10-K: Brookfield Oaktree Holdings Reports 2025 Results Amid Restructuring

Brookfield Oaktree Holdings, LLC reports its annual financial results for 2025, highlighting significant restructuring impacts, AUM growth, and a pending full acquisition by Brookfield.

Summary

• Total revenues decreased to $679.5 million for the year ended December 31, 2025, down from $777.9 million in 2024, primarily due to the deconsolidation of Oaktree Capital I as a result of the 2024 Restructuring.
• Net income attributable to Brookfield Oaktree Holdings, LLC Class A unitholders decreased by $58.3 million, or 20.8%, to $221.9 million in 2025 from $280.2 million in 2024, mainly reflecting lower other income related to consolidated funds.
• Assets Under Management (AUM) increased by $21.0 billion, or 10.4%, to $222.8 billion as of December 31, 2025, from $201.8 billion as of December 31, 2024.
• AUM growth was primarily driven by $14.3 billion of capital commitments to closed-end funds, $14.1 billion of market value appreciation and foreign currency translation, and $7.7 billion of net inflows into open-end and evergreen funds.
• This growth was partially offset by $14.0 billion of distributions from closed-end funds and $2.0 billion due to changes in uncalled capital commitments for funds entering liquidation.
• The company no longer earns incentive income directly following the 2024 Restructuring; instead, these economics are reflected through investment income from its approximately 74% equity method investment in Oaktree Capital I.
• Brookfield will acquire the approximately 26% interest in Oaktree that it does not already own, aiming for 100% ownership, with the transaction expected to close in the first half of 2026.
• The company has funded $637.5 million of its $750.0 million capital commitment to Oaktree Opportunities Fund XI, L.P. (Opps XI) and $218.9 million of its $796.2 million capital commitment to Oaktree Opportunities Fund XII, L.P. (Opps XII) as of December 31, 2025.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report with significant negative financial performance metrics (revenue, net income, unrealized gains) largely attributable to the 2024 Restructuring, offset by strong AUM growth and the strategic full acquisition by Brookfield, which could stabilize future operations. The restructuring impacts make direct year-over-year comparisons challenging for some metrics.

Positives

• Assets Under Management (AUM) increased by $21.0 billion (10.4%) to $222.8 billion as of December 31, 2025, demonstrating strong growth in managed capital.
• Significant capital commitments of $14.3 billion were secured for closed-end funds, indicating continued investor confidence and demand for Oaktree's strategies.
• Net inflows of $7.7 billion into open-end and evergreen funds highlight sustained investor interest in these flexible investment vehicles.
• Market value appreciation and foreign currency translation contributed $14.1 billion to AUM growth, reflecting positive investment performance and favorable currency movements.
• Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2025, and internal control over financial reporting was also effective.
• No material cyberattacks or incidents were reported, indicating effective cybersecurity risk management.

Negatives

• Total revenues decreased by $98.4 million (12.6%) to $679.5 million in 2025 from $777.9 million in 2024, primarily due to the 2024 Restructuring and deconsolidation of Oaktree Capital I.
• Net income attributable to Brookfield Oaktree Holdings, LLC Class A unitholders decreased by $58.3 million (20.8%) to $221.9 million in 2025 from $280.2 million in 2024, mainly due to lower other income from consolidated funds.
• The net change in unrealized appreciation (depreciation) on consolidated funds investments shifted from an appreciation of $150.7 million in 2024 to a depreciation of $31.5 million in 2025, representing a significant negative swing of $182.2 million.
• Distributions declared per Class A unit decreased to $2.10 in 2025 from $2.84 in 2024.
• Interest and dividend income decreased by $7.4 million (1.5%) to $483.0 million in 2025.
• The company no longer directly earns incentive income due to the 2024 Restructuring, impacting the revenue mix and direct compensation structure.

