in DoubleLine Funds. If DoubleLine captures a portion of the flows exiting PIMCO after  Bill Gross’s departure, this hidden asset may be worth more than the $3 of per share value we currently ascribe to it.

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