OAKTREE CAPITAL GROUP, LLC

Transcription

1 OAKTREE CAPITAL GROUP, LLC First Quarter 2014

2 Forward-Looking Statements & Safe Harbor This presentation contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 (the Securities Act ) and Section 21E of the U.S. Securities Exchange Act of 1934, each as amended, which reflect the current views of Oaktree Capital Group, LLC (the Company ), with respect to, among other things, its future results of operations and financial performance. In some cases, you can identify forward-looking statements by words such as anticipate, approximately, believe, continue, could, estimate, expect, intend, may, outlook, plan, potential, predict, seek, should, will and would or the negative version of these words or other comparable or similar words. These statements identify prospective information. Important factors could cause actual results to differ, possibly materially, from those indicated in these statements. Forward-looking statements are based on the Company s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Such forward-looking statements are subject to risks and uncertainties and assumptions relating to the Company s operations, financial results, financial condition, business prospects, growth strategy and liquidity, including, but not limited to, changes in the Company s anticipated revenue and income, which are inherently volatile; changes in the value of the Company s investments; the pace of raising new funds; changes in assets under management; the timing and receipt of, and the impact of taxes on, carried interest; distributions from and liquidation of the Company s existing funds; changes in the Company s operating or other expenses; the degree to which the Company encounters competition; and general economic and market conditions. The factors listed in the section captioned Risk Factors in the Company s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the U.S. Securities and Exchange Commission ( SEC ) on February 28, 2014, which is accessible on the SEC s website at provide examples of risks, uncertainties and events that may cause the Company s actual results to differ materially from the expectations described in its forward-looking statements. Forward-looking statements speak only as of the date the statements are made. Except as required by law, the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. This presentation and its contents do not constitute and should not be construed as (a) a recommendation to buy, (b) an offer to buy or solicitation of an offer to buy, (c) an offer to sell, or (d) advice in relation to, any securities of any investment fund managed by the Company s subsidiaries. The Company discloses certain non-gaap financial measures in this presentation, including distributable earnings and fee-related earnings. Reconciliations of these non-gaap financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are presented in the Appendix. 1

3 A Global, Diversified Alternatives Franchise $86 billion in broadly diversified AUM, with over 800 employees in 16 cities and 12 countries Corporate Debt Distressed Debt Control Investing Convertible Securities Real Estate Listed Equities AUM (1) $33.0Bn $21.4Bn $14.7Bn $9.1Bn $6.3Bn $1.7Bn U.S. high yield bonds Global high yield bonds European high yield bonds U.S. senior loans European senior loans Mezzanine finance Distressed opportunities Value opportunities Emerging market opportunities Global principal investments European principal investments Asia principal investments Power opportunities U.S. convertible securities Non-U.S. convertible securities High income convertible securities Real estate opportunities Real estate debt Emerging markets absolute return Emerging markets equities (long-only) Value Equities Enhanced income Strategic credit European private debt New strategy within the last three years 1 Unless otherwise indicated, all data in this presentation is on a segment basis and is as of March 31,

4 Guiding Principles Driving Growth and Success Excellence in Investing High batting average Risks under control Outperformance over the cycle Discipline AUM ($Bn) $86 Funds sized appropriately Patience in investing and returning capital when appropriate Telling clients when our markets aren t attractive $29 $52 Putting the Client First Clients interests foremost Fair and transparent fee arrangements Focus on short-term maximization for clients, leading to long-term maximization for Oaktree Ten Years Ago Five Years Ago Today (3/31/2004) (3/31/2009) (3/31/2014) 3

5 History of Exceptional Investment Performance Superior Returns, Both Gross and Risk-Adjusted, in Our Open-End Funds Annualized gross return since inception 10.0% 10.3% 8.9% 8.5% Sharpe ratio since inception (2) U.S. High Yield Bonds Oaktree Benchmark U.S. Convertibles U.S. High Yield Bonds Oaktree Benchmark (1) (1) U.S. Convertibles Outstanding Track Record in our Closed-End Funds 19.9% Aggregate gross IRR 19.9% (3) 10.2% 4.7% Drawn capital $64Bn (3) % of pre-2013 funds with positive gross IRRs 100% % of pre-2013 committed capital over 8% net IRR 91% (3) (4) Oaktree S&P 500 MSCI World (Local)(4) 1 Detail on benchmarks is presented in the Appendix 2 The Sharpe Ratio is a metric used to calculate risk-adjusted return. It is the ratio of excess return to volatility, with excess return defined as the return above that of a riskless asset (three-month T-bill) divided by the standard deviation of such returns. The higher the Sharpe Ratio, the greater the return for a given level of risk compared to the risk-free rate 3 Since oldest strategy inception in October Represents annualized time-weighted return since October

