Market volatility hit financial firms’ third quarter earnings, leading to losses for private equity firms ranging from The Blackstone Group to Kohlberg Kravis Roberts. Los Angeles-based Oaktree Capital Group was no exception, reporting a $94.9 million economic net loss.
Oaktree executives pointed to both real estate and European investments as the sectors with the best performance. Chairman Howard Marks highlighted the same two investment strategies on the firm’s February earnings call, noting that the sectors had both the most investments and the best returns in 2014. This trend has continued: In the third quarter, real estate funds were the most profitable of the firm’s funds, adding $3.3 million in income. Oaktree lost $20 million overall in its investments in the quarter.
Despite difficult market conditions, the firm’s latest real estate fund, Oaktree Real Estate Opportunities Fund VII, continued to pick up commitments after its first $1.3 billion close in the second quarter. The opportunistic fund was launched in September 2014, according to filings with the US Securities and Exchange Commission, and ended the third quarter with more than $1.6 billion in commitments, more than halfway to its $3 billion target.
“In real estate fund seven, the pipeline is diverse across both commercial and residential real estate in the US as well as commercial properties in Europe,” said Bruce Karsh, Oaktree’s co-founder and chief investment officer, on the third-quarter earnings call Thursday. “Our focus remains on increasing value through active asset management and by injecting new capital to fund targeted renovations to help reposition assets.”
Oaktree plans to begin investing that fund’s capital in the first quarter of 2016, executives said on the earnings call. Investors include the Contra Costa County Employees’ Retirement Association, which committed $65 million, and the Louisiana Parochial Employees’ Retirement Association, with $20 million committed, according to PERE Research & Analytics.
Oaktree’s assets under management as of September 30 was $100.2 billion, up 8 percent from the third quarter in 2014.