Oaktree’s path puts private credit choices into relief
Market stress to test whether it is right not to pursue scale as aggressively and broadly as some peers
When the share prices of US private capital companies were racing up to dizzying heights in 2023 and 2024, I sometimes thought of Howard Marks, the high-profile founder of Oaktree Capital.
In what was a golden boom for private credit, Oaktree appeared to be surpassed by other managers, at least in scale and valuation terms. In that frenzied period, Ares Management, a Los Angeles-based credit-focused firm, had reached a peak market capitalisation of $60bn. Blue Owl, a firm with origins that only go back a decade or so, topped out at $40bn.
In contrast, Oaktree went public initially in 2012 at a valuation of $6.5bn. After paying out healthy dividends to shareholders, it then sold a near two-thirds stake to Canadian titan Brookfield at an implied valuation of just $7.7bn in 2019. Last September, Brookfield purchased the rest of Oaktree, this time at an implied valuation of about $11.5bn.
Oaktree’s path partly reflects a somewhat different approach to the other firms that chased scale more aggressively. Ares, founded in the 1990s like Oaktree, now has $600bn assets under management while Blue Owl, assembled over the past decade, already manages some $300bn and industry leader Apollo manages nearly $1tn.
Oaktree at the time of its IPO had about $75bn of assets and by the time of its 2019 sale, that figure had only grown to $120bn. That total today, under the aegis of Brookfield, is up to $225bn.
Late last year, I asked Marks about the approach of the firm he co-founded more than 30 years ago with previous colleagues from Trust Company of the West, another large California money manager. His responses seem particularly pertinent now as the values of several listed private capital managers are down sharply from peaks over worries over loan losses and slowing growth.
Marks — who was careful not to criticise any rivals — pointed out there was an inherent tension between growth in assets and investment returns or, put another way, the conflict between shareholders and fund investors.
“To us, the main negative [of being publicly traded] would be pressure from the shareholders to grow for growth’s sake. Yeah, we were concerned. You know, I think we’ve always been obsessed with doing a great job for the clients, and we were concerned that the clients would think that we had divided loyalties,” said Marks. “I think of us as artisans, you know, kind of like craftspeople. It’s not an assembly line. It’s not scope and scale.”
Oaktree started with two main areas of focus since its founding — buying existing bonds and loans of healthy companies and originating loans to them; and separately distressed debt investing, an area Oaktree pioneered. The flagship distressed debt vehicle, which Oaktree calls its “Opportunities” fund, depended on economic dislocations that were so not evident in the US during the 2010s.
As such, Oaktree’s growth was constrained. And as Marks told me, even after successful vintages of the Opportunities fund over the years, its managers would sometimes ask to raise a smaller subsequent pool if they believed there would be fewer good deals available.
As for the firms that grew and prospered between 2019 and 2025, they made the decision to take advantage of changes in the traditional banking sector to become huge originators of loans — both to highly leveraged risky, private equity backed companies but also in so-called investment grade, asset-based lending. The steady management fees from these operations have been highly valuable to public market investors.
Oaktree’s focus on big, if volatile, performance fees never quite resonated while listed. But as Marks suggested last year, the growth of the industry might come under more scrutiny at times of market stress like now.
“There’s nothing wrong with private credit,” Marks said. “The only question will be, in my opinion, when the tide goes out, you’ll find out who made prudent credit decisions, individual lending decisions, and who didn’t.”
That, of course, will apply as well to Oaktree, which is actually closer to the factory model than the workshop approach. Its parent Brookfield is publicly traded and manages more than $1tn. And within that, Oaktree’s asset base has been swelling in areas such as asset-based lending, investment funds known as business development companies, direct lending and the like. At least though, its distressed debt arm will be on the hunt for any bargains that from the receding sea.