Oaktree Capital filed a registration statement for a new non-traded BDC: Oaktree Strategic Credit Fund. Oaktree is joining Bain Capital, Apollo, and Blackstone by making high net worth retail investors an important part of their fundraising strategy. In this article we provide a preview of Oaktree’s new non-traded BDC.
Oaktree Strategic Credit Investment Strategy
According to the prospectus, Oaktree Strategic Credit will focus on private debt opportunities, mainly in US companies. The prospectus also allows them to invest in European companies. However, to maintain compliance with the regulatory requirements of a business development company, they must put at leas ty70% of their assets in private US companies. Most of their debt investments will be non rated. They will invest opportunistically, so the investment portfolio will change with market conditions. Oaktree believes the market for lending to private companies is underserved. Key themes they will focus on will be stressed sector/rescue lending, situational lending, sponsor related financing, secondary private loans, and loan portfolios.
Oaktree Strategic Credit Fund has a maximum capital raise of $5 billion The latest prospectus includes three classes of shares: Class S, Class D, and Class I . Class S shares will have a servicing/distribution fee of 0.85% per year, with a 3.5% cap. Class D wil have a shareholder servicing/distribution fee of 0.25% per year with a 1.5% cap. Class I shares will not have any shareholder servicing or distribution fees. The minimum initial investment for Class I shares is $1 million.
Oaktree’s new BDC will have a base management fee of 1.25% per year. Additionally, it will charge an incentive fee consisting of two parts. The first part of the incentive fee is based on income- the manager will receive 12.5% of pre incentive fee net investment income over a 5.0% hurdle rate. Additionally, the fund will pay the manager 12.5% of cumulative realized capital gains.
Notably this fee structure is nearly identical to that of Apollo’s new non-traded BDC.
About Oaktree Capital
Oaktree Capital Management is a global alternative asset manager with more than $158 billion in AUM as of 9/30/2021, according to its website. They have deep expertise across the capital structure. They organize their investment professionals into four broad categories: credit, private equity, real assets, and listed equities. Well known for their expertise in distressed debt, approximately 69% of their assets are in credit. Their clients include 67 of the 100 largest pension plans in the US, 40 state retirement plans along with 15 major sovereign wealth funds and 500+ corporations around the world. In 2019 Brookfield Asset Management acquired a majority interest in Oaktree. Oaktree entered the non-traded REIT space back in 2017. After transitioning the management over to Brookfield, this REIT has over $500 million in net assets. It is likely Oaktree will quickly gain market share in the non-traded BDC industry.
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