We estimate that our net proceeds from the offering of Class A units offered
by us will be approximately $314.3 million, after deducting underwriting
discounts and commissions and estimated offering expenses payable by us. If the
underwriters exercise in full their option to purchase additional Class A
units, the net proceeds to us will be approximately $362.6 million, after
deducting underwriting discounts and commissions and estimated offering
expenses payable by us. We will not receive any proceeds from the sale of Class
A units offered by the selling unitholders participating in this offering.
We will use all of the proceeds received by us (including any proceeds to us
resulting from the underwriters’ exercise of their option to purchase
additional Class A units), in each case net of underwriting discounts and
commissions, to acquire OCGH units from OCGH unitholders, including our
directors and members of our senior management, pursuant to an exchange
agreement. OCGH units represent economic interests in the Oaktree Operating
Group. Accordingly, we will not retain any of the proceeds received by us in
this offering.
We compete with many other firms in every aspect of our business, including
raising funds, seeking investments and hiring and retaining professionals. Many
of our competitors are substantially larger than us and have considerably
greater financial, technical and marketing resources. Certain of these
competitors periodically raise significant amounts of capital in investment
strategies that are similar to ours. Some of these competitors also may have a
lower cost of capital and access to funding sources that are not available to
us, which may create further competitive disadvantages for us with respect to
investment opportunities. In addition, some of these competitors may have
higher risk tolerances or make different risk assessments than we do, allowing
them to consider a wider variety of investments and establish broader networks
of business relationships. In short, we operate in a highly competitive
business and many of our competitors may be better positioned than we are to
take advantage of opportunities in the marketplace.
Company Description
Oaktree is a leading global investment management firm focused on alternative
markets. We are experts in credit and contrarian, value-oriented investing.
Since December 31, 2006, we have more than doubled our assets under management,
or AUM, to $74.9 billion as of December 31, 2011, and grown to
over 650
employees in 13 offices around the world. Since our founding in 1995, our
foremost priority has been to provide superior risk-adjusted investment
performance for our clients. We have built Oaktree by putting our clients’
interests first and by forsaking short-term advantage for the long-term good
of our business.
Unlike other leading alternative investment managers, our roots are in credit.
A number of our senior investment professionals started investing together in
high yield bonds in 1986 and convertible securities in 1987. From those
origins, we have expanded into a broad array of complementary strategies in six
asset classes: distressed debt, corporate debt, control investing, convertible
securities, real estate and listed equities. We pursue these strategies through
closed-end, open-end and evergreen funds.
Our investment professionals have generated impressive investment performance
through multiple market cycles, almost entirely without the use of fund-level
leverage. As of December 31, 2011, our closed-end funds have produced an
aggregate gross internal rate of return, or IRR, of 19.4% on over $52 billion
of drawn capital, and our since-inception risk-adjusted returns (as measured by
the Sharpe Ratio) for our six open-end strategies with track records of at
least three years have all exceeded their Relevant Benchmarks.
In our investing activities, we adhere to the following fundamental tenets:
# Focus on Risk-Adjusted Returns . Our primary goal is not simply to achieve
superior investment performance, but to do so with less-than-commensurate
risk. We believe that the best long-term records are built more through the
avoidance of losses in bad times than the achievement of superior relative
returns in good times. Thus, our overriding belief is that “if we avoid the
losers, the winners will take care of themselves.”
# Focus on Fundamental Analysis . We employ a bottom-up approach to
investing, based on proprietary, company-specific research. We seek to
generate outperformance from in-depth knowledge of companies and their
securities, not from macro-forecasting. Our more than 200 investment
professionals have developed a deep and thorough understanding of a wide
number of companies and industries, providing us with a significant
institutional knowledge base.
# Specialization . We offer a broad array of specialized investment
strategies. We believe this offers the surest path to the results we and our
clients seek. Clients interested in a single investment strategy can limit
themselves to the risk exposure of that particular strategy, while clients
interested in more than one investment strategy can combine investments in
our funds to achieve their desired mix. Our focus on specific strategies has
allowed us to build investment teams with extensive experience and
expertise. At the same time, our teams access and leverage each other’s
expertise, affording us both the benefits of specialization and the
strengths of a larger organization.
Since our founding in 1995, our AUM has grown significantly, even as we have
distributed more than $42 billion from our closed-end funds. Although we have
limited our AUM when appropriate to generate superior risk-adjusted returns,
we have a long-term record of organically growing our investment strategies,
increasing our AUM and expanding our client base. We manage assets on behalf of
many of the most significant institutional investors in the world, including 73
of the 100 largest U.S. pension plans, 39 states in the United States, over 350
corporations, over 300 university, charitable and other endowments and
foundations, and over 150 non-U.S. institutional investors, including six of
the top 10 sovereign wealth fund nations.
Our AUM grew to $74.9 billion as of December 31, 2011 from $17.9 billion as of
December 31, 2000 (representing a compound annual growth rate, or CAGR, of
13.9%). Over the same period, the portion of our AUM that generates management
fees, or management fee-generating AUM, grew from $16.7 billion to $67.0
billion, and the portion of our AUM that potentially generates incentive
income, or incentive-creating AUM, increased from $6.7 billion to $36.2
billion.
Our business generates segment revenue from three sources: management fees,
incentive income and investment income. Management fees are calculated as a
fixed percentage of the capital commitments (as adjusted for distributions
during the liquidation period) or NAV of a particular fund. Incentive income
represents our share (typically 20%) of the investors’ profits in certain of
our funds, subject to applicable hurdle rates or high-water marks. Investment
income is the return on our investments in each of our funds and, to a growing
extent, funds and businesses managed by third parties with whom we have
strategic relationships. Our business is comprised of one segment, our
investment management segment, which consists of the investment management
services that we provide to our clients.
For the years ended December 31, 2009, 2010 and 2011, the net loss attributable
to Oaktree Capital Group, LLC (on a consolidated basis) was $57.1 million,
$49.5 million and $96.0 million, respectively. Adjusted net income, or ANI, for
our investment management segment for the years ended December 31, 2009, 2010
and 2011 was $675.6 million, $763.9 million and $428.4 million, respectively.
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We were formed as a Delaware limited liability company on April 13, 2007, in
connection with the May 2007 Restructuring.
Our principal executive offices are located at 333 South Grand Avenue, 28th
Floor, Los Angeles, California 90071. Our telephone number is (213) 830-6300.
Our internet address is www.oaktreecapital.com.