INVESTMENTS

Corporate Investments

Corporate investments consist of investments in funds and companies in which the Company does not have a controlling financial interest. Investments for which the Company is deemed to exert significant influence are accounted for using the equity method of accounting and reflect Oaktree’s ownership interest in each fund or company. In the case of investments for which the Company is not deemed to exert significant influence or control, the fair value option of accounting has been elected. Investment income represents the Company’s pro-rata share of income or loss from these funds or companies, or the change in fair value of the investment, as applicable. Oaktree’s general partnership interests are substantially illiquid. While investments in funds reflect each respective fund’s holdings at fair value, equity-method investments in DoubleLine Capital LP and its affiliates (collectively, “DoubleLine”) and other companies are not adjusted to reflect the fair value of the underlying company. The fair value of the underlying investments in Oaktree funds is based on the Company’s assessment, which takes into account expected cash flows, earnings multiples and/or comparisons to similar market transactions, among other factors. Valuation adjustments reflecting consideration of credit quality, concentration risk, sales restrictions and other liquidity factors are integral to valuing these instruments.

The Company adopted the new consolidation guidance effective the first quarter of 2016, resulting in the deconsolidation of substantially all of Oaktree’s investment funds. Corporate investments consisted of the following:



	As of
Corporate Investments:	June 30, 2016		December 31, 2015

Equity-method Investments:
Oaktree funds	$	915,942	$	51,899
Non-Oaktree funds	59		65,901
Companies	19,621		28,562
Other investments, at fair value	100,616		67,626
Total corporate investments	$	1,036,238	$	213,988

The components of investment income (loss) are set forth below:



	Three Months Ended June 30,				Six Months Ended June 30,
Investment Income (Loss):	2016		2015		2016		2015

Equity-method Investments:
Oaktree funds	$	10,245	$	1,075	$	28,901	$	327
Non-Oaktree funds	14		2,140		318		4,733
Companies	16,682		12,358		31,789		22,322
Other investments, at fair value	14,059		121		9,439		994
Total investment income	$	41,000	$	15,694	$	70,447	$	28,376

Equity-method Investments

The Company's equity-method investments include its investments in Oaktree funds for which it serves as general partner, and other third-party funds and companies that are not consolidated for which the Company is deemed to exert significant influence. The Company's share of income or loss generated by these investments is recorded within investment income in the condensed consolidated statements of operations. The Company's equity-method investments in Oaktree funds principally reflect the Company’s general partner interests in those funds, which typically does not exceed 2.5% in each fund. The Oaktree funds are investment companies that follow a specialized basis of accounting established by GAAP. Equity-method investments in companies include the Company’s one-fifth equity stake in DoubleLine.

Each reporting period, the Company evaluates each of its equity-method investments to determine if any are considered significant, as defined by the SEC. As of or for the year ended December 31, 2015, no individual equity-method investment met the significance criteria. As a result, separate financial statements were not required for any of the Company’s equity-method investments.

Summarized financial information of the Company’s equity-method investments is set forth below. Equity-method investments were not material for periods prior to adoption of the deconsolidation guidance in the first quarter of 2016, pursuant to the consolidation rules then in effect.



Statement of Financial Condition:	As of June 30, 2016
Assets:
Cash and cash-equivalents	$	3,285,360
Investments, at fair value	40,995,952
Other assets	2,220,264
Total assets	$	46,501,576
Liabilities and Capital:
Debt obligations	$	7,014,441
Other liabilities	2,285,463
Total liabilities	9,299,904
Total capital	37,201,672
Total liabilities and capital	$	46,501,576



Statements of Operations:	Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
Revenues / investment income	$	482,265		$	1,025,099
Interest expense	(41,640		)	(80,169		)
Other expenses	(217,303		)	(437,739		)
Net realized and unrealized gain on investments	550,657			838,724
Net income	$	773,979		$	1,345,915

