Oaktree plans Asia growth with caution

“These are countries where the legal system, bankruptcy code and the sanctimony of the rule of law is under development in a positive way, especially in China,” Wintrob told reporters at the firm’s Hong Kong office. “As those institutions and the predictability of the outcomes and the willingness to uphold the priority of creditors vis-à-vis one another develop, you will see more opportunities here to invest more aggressively.”

The comments underlined an ongoing expansion effort in Asia, which accounts for about 14%, or $14 billion, of Oaktree’s current assets under management. In addition to Hong Kong, the firm operates out of bases in Beijing, Shanghai, Seoul, Tokyo, Singapore and Sydney, with recent activity including a growth initiative alongside private equity firm Navis Capital Partners for regional gym owner Fitness First.

Wintrob emphasized opportunities related to increasing comfort levels among Asian governments and state-owned entities with alternatives and the market’s “Darwinian process” of separating the most competitive businesses from the least. This trend is expected to diversify Oaktree’s asset class mix beyond a strong focus on distress investments in privately-owned businesses.

Plans for an expanded Asian footprint, however, were tempered by acknowledgment that a number of macro themes related to both surging investor confidence and uncertainty have indicated a cyclic correction may be pending with unpredictable timing. This environment was characterized by low interest rates, unabated growth in passive investing, unprecedented central bank support for markets and a range of geopolitical threats such as the North Korea crisis which have failed to impact investor sentiment.

“There’s a lot of stuff going on globally that would indicate we’re a lot closer to the top than the bottom,” Wintrob said, adding that his firm was now raising its standards around risk control and downside protection. “It doesn’t seem like people are too worried about it, which tells me that if there is a problem, you’ll have big reaction because no one’s prepared for it.”

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• Topics
• Greater China
• Credit/Special Situations
• South Asia
• China
• India
• Asia
• Distress