10-Q: Brookfield Oaktree Holdings Reports First Quarter 2024 Results, Driven by Incentive Income
Quarterly Report
Brookfield Oaktree Holdings saw a significant increase in net income attributable to Class A unitholders, driven by higher incentive income and other income.
Summary
- Brookfield Oaktree Holdings, LLC reported its financial results for the first quarter ended March 31, 2024.
- Net income attributable to Brookfield Oaktree Holdings, LLC Class A unitholders increased to $76.8 million, or $0.70 per unit, compared to $38.9 million, or $0.39 per unit, for the same period in 2023.
- The increase in net income was primarily driven by higher incentive income and other income.
- Incentive income increased to $115.3 million, compared to $59.4 million for the same period in 2023.
- The company's incentive-creating assets under management (AUM) increased to $55.4 billion as of March 31, 2024, from $54.8 billion as of December 31, 2023.
- Accrued incentives ended the quarter at $1.9 billion.
- The company has subscribed for a limited partner interest in, and made a capital commitment of, $750 million to Oaktree Opportunities Fund XII, L.P.
Sentiment
Score: 7
Explanation: The document presents a positive outlook with increased incentive income and AUM, but also acknowledges risks and uncertainties in the global economy.
Positives
- Incentive income increased by $55.9 million compared to the first quarter of 2023.
- Incentive-creating AUM increased by $0.6 billion during the quarter.
- Net change in unrealized appreciation on consolidated funds investments increased by $142.7 million.
Negatives
- Investment income decreased by $33.5 million compared to the first quarter of 2023.
- Net realized gain (loss) on consolidated funds investments decreased $83.5 million, to a loss of $51.8 million for the first quarter of 2024.
Risks
- Global economic conditions can significantly impact the values of Oaktrees and its funds investments and the ability to make new investments or sell existing investments for these funds.
- The failures of three U.S. commercial banks (First Republic, Silicon Valley Bank and Signature Bank) in 2023 have raised concerns about institutions with concentrated exposure to certain types of depositors in the same industry.
- The ongoing Russia-Ukraine conflict, including global sanctions imposed on Russia, and more recent conflict between Israel and Hamas, create continued uncertainty and volatility in the global financial markets and economy and, as a result, may adversely impact Oaktrees business and its funds and their respective portfolio companies business.
Future Outlook
The report contains forward-looking statements regarding future results of operations and financial performance, which are subject to risks, uncertainties, and assumptions.
Industry Context
As a global investment manager, Oaktree is affected by a wide range of factors, including the condition of the global economy and financial markets; the relative attractiveness of Oaktrees investment strategies and investors demand for them; and regulatory or other governmental policies or actions.
Related Party Transactions
- Oaktree Capital I, along with certain other Oaktree Operating Group members as co-borrowers, are parties to a credit agreement with a subsidiary of Brookfield that provides for a subordinated credit facility.
- The Company is party to the Services Agreement with OCM. Pursuant to the Services Agreement, OCM provides administrative services to the Company necessary for the operations of the Company
Stakeholder Impact
- The company plans to distribute amounts it receives in respect of such distributions, less any tax and tax receivable obligations, to holders of its Class A units.
- Distributions on the preferred units are discretionary and non-cumulative.
Key Dates
| Date | Description |
|---|---|
| 2007-04-13 | Brookfield Oaktree Holdings, LLC formed |
| 2018-05-17 | Company issued 7,200,000 of its 6.625% Series A preferred units |
| 2018-08-09 | Company issued 9,400,000 of its 6.550% Series B preferred units |
| 2019-09-30 | Mergers with affiliates of Brookfield completed |
| 2019-10-01 | Restructurings completed in connection with the Mergers |
| 2020-05-20 | OCM entered into a note and guaranty agreement with certain accredited investors |
| 2021-09-14 | Oaktrees bank credit facility was amended |
| 2021-11-04 | OCM entered into a note and guaranty agreement with certain accredited investors |
| 2022-03-30 | Oaktree Capital I entered into a note and guaranty agreement with certain accredited investors |
| 2022-06-08 | Offering closed, and Oaktree Capital I received proceeds of 200 million on the closing date. |
| 2022-11-30 | Internal Oaktree reorganization to facilitate the separation of Brookfields capital business and asset management business |
| 2023-05-01 | Brookfield and OCM, Oaktree Capital I, Oaktree Capital II, OCM Cayman, Oaktree AIF and Oaktree Investment Holdings, L.P. (collectively, the Oaktree Depositors) entered into a deposit agreement |
| 2023-05-22 | Company subscribed for a limited partner interest in, and made a capital commitment of, $750 million to Oaktree Opportunities Fund XII, L.P. |
| 2023-06-27 | Company entered into a contribution agreement with Brookfield Corporate Treasury Ltd. |
| 2023-06-29 | Company entered into a letter agreement with BP US REIT LLC |
| 2023-06-30 | Acquisition was completed |
| 2023-07-31 | A true-up contribution of $13.9 million was made |
| 2023-10-06 | An amendment was signed to further extend the maturity date to October 6, 2028 and change the interest rate to the SOFR plus 1.6% or an alternative base rate plus 0.5%. |
| 2024-03-31 | End of the quarterly period |
| 2024-05-08 | As of May 8, 2024, there were 116,373,234 Class A units and 43,756,355 Class B units of the registrant outstanding. |
| 2024-05-10 | Date of report |
Keywords
incentive income, assets under management, AUM, Oaktree, Brookfield, financial results, alternative investments, investment management
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