6 The Power of Credit, with the Upside of Equity Total Portfolio Holdings for Incentive-Creating Funds (1) % of Aggregate Fund Holdings 31% 4% Senior and Secured Debt Sub Debt Current Income $1.8 billion in LTM = 4.5% yield (2) Downside Protection Helping to preserve capital and the ability to realize accrued incentives (fund level) Fixed Maturities Ability to achieve return of principal in varied environments 65% Equities Value Creation Through debt restructurings, portfolio enhancement action and creation of de novo investment platforms 1 Size of bar segment reflects the share of aggregate holdings of incentive-creating Oaktree closed-end and evergreen funds and separate accounts as of March 31, Current income and yield across consolidated funds 5

7 Best-in-Class Investor Base Blue-chip Clientele 300 largest global pension plans largest U.S. pension funds 74 States 38 Universities, endowments and foundations 342 Sovereign wealth funds 11 Diversifying and Growing our Clientele 12/31/06 3/31/14 HNW and sub-advisory AUM $2.0Bn $11.4Bn Non-U.S. AUM $6.1Bn $25.0Bn Total AUM $35.6Bn $86.2Bn Total Clients 1,058 1,964 Success in Cross Selling % AUM New Sources of Fundraising Capital LTM Gross Capital Raised Clients in 4 or more strategies 39% Clients in 2 3 strategies 38% Total in multiple strategies 77% 45% 36% New products 1 Legacy products New clients Existing clients 1 New products include strategies launched within the past three years. 6

8 Recently Launched Products, a Natural Evolution We have raised $9.2 billion of capital in products that did not exist three years ago Existing Strategy New Step-out Progress EMERGING MARKETS OPPORTUNITIES Raised almost $900 million DISTRESSED DEBT STRATEGIC CREDIT Reached $2.2 billion in AUM VALUE EQUITIES Raised $250 million, expect to reach $400 million SENIOR LOANS ENHANCED INCOME CLOs EIF II expected to reach $2.2 billion, with leverage Closed $517 million CLO in January REAL ESTATE REAL ESTATE DEBT $794 million of committed capital EMERGING MARKETS ABSOLUTE RETURN EMERGING MARKETS EQUITIES Strategy AUM reached $1.2 billion as of March 31 Additional $1.3 billion of inflows in April EUROPEAN PRINCIPAL EUROPEAN PRIVATE DEBT $914 million of committed capital Managed by established European control investing team 7

9 Increasing Fee Revenues from Recently Launched Products Strong New Product Fundraising with Future Fees AUM and Fee-generating AUM in products launched within the last 3 years (in billions) $10 $9.2 Near-Term Fee Revenue Drivers: ENHANCED INCOME FUND II REAL ESTATE DEBT $8 $7.9 $3.4 EMERGING MARKETS EQUITIES $6 $5.3 $3.2 STRATEGIC CREDIT COMMINGLED FUND $4 $3.7 $1.9 EMERGING MARKETS DEBT $2 $0 $0.7 $2.6 $5.8 $0.7 $4.7 $1.3 $3.0 $3.4 $0.7 $0.5 $1.9 $0.2 $0.5 $0.8 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Fee-generating AUM AUM not earning fees MULTI-STRATEGY LIQUID CREDIT CLOs VALUE EQUITIES 8

10 Broad Array of Long-Term Growth Opportunities DISTRIBUTION Emerging Markets Equity sub-advisory relationships with Northern Trust and Harbor Funds ACCESSING INCREASING RETAIL DEMAND FOR ALTERNATIVES EMERGING MARKETS Long-only Equity Distressed Debt Corporate Debt FAST GROWING, INEFFICIENT MARKETS NEW PRODUCTS Strategic Credit Real Estate Debt Enhanced Income Fund II CLOs Multi-Strategy Liquid Credit ADDRESSING INVESTORS DEMAND FOR INCOME AND LIQUIDITY ESTABLISHED STRATEGIES Mezzanine Fund IV Principal Fund VI Open-End and Evergreen Funds OFFERING INVESTORS A DIVERSE RANGE OF PRODUCTS 9