Other Investments, at Fair Value

Other investments, at fair value primarily consist of investments in certain Oaktree and non-Oaktree funds for which the fair value option of accounting has been elected, as well as derivatives utilized to hedge the Company’s exposure to investment income earned from unconsolidated funds. The following table summarizes net gains (losses) attributable to the Company's other investments:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016			2015

Realized gain (loss)	$	105	$	58	$	(2,389	)	$	58
Net change in unrealized gain (loss)	13,954		63		11,828			936
Total	$	14,059	$	121	$	9,439		$	994

Investments of Consolidated Funds

Investments, at Fair Value

Investments held and securities sold short by the consolidated funds are summarized below:



	Fair Value as of				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
United States:
Debt securities:
Consumer discretionary	$	550,122	$	3,387,072	16.7	%	7.5	%
Consumer staples	153,994		686,071		4.7		1.5
Energy	50,760		854,220		1.5		1.9
Financials	124,291		1,293,508		3.8		2.9
Government	—		95,508		—		0.2
Health care	292,452		1,135,799		8.9		2.5
Industrials	352,038		1,710,706		10.7		3.8
Information technology	251,870		1,293,815		7.6		2.9
Materials	197,230		1,393,521		6.0		3.1
Telecommunication services	65,559		471,711		2.0		1.0
Utilities	44,249		686,126		1.3		1.5
Total debt securities (cost: $2,130,737 and $15,304,870 as of June 30, 2016 and December 31, 2015, respectively)	2,082,565		13,008,057		63.2		28.8
Equity securities:
Consumer discretionary	634		1,813,832		0.0		4.0
Consumer staples	—		872,472		—		1.9
Energy	—		1,810,290		—		4.0
Financials	3,018		7,639,790		0.1		16.9
Health care	112		92,866		0.0		0.2
Industrials	—		1,728,086		—		3.8
Information technology	—		67,253		—		0.2
Materials	—		882,366		—		2.0
Telecommunication services	—		16,471		—		0.0
Utilities	—		156,865		—		0.3
Total equity securities (cost: $2,213 and $13,290,699 as of June 30, 2016 and December 31, 2015, respectively)	3,764		15,080,291		0.1		33.3



	Fair Value as of				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Europe:
Debt securities:
Consumer discretionary	$	304,868	$	1,329,387	9.2	%	2.9	%
Consumer staples	81,685		222,789		2.5		0.5
Energy	13,712		144,742		0.4		0.3
Financials	16,367		808,568		0.5		1.8
Government	1,260		46,946		0.0		0.1
Health care	139,437		197,569		4.2		0.5
Industrials	56,557		291,950		1.7		0.7
Information technology	26,818		71,168		0.8		0.2
Materials	198,828		377,460		6.0		0.8
Telecommunication services	158,004		200,610		4.8		0.4
Utilities	—		18,028		—		0.0
Total debt securities (cost: $1,008,521 and $4,207,531 as of June 30, 2016 and December 31, 2015, respectively)	997,536		3,709,217		30.1		8.2
Equity securities:
Consumer discretionary	452		270,370		0.0		0.6
Consumer staples	—		145,108		—		0.3
Energy	—		21,791		—		0.0
Financials	245		6,239,424		0.0		13.8
Government	—		40,290		—		0.1
Health care	—		79,582		—		0.2
Industrials	—		1,499,142		—		3.3
Information technology	—		1,646		—		0.0
Materials	—		475,306		—		1.1
Telecommunication services	—		4,834		—		0.0
Utilities	—		344,736		—		0.8
Total equity securities (cost: $701 and $7,627,245 as of June 30, 2016 and December 31, 2015, respectively)	697		9,122,229		0.0		20.2
Asia and other:
Debt securities:
Consumer discretionary	9,651		102,531		0.3		0.2
Consumer staples	12,851		33,061		0.4		0.1
Energy	11,755		193,645		0.4		0.4
Financials	1,087		27,413		0.0		0.1
Government	560		6,974		0.0		0.0
Health care	122		47,010		0.0		0.1
Industrials	2,867		268,710		0.1		0.6
Information technology	142		31,983		0.0		0.1
Materials	10,290		248,830		0.3		0.6
Utilities	—		2,713		—		0.0
Total debt securities (cost: $55,151 and $1,090,867 as of June 30, 2016 and December 31, 2015, respectively)	49,325		962,870		1.5		2.2