Risks

• Oaktree or the company may alter business terms, reduce AUM, or lower fees, which could adversely affect results of operations.
• Global financial market and economic conditions (e.g., interest rates, credit availability, inflation, geopolitical uncertainty, trade barriers, public health issues) could materially reduce revenues, earnings, and cash flow.
• Inflation has adversely affected and may continue to adversely affect the business and financial condition of Oaktree's funds and their portfolio companies.
• Inability to raise capital from investors would adversely affect financial condition by reducing incentive fees and capital deployment.
• Dependence on OCM and its affiliates for fund advisory services and operations support; significant alteration or termination of these arrangements could be harmful.
• Revenues are volatile due to the nature and structure of the business, potentially impacting preferred unit distributions.
• Conflicts of interest or inter-fund governance matters could cause reputational harm.
• The investment management business is intensely competitive, and poor performance of Oaktree funds could adversely affect capital raising and financial performance.
• Oaktree may not be able to maintain its current incentive fee structure due to industry pressure to reduce fees, impacting profit margins.
• Investment opportunities often involve business, regulatory, legal, or other complexities, which can be difficult and costly to manage.
• Technological developments in artificial intelligence (AI) could disrupt markets, increase competition, and subject the company to legal/regulatory risks and compliance costs.
• Extensive regulation and/or legal and regulatory changes, as well as compliance failures and negative publicity, could adversely affect the company.
• SEC rules barring 'bad actors' from relying on Rule 506 of Regulation D in private placements could materially adversely affect Oaktree's business.
• Failure to comply with 'pay to play' regulations could adversely affect reputation.
• Failure to maintain security of information and technology networks or a cybersecurity breach could have a material adverse effect.
• Interruption of information technology, communications systems, or data services could disrupt business, result in losses, or limit growth.
• Substantial litigation risks and potential significant liabilities and damage to professional reputation.
• Oaktree employee misconduct, difficult to detect and deter, could subject the company to regulatory sanctions and reputational harm.
• Historical returns of Oaktree's funds should not be considered indicative of future results.
• Investments in distressed businesses involve significant risks and potential additional liabilities.
• Certain funds may be subject to risks arising from potential control group liability under ERISA.
• Poor investment performance during adverse market conditions may result in high investor redemptions, exacerbating liquidity pressures.
• Valuation methodologies for certain assets in Oaktree's funds can be subject to significant subjectivity, and values may never be realized.
• Investments in companies based outside the United States expose the company to additional risks (e.g., currency, political, regulatory).
• Significant investments in Oaktree's current and future funds carry the risk of loss.
• Investments in highly leveraged companies increase the risk of loss.
• Use of leverage by Oaktree's funds could have a material adverse effect on financial condition.
• Changes in debt financing markets and higher interest rates may negatively impact funds and portfolio companies.
• Risks in using prime brokers, custodians, counterparties, administrators, other agents, and third-party service providers.
• The market price of preferred units could be adversely affected by various factors, including operating results, distributions, interest rates, and liquidity.
• Failure to maintain effective internal controls over financial reporting could adversely affect accuracy and timing of financial reporting.
• Distributions on preferred units are discretionary and non-cumulative.
• Indirect economic interest in only a portion of the Oaktree Operating Group may negatively impact the ability to pay preferred unit distributions.
• Risk of being deemed an investment company under the Investment Company Act, which could make it impractical to continue business.
• Operating agreement contains provisions that substantially limit remedies available to preferred unitholders for actions by officers and/or directors.
• Ability to make distributions to preferred unitholders may be limited by holding company structure, Delaware law, contractual restrictions, and terms of any senior securities.
• If distributions on preferred units exceed gross ordinary income, liquidation value may be less than preferred unit liquidation value, and holders may incur out-of-pocket tax liability.
• U.S. taxpayers holding preferred units should anticipate filing annual requests for income tax return extensions and may be required to file amended returns.
• Investment in preferred units will give rise to Unrelated Business Taxable Income (UBTI) for certain tax-exempt holders.
• Non-U.S. holders face unique U.S. tax issues from owning preferred units, potentially resulting in adverse tax consequences (e.g., Effectively Connected Income, withholding tax).
• Holders of preferred units may be subject to state and local taxes and return filing requirements.
• Amounts distributed in respect of preferred units could be treated as guaranteed payments for U.S. federal income tax purposes.
• Holders of preferred units who do not hold units through the record date for a distribution may still be allocated gross ordinary income.

Future Outlook

Brookfield is expected to acquire the remaining 26% interest in Oaktree, aiming for 100% ownership, with the transaction anticipated to close in the first half of 2026. The company expects to continue making distributions to its preferred and Class A unitholders and may issue additional units or debt and other equity securities to increase available capital. Management believes current liquidity sources will be sufficient for working capital for at least the next twelve months. The company is evaluating the effects of new accounting guidance (ASU 2024-03) on expense disaggregation, effective for annual periods beginning January 1, 2027, and interim periods beginning January 1, 2028. The company also acknowledges the potential for AI Technologies to disrupt markets and increase competition, legal, and regulatory risks.

