Oaktree Capital Group LLC, the world’s largest distressed-debt investor, is telling clients it’s targeting the lowest returns it has ever sought, according to Chairman Howard Marks.
“In the distressed strategies, like distressed debt and real estate, we’re aiming to make 15 percent gross,” Marks said today at the Goldman Sachs Financial Services Conference in New York. “The irony is, of course, that today 15 percent sounds like some herculean task. It’s the lowest yield we’ve ever targeted.”
Oaktree’s latest flagship distressed-debt fund, which began investing in 2009, had a 13.6 percent gross internal rate of return as of Sept. 30, according to the firm’s quarterly earnings report. Predecessors of the pool have returned as much as 35 percent, the report shows.
Oaktree, based in Los Angeles, has sought to take advantage of Europe’s sovereign-debt crisis by buying distressed assets such as unwanted bank loans even as no “deluge” materialized, Marks said in a July interview with Bloomberg Television. Today, he said, the firm is seeing “moderate” investing opportunities globally.
“The U.S. economy is decent and the capital markets are generous,” Marks said at the conference. “We are making decent investments as long as you have expectations which are reasonable.”
Oaktree oversees $81 billion of assets, with more than half comprising distressed and corporate debt. The firm, which Marks co-founded in 1995, also manages funds that invest in leveraged buyouts, real estate and convertible bonds.