11 Our Business Model Generates Reliable, Strong Cash Flow Investment Performance Open-End Funds Annualized Gross Returns Since Inception 10.0% 10.3% 8.9% 8.5% Closed-End Funds 19.9% 10.2% 4.7% Gross Fundraising Cumulative ($Bn) Cumulative 1Q2007 1Q 2014 $76 $65 $56 $44 $31 $19 $89 $92 U.S. High Yield Bonds U.S. Convertibles Oaktree Benchmark Oaktree S&P 500 MSCI World (Local) Q 2014 Equity Distributions Cumulative equity distributions as a % of distributable earnings * Distributable Earnings Cumulative ($Bn) Cumulative 1Q2007 1Q 2014 $4.0 $4.2 80% since IPO $1.8 $2.3 $3.0 $0.4 $0.8 $1.2 *Amounts are at the Oaktree Operating Group level Q

12 Refilling the Incentive Income Pipeline In the last twelve months, incentives created replaced record incentive income recognized Incentive Income Recognized (Gross, $Mm) Incentives Recognized and Created LTM (Gross, $Mm) $338 $293 $996 $1,062 $243 $122 2Q13 3Q13 4Q13 1Q14 Incentive income recognized Incentives created (fund level) 11

13 Substantial Asset Value with Significant Upside BOOK VALUE + ACCRUED INCENTIVES (FUND LEVEL), NET $11.57* + $7.96* Includes: $924 million Cash and Treasurys $1.4 billion Investments 84% in liquidating or evergreen funds 49% Level I or II securities TOTAL $19.53* + DoubleLine DoubleLine carrying value of $13 million is significantly below FMV * Per Operating Group unit. Accrued incentives (fund level), net, is presented before income taxes 12

14 Long History of Paying Out Equity Distributions Distributable Earnings and Equity Distributions ($Bn) Since inception, we have paid out ~82% of our distributable earnings. In addition, we have made opportunistic stock buybacks $5.7Bn $4.7Bn 72 consecutive quarters of equity distributions Q 2014 Cumulative distributable earnings Cumulative equity distributions by Oaktree Operating Group The distributable earnings and equity distribution shown above are at the Oaktree operating group level, and therefore, before taxes and other costs borne by the Class A unitholders 13

15 Investment Highlights Global, diversified alternative asset manager with deep expertise across asset classes Contrarian, value-oriented approach delivers superior risk-adjusted investment performance across economic cycles Large, loyal client base of leading institutions around the world Strong capital raising capabilities in all environments Broad range of growth opportunities across the platform Attractive business model generates strong cash flow to unitholders Significant underlying asset value 14

16 Appendix

17 Assets Under Management Assets Under Management ($Bn, as of December 31, unless otherwise noted) $90 80 $73 $83 $75 $77 $84 $ $53 $ $5 $7 $10 $12 $15 $18 $23 $25 $28 $28 $30 $36 0 AUM Management fee-generating AUM Incentive-creating AUM 16

18 Preponderance of Capital in Long-Term Closed-End Funds % of AUM (1) % Management Fees (2) Lockup Incentive Income Closed-end Distressed debt Control investing d Real estate Mezzanine finance 55% 73% year fund term 20% of LP profits after return of capital, subject to preferred return hurdle Open-end High yield bonds Convertible d securities Senior loans 40% 21% mostly 30 days Evergreen Value opportunities Emerging markets d Strategic credit 5% 6% 90 days to 3 years 10-20% of annual LP profits, subject to highwater mark or preferred return hurdle 1 As of March 31, For the first quarter of 2014 Note: The above represents the general characteristics of the fund structures, but specific terms may vary depending on the strategy. 17

