Brookfield Asset Management's acquisition of credit manager Oaktree could be a boon for Oaktree, which saw its assets under management dip in 2018 and struggled under the yoke of being a publicly traded company.
When the acquisition is complete, Toronto-based Brookfield will be among the largest alternative money managers in the world, with total assets under management of about $475 billion. By comparison, Blackstone Group LP had $472 billion in assets under management, Apollo Global Management had $280.3 billion and The Carlyle Group LP had $216.5 billion in assets under management as of Dec. 31.
Brookfield is paying $4.7 billion in cash and stock for a 62% majority interest in Oaktree Capital Group LLC, which will be taken private as part of the transaction. The business combination will make Oaktree part of a much larger global money manager with somewhat complementary investment businesses.
Indeed, in its March 13 joint news release announcing the deal, both companies stressed that there will be little overlap in investment strategies. Oaktree will continue to operate independently, but under Brookfield's umbrella, according to documents filed with the SEC.
"Brookfield's investment strategies are complementary to ours with no material overlap," according to an Oaktree FAQ on the deal attached to the SEC filing. "Even where it may seem there may be some overlap, for example in infrastructure or real estate funds, each company operates in very different manners, resulting in minimal true overlap with respect to regional focuses, transaction sizes or markets, for example." The Brookfield-Oaktree combination could be the first of many mergers in alternative investments, as an increasing number of investors trim their rosters of money managers.
After the 2008 global financial crisis, investors looked to reduce their manager lineups, realizing that too many managers gave them index-like returns with much higher costs. And for their part, alternative investment managers are adapting to a new world in which they need to have the breadth to offer investors multiple strategies. Credit managers, in particular, need to have a degree of heft, at least $100 billion in AUM, to be taken seriously as a lender, sources say.