Oaktree Capital Group LLC (OAK:US), the world’s largest distressed-debt investor, said first-quarter profit fell 10 percent as the firm earned less in fees for managing its funds above performance targets.
Net income decreased to $51.8 million, or $1.30 a share, from $57.6 million, or $1.91 a share, a year earlier, Los Angeles-based Oaktree said in a statement today. Assets under management rose to $86.2 billion from $83.6 billion at the end of the fourth quarter as the firm attracted new money.
Oaktree Chairman Howard Marks has been urging caution in credit investing since last year, saying loan funds are flush with unprecedented amounts of cash, allowing the lowest-rated companies to borrow at cheap rates. His concerns were echoed this week at the Milken Institute Global Conference in Beverly Hills, California, where investors from Apollo Global Management LLC (APO:US) co-founder Marc Rowan to TCW Group’s Tad Rivelle said debt markets are in a late stage of the credit cycle and deteriorating lending standards show signs of a potential future credit crisis.
Oaktree had “more muted monetization activity during the quarter,” Credit Suisse Group AG analysts led by Christian Bolu said in a note to clients before the earnings were announced. “Given a more cautious tone to the credit markets, we anticipate high single- to low double-digit returns across the Oaktree franchise going forward.”
Oaktree reported results before U.S. markets opened in New York. The company closed yesterday at $53, above the $43 at which it sold shares to the public in 2012. The stock has lost 9.9 percent so far this year.
Adjusted net income, a measure of profit excluding costs such as noncash equity compensation and income taxes, fell to $246.9 million, or $1.46 a share, from a record $335.8 million, or $1.95 a share, in the first quarter last year. Analysts had expected adjusted earnings of $1.09 a share for last quarter, according to the average of nine estimates in a Bloomberg survey.
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