Financial Performance Overview

Brookfield Oaktree Holdings, LLC is an alternative asset management firm that holds investments in credit, real estate, and private equity funds managed by Oaktree Capital Management and Brookfield Asset Management. The company’s financial performance is largely driven by the performance of the funds and investments held by its subsidiary, Oaktree Capital I.

In the third quarter of 2024, Brookfield Oaktree Holdings reported total revenues of $140.3 million, up from $112.4 million in the same period in 2023. This increase was primarily due to higher interest and dividend income, as well as improved investment performance. However, the company no longer earns incentive income due to the deconsolidation of Oaktree Capital I as part of a 2024 restructuring.

For the first nine months of 2024, total revenues were $550.4 million, up from $343.7 million in the same period in 2023. Again, this increase was driven by higher interest and dividend income and investment income, partially offset by the loss of incentive income.

Revenue and Profit Trends

Brookfield Oaktree Holdings’ revenue is primarily composed of three main sources: interest and dividend income, incentive income, and investment income.

Interest and dividend income increased significantly in both the third quarter and first nine months of 2024 compared to the same periods in 2023. This was mainly due to higher income from the company’s investments in the Oaktree Opportunities Fund XI and Oaktree Opportunities Fund XII. However, the deconsolidation of Oaktree Capital I resulted in a decrease in this revenue source.

Incentive income, which the company previously earned from certain Oaktree funds, has been eliminated entirely following the 2024 restructuring and deconsolidation of Oaktree Capital I.

Investment income, which represents the company’s share of income or loss from its investments, remained relatively stable in the third quarter but increased by 69.5% in the first nine months of 2024 compared to the same period in 2023. This was primarily due to increases in the values of the company’s credit investments.

On the expense side, the company no longer incurs incentive income compensation expense or interest expense related to Oaktree Capital I and its consolidated funds due to the 2024 restructuring. However, consolidated fund expenses increased, mainly due to costs associated with the Oaktree Opportunities Fund XII.

Overall, net income attributable to Brookfield Oaktree Holdings’ Class A unitholders increased significantly in both the third quarter and first nine months of 2024 compared to the same periods in 2023, reflecting the improved performance of the company’s consolidated funds and higher interest and dividend income.

Strengths and Weaknesses

Strengths:

• Diversified investment strategies across credit, real estate, and private equity, which has historically allowed the company to benefit from both strong and weak economic environments.
• Strong performance of the Oaktree Opportunities Funds, which have driven increases in interest and dividend income and investment income.
• Deconsolidation of Oaktree Capital I has simplified the company’s structure and eliminated certain expenses.

Weaknesses:

• Loss of incentive income following the 2024 restructuring and deconsolidation of Oaktree Capital I, which was previously a significant revenue source.
• Increased consolidated fund expenses, particularly related to the Oaktree Opportunities Fund XII.
• Potential exposure to the performance of the Oaktree Opportunities Funds, which the company has significant investments in.

Outlook and Future Considerations

The company’s future performance will largely depend on the continued strong performance of its investments in the Oaktree Opportunities Funds, as well as its ability to identify and capitalize on new investment opportunities. The deconsolidation of Oaktree Capital I has simplified the company’s structure, but it has also eliminated a significant revenue stream in the form of incentive income.

Going forward, the company will need to focus on generating consistent returns from its investment portfolio and managing its expenses to maintain profitability. The company’s significant capital commitments to the Oaktree Opportunities Funds, which totaled $750 million each for Funds XI and XII as of September 30, 2024, will also be an important factor in its future performance.

Additionally, the company’s recent acquisition of a non-traded REIT, Brookfield REIT, through its subsidiary NTR, represents a new area of focus and potential growth. However, the company’s success in this venture will depend on its ability to effectively manage and integrate the REIT operations.

Overall, Brookfield Oaktree Holdings appears to be in a strong financial position, with a diversified investment portfolio and a simplified organizational structure following the 2024 restructuring. However, the loss of incentive income and the potential risks associated with its significant investments in the Oaktree Opportunities Funds will be important factors to monitor going forward.