10-K: Brookfield Oaktree Holdings Reports 2024 Financial Results, AUM Reaches $201.8 Billion

Brookfield Oaktree Holdings' 2024 results highlight a shift in financial structure and growth in assets under management to $201.8 billion.

Summary

• Brookfield Oaktree Holdings (BOH) reported its 10-K filing for the fiscal year ended December 31, 2024.
• The company holds investments in credit, real estate, and equity managed by Oaktree Capital Management, L.P. and Brookfield Asset Management Ltd.
• BOH has an approximate 72% economic interest in Oaktree Capital I, L.P., which holds a majority of Oaktrees investments in its funds.
• A restructuring completed on July 1, 2024, resulted in BOH no longer consolidating Oaktree Capital I, but rather accounting for it under the equity method.
• Following the restructuring, BOH's revenue primarily consists of investment income from limited partner investments in certain Oaktree flagship opportunistic funds, its equity method investment in Oaktree Capital I, and an indirect ownership in Brookfield REIT.
• Oaktree's assets under management (AUM) increased by $12.6 billion, or 6.7%, to $201.8 billion as of December 31, 2024, from $189.2 billion as of December 31, 2023.
• The AUM increase was driven by $15.5 billion of capital commitments to closed-end funds, $8.8 billion of market value appreciation and foreign currency translation, and $6.4 billion of net inflows into open-end and evergreen funds.
• These increases were partially offset by $13.1 billion of distributions from closed-end funds, $3.3 billion related to the spin-out of Oaktrees Transportation Infrastructure strategy, and $2.2 billion due to change in uncalled capital commitments for funds entering liquidation.
• The company's strategy emphasizes an opportunistic, value-oriented, and risk-controlled approach to investing.
• The distributions to holders of the Series A and Series B preferred units listed on the NYSE are generally serviced by the distributions from Oaktree Capital I.

Sentiment

Score: 7

Explanation: The document presents a balanced view with positive AUM growth but also acknowledges various risks and challenges. The sentiment is cautiously optimistic.

Positives

• Assets under management increased by 6.7% to $201.8 billion.
• Significant capital commitments to closed-end funds demonstrate investor confidence.
• The company emphasizes a risk-controlled investment approach.
• The company benefits from Oaktrees extensive in-house global Marketing and Client Relations groups.

Negatives

• Distributions from closed-end funds partially offset AUM growth.
• The company's revenues are volatile due to the nature and structure of its business.
• The company depends on OCM as the primary investment adviser to Oaktrees funds to support Oaktrees funds investment activities and a Services Agreement with OCM to support Oaktrees operations; if the terms of the services provided by OCM were significantly altered or if the arrangements to provide such services were terminated, our ability to achieve our investment objective or operate as a public reporting company could be significantly harmed.

Risks

• Conditions in the global financial markets and economies could materially reduce revenues, earnings, and cash flow.
• Inflation may adversely affect Oaktrees business, results of operations, and financial condition of Oaktrees funds and their portfolio companies.
• Oaktree's ability to raise capital from investors depends on factors outside its control.
• Poor performance of Oaktree funds could adversely affect Oaktrees ability to raise capital for future funds.
• Extensive regulation in the United States and abroad affects Oaktrees activities and creates the potential for significant liabilities and penalties.
• Cybersecurity breaches could have a material adverse effect on the company.
• Oaktree is subject to substantial litigation risks and may face significant liabilities and damage to its professional reputation.
• Oaktree employee misconduct could subject Oaktree to significant regulatory sanctions and reputational harm.

Future Outlook

The company's future performance is largely driven by the performance of certain funds and other investments held directly or indirectly by Oaktree Capital I.

Industry Context

The document indicates that Oaktree operates in a highly competitive investment management business, facing competition for clients, personnel, and investment opportunities from various types of firms.

Comparison to Industry Standards

• The document does not provide a direct comparison to industry standards.
• However, it mentions that Oaktree competes with firms of various sizes, including those substantially larger with greater resources.
• It also notes a general trend toward lower fees in the investment management industry, suggesting a competitive pressure on fee structures.

Legal Proceedings

• Oaktree, its affiliates, investment professionals, and portfolio companies are routinely involved in litigation and other legal actions in the ordinary course of their business and investing activities.
• Oaktree is subject to the authority of a number of U.S. and non-U.S. regulators, including the SEC and the Financial Industry Regulatory Authority, and those authorities periodically conduct examinations of Oaktree and make other inquiries that may result in the commencement of regulatory proceedings against Oaktree and its personnel.

Related Party Transactions

• OCM provides certain administrative and other services relating to the operations of the Companys business pursuant to the Services Agreement between the Company and OCM.
• The distributions to holders of the Series A and Series B preferred units have been, and are expected to continue to be, generally serviced by distributions we receive from Oaktree Capital I.
• The company has subscribed for a limited partner interest in, and made a capital commitment of, $750.0 million to Oaktree Opportunities Fund XI, L.P.
• The company has subscribed for a limited partner interest in, and made a capital commitment of, $750.0 million to Oaktree Opportunities Fund XII, L.P.
• The company entered into a contribution agreement with Brookfield Corporate Treasury Ltd. and acquired the equity ownership in certain entities which beneficially own shares in Brookfield Real Estate Income Trust Inc.

Stakeholder Impact

• The results of the Company are largely driven by the performance of certain funds and other investments held directly or indirectly by Oaktree Capital I, which is one of the key operating entities of Oaktree.
• The distributions to holders of the Series A and Series B preferred units listed on the NYSE are generally serviced by the distributions from Oaktree Capital I.
• Client relationships are fundamental to Oaktrees business and by extension, to our business.
• Oaktree strives to maintain a work environment that fosters integrity, professionalism, excellence, candor and collegiality among its employees.

Next Steps

• The company expects to continue to make distributions to its preferred unitholders.
• The company expects to continue to make significant principal investments in Oaktrees funds.
• The company may issue additional units or debt and other equity securities with the objective of increasing available capital.

Key Dates

Keywords

assets under management, alternative investments, financial results, Oaktree Capital Management, Brookfield Oaktree Holdings, investment income, financial performance, preferred units, capital commitments, risk factors, AUM, investments, Brookfield, Oaktree