Management Comments

• Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level to accomplish their objectives.
• Management has determined that our internal control over financial reporting as of December 31, 2025, was effective.
• Oaktree believes its success is a byproduct of the success of Oaktree fund investors and thus always strive to achieve superior returns with risk under control, to charge fair and transparent management fees, and to conduct itself with the highest levels of professionalism and integrity.
• Oaktree considers its labor relations to be good.
• We believe that the sources of liquidity described above will be sufficient to fund our working capital requirements for at least the next twelve months.

Industry Context

StockSavvy.ai notes that the alternative asset management industry is intensely competitive, with firms vying for clients, personnel, and investment opportunities. The filing highlights that many competitors are substantially larger and possess considerably greater financial, technical, and marketing resources, potentially leading to competitive disadvantages for Oaktree. The increasing focus on artificial intelligence (AI) technologies is a significant industry trend, with potential for disruption and increased compliance costs, which Oaktree is actively addressing through its cyber risk management program. The general trend towards lower fees in the investment management industry is also noted, potentially impacting Oaktree's profit margins and requiring it to adapt its fee structures to remain competitive.

Comparison to Industry Standards

• Oaktree's definition of Assets Under Management (AUM) is not based on any standard definition and may not be directly comparable to the AUM metrics of other investment managers.
• The investment management business is intensely competitive, with Oaktree competing with a large number of private equity funds, specialized investment funds, hedge funds, corporate buyers, traditional investment managers, commercial banks, investment banks, and other financial institutions.
• Some competitors are noted to have more personnel, greater financial, technical, marketing, and other resources, longer operating histories, more established relationships, and/or greater experience than Oaktree.
• Certain competitors may have a lower cost of capital and access to funding sources not available to Oaktree, creating competitive disadvantages, particularly for funds relying on leverage.
• Some competitors may have higher risk tolerances, different risk assessments, or lower return thresholds, allowing them to consider a wider variety of investments and bid more aggressively.

Management Changes

Corporate Governance

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 U.S. and non-U.S. regulators who periodically conduct examinations and inquiries.
• The company is currently not subject to any pending actions or regulatory proceedings that are expected to have a material impact on its consolidated financial statements.

Related Party Transactions

• **Services Agreement with OCM**: OCM provides administrative services to the company for an annual fee of $750,000, payable quarterly.
• **Investment in Oaktree Opportunities Fund XI (Opps XI)**: The company committed $750.0 million and funded $637.5 million as of December 31, 2025. Distributions from this investment are intended solely for the benefit of the Class A unitholder (an affiliate of Brookfield).
• **Investment in Oaktree Opportunities Fund XII (Opps XII)**: The company committed $796.2 million (initial $750.0 million plus an additional $46.2 million) and funded $218.9 million as of December 31, 2025. Distributions from this investment are intended solely for the benefit of the Class A unitholder (an affiliate of Brookfield).
• **Acquisition of REIT Entities**: The company indirectly acquired 100% of the interests in certain REIT Entities from BUSI II NTR Sub LLC for $307.0 million (plus a $13.9 million true-up) on June 30, 2023. The sole Class A unitholder, Brookfield Corporate Treasury Ltd., contributed the cash for this acquisition.
• **Restructuring Letter Agreement with Treasury**: Brookfield Corporate Treasury Ltd. has the right, in its sole discretion, to make up to $200.0 million of additional capital contributions to the company for its indirect ownership of Brookfield REIT or other operations of NTR and the REIT Entities.
• **Indemnification Letter Agreement with BP US REIT LLC**: BP US REIT LLC agrees to defend, indemnify, and hold harmless the company and its members from third-party claims related to the ownership, management, or ongoing operating of the REIT Entities.
• **SPV Credit Facility**: The company transferred portions of its indirect interests in Opps XI and Opps XII to newly formed special purpose subsidiaries (SPVs) and pledged its ownership interests in these SPVs as collateral for non-recourse credit facilities of an affiliate. The company's potential exposure is limited to the carrying value of its pledged interests ($171.5 million for SPV I, $175.3 million for SPV II, and $102.0 million for SPV III as of December 31, 2025).
• **Intercompany Loans (Oaktree Capital I perspective)**: OCM borrowed $267.0 million from Oaktree Capital I as of December 31, 2025. These loans are interest-bearing.
• **Deposit Agreement with Brookfield (Oaktree Capital I perspective)**: Oaktree Capital I had $236.3 million on deposit with Brookfield as of December 31, 2025, earning interest.
• **Director and Executive Officer Investments in Funds**: Directors and executive officers (and their family trusts) are permitted to invest their own capital in Oaktree funds on the same terms as third-party investors, but without incentive fees. As of December 31, 2025, Oaktree manages approximately $0.9 billion of AUM from these individuals and certain current/former employees. Notable contributions in 2025 include Mr. Marks ($46.6 million), Mr. Karsh ($19.6 million), Mr. Frank ($3.8 million), Mr. Stone ($1.4 million), Mr. Levin ($0.5 million), and Mr. Gilbert ($0.7 million). Notable net distributions in 2025 include Mr. Marks ($15.7 million), Mr. Karsh ($74.9 million), Mr. Frank ($9.5 million), Mr. Stone ($8.7 million), Mr. Levin ($1.5 million), Mr. Gilbert ($5 thousand), and Ms. Whittington ($43.8 thousand).

