Danielle Poli, Co-Portfolio Manager, Oaktree Diversified Income Fund at Oaktree Capital, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss combining public and private credit opportunities in a portfolio.
Brookfield took a strategic stake in Oaktree in 2019, and the two firms created a distribution channel, Brookfield Oaktree Wealth Solutions, to create products for the wealth community. Brookfield has seeded some Oaktree funds and helped with a thoughtful approach to the wealth channel.
Oaktree invests in sub-investment grade public and private credit. Since Poli joined Oaktree in 2014, the private credit market has grown from $500 billion to $1.7 trillion. The growth in the private credit market expands the options for borrowers to access capital. Private credit lenders can obtain covenants on loans, which are rare in the public bond market. Covenants allow lenders to maximize recovery rates when loans experience bad outcomes.
Oaktree has a sourcing and origination team that works with collaboratively with borrowers and private equity sponsors to solve their financing needs. Oaktree is a large-scale lender with the rare ability to fund loans of $1 billion.
Oaktree has an asset allocation committee that includes all portfolio managers of the firm’s credit strategies. Combining public and private credit in a portfolio enhances diversification, and the asset allocation committee regularly discusses the valuation of the two markets and tactical decisions within the portfolio. Volatility can allow entry points into the public markets, while private credit loans typically offer higher yields.
Brookfield Oaktree Wealth Solutions’ Alternative Investing Survey collected opinions that advisors hold regarding alternative investments. The feedback informs the firm’s educational efforts, seeking to provide value to advisors on the areas of greatest need and interests.
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