19 Reconciliation of Non-GAAP Metrics 3 mos. ended March 31, ($ in thousands) Reconciliation of Net Income (Loss) Attributable to Oaktree Capital Group, LLC to Distributable Earnings: Net income (loss) attributable to Oaktree Capital Group, LLC $ 265,195 $ 85,642 $ (127,313) $ (57,058) $ (49,455) $ (95,972) $ 107,810 $ 221,998 $ 57,566 $ 51,794 Accrued incentive income (64,460) - 64,460 Accrued incentive income compensation ,334 - (46,334) Equity-based compensation , , , , ,746 36,024 24,613 5,800 5,199 Income taxes... 2,950 4,743 17,341 18,267 26,399 21,088 30,858 26,232 10,157 7,986 Non-Operating Group other income (6,260) Non-Operating Group expenses ,008 1, , OCGH non-controlling interest. - (599,520) (625,285) (227,313) (163,555) (446,246) 548, , , ,558 ANI , , , , , , ,250 1,080, , ,945 Investment (income) loss (58,801) (40,898) 151,249 (289,001) (149,449) (23,763) (202,392) (258,654) (82,050) (46,480) Receipts of investment income from funds ,732 32,675 26,394 22,591 28,891 88, , ,896 34,026 21,658 Receipts of investment income from DoubleLine and other companies ,496 33,838 35,664 9,013 9,415 Equity-based compensation , ,983 Operating group income taxes. (2,950) (3,043) (7,518) (4,031) (7,640) (6,275) (6,136) (6,175) (2,364) (2,380) Distributable Earnings $ 221,126 $ 401,851 $ 377,403 $ 405,146 $ 635,680 $ 488,535 $ 672,181 $ 984,266 $ 295,027 $ 233,141 Note: 1 Represents Oaktree Capital Management, LLC prior to May 25,

20 Reconciliation of Non-GAAP Metrics (continued) 3 mos. ended March 31, ($ in thousands) Reconciliation of FRE to Net Income (Loss) Attributable to Oaktree Capital Group, LLC: FRE $ 60,591 $ 119,121 $ 255,933 $ 290,231 $ 375,362 $ 314,968 $ 307,617 $ 260,115 $ 64,866 $ 57,723 Incentive income 249, , , , , , ,116 1,030, , ,876 Incentive income compensation (92,193) (78,184) (64,845) (65,639) (159,243) (179,234) (222,594) (436,217) (130,271) (137,828) Investment income (loss) 58,801 40,898 (151,249) 289, ,449 23, , ,654 82,050 46,480 Equity-based compensation (318) (3,828) (652) (3,983) Interest expense, net of interest income (8,581) (1,175) (6,437) (13,071) (26,173) (33,867) (31,730) (28,621) (7,407) (6,625) Other income (expense), net ,243 (1,209) (20) (1,698) ANI , , , , , , ,250 1,080, , ,945 Accrued incentive income ,460 - (64,460) Accrued incentive income compensation (46,334) - 46,334 Equity-based compensation - (921,766) (941,566) (940,683) (949,376) (948,746) (36,024) (24,613) (5,800) (5,199) Non-Operating Group other income , Income taxes... (2,950) (4,743) (17,341) (18,267) (26,399) (21,088) (30,858) (26,232) (10,157) (7,986) Non-Operating Group expenses - (486) (969) (1,008) (1,113) (768) (553) (1,195) (210) (282) OCGH non-controlling interest - 599, , , , ,246 (548,265) (824,795) (262,017) (163,558) Net income (loss) attributable to Oaktree Capital Group, LLC $ 265,195 $ 85,642 $ (127,313) $ (57,058) $ (49,455) (95,972) 107, ,998 57,566 51,794 Note: 1 Represents Oaktree Capital Management, LLC prior to May 25, 2007 ($ in thousands) 1Q Q Q Q 2013 FY Q2014 Reconciliation of segment incentive income to GAAP incentive income: Segment incentive income $ 327,184 $ 338,057 $ 122,424 $ 242,530 $ 1,030,195 $ 292,876 Elimination of amounts attributable to consolidated funds. (327,184) (335,740) (122,424) (242,530) (1,027,878) (292,876) Consolidated incentive income $ - $ 2, ,317-19

21 Benchmark Detail The benchmarks are as follows: U.S. high yield bonds: Citigroup U.S. High Yield Cash-Pay Capped Index U.S. convertibles: Oaktree custom convertible index that represents the Credit Suisse Convertible Securities Index from inception through December 31, 1999, the Goldman Sachs/Bloomberg Convertible 100 Index from January 1, 2000 through June 30, 2004 and the BofA Merrill Lynch All U.S. Convertibles Index thereafter 20