Oaktree Capital Group LLC (OAK) Chairman Howard Marks said it’s difficult to find bargains because prices of private assets have risen as investors search for yield.
“The bargain hunter is having a tough time because the low level of Treasury rates has pushed everyone to riskier assets, which has driven up prices,” Marks said today in an interview on Bloomberg Television with Erik Schatzker and Stephanie Ruhle. “I’m not aware of any broad sweet spots today, and I don’t think there should be any.”
Private assets, which aren’t traded on exchanges, remain cheaper than public securities because investors demand to be compensated for the inherent illiquidity, said Marks, who co-founded Los Angeles-based Oaktree in 1995. Markets have become more efficient and price discrepancies, which investors seek to profit from, are more difficult to exploit, Marks said.
Executives at Fortress Investment Group LLC (FIG), Blackstone Group LP (BX) and Carlyle Group LP (CG) have said the environment is ripe for selling while finding new opportunities in credit and leveraged buyouts at attractive prices remains difficult. Marks said this year that Oaktree, the biggest distressed-debt investor with $80 billion in assets as of Sept. 30, is targeting annualized returns of 15 percent in its distressed holdings, down from 20 percent in previous years.
“It’s tough out there,” Bill Conway, Carlyle’s co-chief executive officer, said this month. “Finding the right assets at the right prices is tough, but this business is always tough.”
The Dow Jones Industrial Average rose to 16,000 for the first time today, and European shares advanced after the longest weekly rally in 15 months, making it harder to find bargains.
The environment is “not great” for distressed investing, which has forced Oaktree to ask investors for more time to invest its Principal Fund V, John Frank, the firm’s managing principal, said earlier this month. The fund seeks to take control positions in companies that are burdened by debt or experiencing other forms of financial distress.
Oaktree is set to raise more than $10 billion this year, a third of it for new strategies such as real estate debt and strategic credit, which seeks returns of about 10 percent by investing in pressured companies that aren’t considered distressed, a lower-risk approach than distressed investing. The firm’s profit in the third quarter rose 70 percent to $43 million from a year earlier as its asset base grew.
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