The world’s largest distressed debt investor, Los-Angeles based, Oaktree Capital Group LLC (NYSE:OAK), announced its second quarter results, the first as a public company today. Oaktree is a value oriented asset manager, founded by Howard Marks.
‘Economic net income’ (ENI) grew by 6 percent to $103.6 million (60 cents a share), from $98 million (43 cents a share) in the year ago period. According to this article by Amy Or in the Wall Street Journal, total revenue rose 13.6 percent to $341.1 million, from $300.3 million in the quarter last year, as better returns accrued to its distressed investments portfolio, new subscriptions in funds, and a sale of cell-tower company, Mobilite LLC. Cash flow rose by 3.6 percent to $176.4 million from $170.3 million a year ago.
Analysts had expected ‘adjusted net income’, a metric preferred by Oaktree Capital Group LLC (NYSE:OAK), at 61 cents a share. This was beaten by a wide margin, as the company reported adjusted net income at $165.5 million (89 cents a share).
Howard Marks, Chairman, said, “I am very pleased with our initial quarter as a public company. I feel we continued to demonstrate the same focus on delivering superior returns and service to our clients, as has been our priority since Oaktree’s founding. The benefits of that focus were evident in the quarter’s strong fundraising, profitable fund realizations, and overall market-value gains during a down quarter for equity markets. Equally important were the strides we took in enhancing our global platform and developing additional investment strategies for our clients.”
Assets under management rose to $78.7 billion, up from $77.9 billion sequentially, but lower than last year’s $79.5 billion. The firm’s latest distressed investment fund, its ninth in the series, has collected $4.6 billion, compared to the initial size of $4 billion. Oaktree’s philosophy is to scoop up assets under disposal by organizations in financial difficulties or in default.
“We still need the development of some events that are going to scare the hell out of people,” Chairman Howard Marks said at the recent Morgan Stanley (NYSE:MS) Financials Conference. “That’s what gives rise to that great environment where everybody wants to sell and nobody wants to buy. That’s the raw material for our greatest returns.”
Oaktree’s Group LLC (NYSE:OAK) quarterly performance is in the face of a difficult investment climate prevailing through the quarter, as concerns over European sovereign debt, a global economy shifting to a lower gear, and lower stock indexes left markets choppy and uncertain. Its peer, The Blackstone Group L.P (NYSE:BX), reported a substantial fall in earnings in its second quarter results. “It’s been 14 straight months of outflows from domestic equity funds, and mergers and acquisitions activity also declined. Generally a pretty miserable (market) situation in the second quarter,” The Blackstone Group L.P (NYSE:BX) CEO, Stephen Schwarzman, told analysts on a conference call for its second quarter results.