Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Oaktree Capital Group, LLC | d449181d8k.htm |
 goldman
sachs
financial
services
conference
december
4,
2012
Perception and Reality
Howard Marks, Chairman
Oaktree Capital Group, LLC
Exhibit 99.1 |
 goldman
sachs
financial
services
conference
december
4,
2012
Perception and Reality
1
What’s the most reliable way to make money as an investor?
•
Find situations where perception underestimates reality
|
 goldman
sachs
financial
services
conference
december
4,
2012
Perception and Reality
2
Reality:
•
We have raised roughly $10 billion or more per year for six years in a
row without acquisitions. •
AUM was $36 billion at the end of 2006. Now it’s $81
billion. •
We feel these inflows were a reward from our clients for our able
handling of the crisis. •
In recent years the inflows have been masked by outflows from
liquidating closed-end funds. The lion’s share
of these outflows is behind us. Oaktree does pursue growth
(albeit not for its own sake or regardless of the realities of the market).
Oaktree
Perception
#1
-
-
Oaktree
isn’t
a
growing
company |
 goldman
sachs
financial
services
conference
december
4,
2012
Perception and Reality
3
Oaktree
Perception
#2
-
-
Oaktree
is
more
interested
in
building
value
for
its
LPs
than
for
shareholders
Reality:
•
We aggressively add to AUM when the time is right.
•
The founders dilute their ownership by distributing equity to
employees for the purpose of strengthening our company.
•
We’ve bought back stock at the low when we were traded on the GS
TrUE platform and again this year on NYSE.
•
The founding Principals are compensated almost exclusively through
their shareholdings. We build shareholder value best by
protecting and enhancing our brand. It’s what enabled us to raise large
amounts in 2007 through 2009.
We build the brand through performance, risk control and
integrity. |
 goldman
sachs
financial
services
conference
december
4,
2012
Perception and Reality
•
Our markets grow, permitting AUM growth.
•
We have potential for market share growth within our markets.
•
We have substantial opportunities for cross-selling in the U.S.
and offshore fundraising. •
Cyclical fluctuations provide opportunities for asset expansion at
unusual levels of profitability. •
Asia is essentially unexploited vis-a-vis our
strategies. •
We add new strategies, as we have this year.
•
We engage in strategic transactions (e.g., DoubleLine).
4
Our opportunities offer the potential to grow for many years.
Reality:
Oaktree
Perception
#3
-
-
Oaktree’s
growth
potential
is
limited |
 goldman
sachs
financial
services
conference
december
4,
2012
Perception and Reality
•
$2.1 billion of gross carry ($1.3 billion net of compensation expense)
has been accrued on our funds’ books (roughly $8.50/share
net). There’s roughly $5.00/share from Opps VIIb alone. •
We recognize and receive carry only after LPs have received their
capital back and their preferred return. We call this
point “crossover.” •
On Opps VIIb, as of September 30, 2012, we would have had to
distribute approximately $12.3 billion to
reach
crossover.
Last
month,
Opps
VIIb
reached
$11.1
billion
distributed,
leaving
$1.2
billion
plus
subsequent preferred return accruals to be distributed to reach
crossover. •
We expect to reach crossover on Opps VIIb in 2013.
•
Much of the taxable income relating to this carry has been recognized
already. The best shelter against coming increases is for
taxes to have been prepaid. 5
Reality:
Oaktree
Perception
#4
-
-
Carry
has
little
value |
 goldman
sachs
financial
services
conference
december
4,
2012
Perception and Reality
•
Under our funds’
waterfall we recognize and receive carry only after our LPs have
received their capital plus preferred return. Thus our risk of
clawback is negligible. •
The assets that underlie our accumulated potential carry are more
likely to be debt rather than equity, and thus less subject to
drastic loss of value. •
Our debt in turn is more likely to be senior than subordinated.
•
We did not have negative incentive income in 2008.
6
Reality:
As of September 30, 2012, all of our 47 closed-end funds that were
more than a year old had positive gross IRRs since inception
and 35 were above the 8% net preferred return hurdle required to earn carry.
Oaktree has earned incentive income every year for the last 15 years
and every quarter for the last 35 quarters.
Oaktree
Perception
#5
-
-
Carry
is
uncertain,
unreliable
and
can
evaporate |
 goldman
sachs
financial
services
conference
december
4,
2012
Disclosures and Forward-Looking Statements
7
•
This presentation may not be copied, reproduced, republished, posted,
transmitted, disclosed, distributed or disseminated, in whole or in part, in
any way without the prior written consent of Oaktree Capital Group,
LLC (together with its affiliates, “Oaktree”) or as required by applicable
law.
•
This presentation contains forward-looking statements within the
meaning of Section 27A of the U.S. Securities Act of 1933, or 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, 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 Oaktree’s
beliefs, assumptions and expectations of its future performance, taking into
account all information currently available to Oaktree. Such
forward-looking statements are subject to risks and uncertainties and assumptions
relating to Oaktree’s operations, financial results, financial
condition, business prospects, growth strategy and liquidity, including, but not limited
to, changes in our anticipated revenue and income, which are
inherently volatile; changes in the value of our investments; the pace of our raising
of new funds; the timing and receipt of and impact of taxes on carried
interest; distributions from and liquidation of our existing funds; changes in
our operating or other expenses; the degree to which we encounter
competition, and general economic and market conditions. The factors listed in
the section captioned “Risk Factors” in Oaktree’s
prospectus dated April 11, 2012, which was filed with the SEC on April 12, 2012 in accordance
with Rule 424(b) of the Securities Act, and in Part II, Item 1A.
“Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2012, each of which is accessible on the SEC’s
website at www.sec.gov, provide examples of risks, uncertainties and events that
may cause Oaktree’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, Oaktree 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 the information contained herein are for
educational and informational purposes only and do not constitute and should not
be construed as an invitation, inducement or offer to sell or
solicitation of an offer to buy any securities or related financial instruments in any
jurisdiction in which such offer or solicitation, purchase or sale
would be unlawful under the securities, insurance or other laws of such
jurisdiction. Responses to any inquiry that may involve
attempting to effect transactions in securities will not be made absent compliance with
relevant broker-dealer, investment advisor, broker-dealer
agent or investment advisor representative registration requirements, or applicable
exemptions or exclusions from such requirements. |