Stakeholder Impact

• **Shareholders (Class A Unitholders)**: Experienced a decrease in distributions per unit ($2.10 in 2025 vs. $2.84 in 2024) and lower net income attributable to them. The pending full acquisition by Brookfield will result in Brookfield owning 100% of Oaktree, significantly altering the Class A unitholders' economic interest and control.
• **Preferred Unitholders**: Distributions are discretionary and non-cumulative, and their payment is generally serviced by distributions from Oaktree Capital I. The pending full acquisition by Brookfield is explicitly stated not to affect the terms of their outstanding preferred units.
• **Employees (OCM personnel)**: OCM compensates its officers and employees who perform duties for the company. The company emphasizes cultivating an inclusive and diverse work environment, providing training and career development opportunities. Employee misconduct remains a risk.
• **Clients/Investors in Oaktree Funds**: Oaktree prioritizes client interests, aiming for superior returns with risk control and transparent fees. Poor fund performance could lead to investor dissatisfaction, redemptions, and difficulty in raising new funds. Effective management of conflicts of interest is crucial for maintaining Oaktree's reputation with clients.
• **Brookfield**: The pending acquisition of the remaining 26% interest in Oaktree will result in Brookfield having 100% economic and voting interests, consolidating its control and potentially enhancing strategic alignment and operational synergies.

Next Steps

• Brookfield's acquisition of the remaining 26% interest in Oaktree is expected to close in the first half of 2026.
• The company expects to continue making distributions to its preferred unitholders and Class A unitholders.
• The company may issue additional units or debt and other equity securities with the objective of increasing available capital.
• The company may, from time to time, repurchase its preferred units or OCGH, OEP, or OEP II units.
• The Colorado AI Act, which imposes various obligations on developers and deployers of high-risk AI systems, goes into effect on June 30, 2026.
• The EU's revised anti-money laundering regime is expected to come into effect as early as June 2026.
• A FinCEN rule requiring registered investment advisers to adopt an anti-money laundering and countering the financing of terrorism (AML/CFT) program is scheduled to go into effect January 2026.
• FASB ASU 2024-03 on expense disaggregation disclosures will be effective for annual periods beginning January 1, 2027, and interim periods beginning January 1, 2028, with the company currently evaluating its effects.

Key Dates

Recommendation

The filing presents a mixed financial picture for Brookfield Oaktree Holdings, LLC. While Assets Under Management (AUM) showed healthy growth, key financial metrics like total revenues and net income attributable to Class A unitholders declined significantly year-over-year, largely due to the 2024 Restructuring and deconsolidation of Oaktree Capital I. The pending full acquisition by Brookfield introduces a strategic shift, potentially offering long-term stability and integration benefits, but the immediate financial performance is weaker. Preferred unitholders face discretionary and non-cumulative distributions, and the Class A unitholders saw a reduction in distributions. Given the ongoing integration and the short-term financial headwinds, a 'Hold' recommendation is appropriate for investors to observe the execution of the Brookfield acquisition and its impact on future financial stability and performance.

Keywords

Alternative Asset Management, Investment Management, Oaktree, Brookfield, SEC Filing, 10-K, AUM Growth, Financial Performance, Restructuring, Preferred Units, Credit Investments, Real Estate Investments, Equity Investments, Corporate Governance, Risk Management, Cybersecurity, Regulatory Compliance, Capital Commitments, Distressed Debt, Private Equity