	Fair Value as of						Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	June 30, 2016			December 31, 2015			June 30, 2016		December 31, 2015
Asia and other:
Equity securities:
Consumer discretionary	$	25,043		$	506,761		0.8	%	1.1	%
Consumer staples	17,393			29,863			0.5		0.1
Energy	11,026			192,844			0.3		0.4
Financials	46,510			986,753			1.4		2.2
Health care	1,471			18,535			0.0		0.1
Industrials	25,865			1,032,225			0.8		2.3
Information technology	20,858			244,433			0.6		0.5
Materials	15,397			96,326			0.5		0.2
Telecommunication services	2,446			34,678			0.1		0.1
Utilities	2,292			154,824			0.1		0.3
Total equity securities (cost: $163,082 and $3,370,406 as of June 30, 2016 and December 31, 2015, respectively)	168,301			3,297,242			5.1		7.3
Total debt securities	3,129,426			17,680,144			94.8		39.2
Total equity securities	172,762			27,499,762			5.2		60.8
Total investments, at fair value	$	3,302,188		$	45,179,906		100.0	%	100.0	%
Securities Sold Short
Equity securities (proceeds: $68,170 and $102,236 as of June 30, 2016 and December 31, 2015, respectively)	$	(61,838	)	$	(91,246	)

As of June 30, 2016 and December 31, 2015, no single issuer or investment had a fair value that exceeded 5% of Oaktree’s total consolidated net assets.

Net Gains (Losses) From Investment Activities of Consolidated Funds

Net gains (losses) from investment activities in the condensed consolidated statements of operations consist primarily of realized and unrealized gains and losses on the consolidated funds’ investments (including foreign exchange gains and losses attributable to foreign-denominated investments and related activities) and other financial instruments. Unrealized gains or losses result from changes in the fair value of these investments and other financial instruments. Upon disposition of an investment, unrealized gains or losses are reversed and an offsetting realized gain or loss is recognized in the current period.

The following table summarizes net gains (losses) from investment activities:



	Three Months Ended June 30,
	2016						2015
	Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments			Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments

Investments and other financial instruments	$	8,651		$	17,740		$	707,427		$	(1,018,970	)
Measurement alternative guidance for CLO liabilities ⁽¹⁾	—			(24,172		)	—			—
Foreign-currency forward contracts ⁽²⁾	(298		)	849			175,334			(339,448		)
Total-return and interest-rate swaps ⁽²⁾	(907		)	222			(2,248		)	(56,008		)
Options and futures ⁽²⁾	(764		)	60			(21,778		)	(5,150		)
Swaptions ⁽²⁾⁽³⁾	—			—			(1,187		)	1,191
Total	$	6,682		$	(5,301	)	$	857,548		$	(1,418,385	)



	Six Months Ended June 30,
	2016						2015
	Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments			Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments

Investments and other financial instruments	$	12,322		$	27,423		$	875,226		$	(461,655	)
Measurement alternative guidance for CLO liabilities ⁽¹⁾	—			(52,374		)	—			—
Foreign-currency forward contracts ⁽²⁾	(500		)	457			471,310			(319,064		)
Total-return and interest-rate swaps ⁽²⁾	(890		)	(1,396		)	(7,174		)	(116,226		)
Options and futures ⁽²⁾	(849		)	(83		)	(3,977		)	(16,299		)
Swaptions ⁽²⁾⁽³⁾	—			—			(3,007		)	2,342
Total	$	10,083		$	(25,973	)	$	1,332,378		$	(910,902	)


(1)	Represents the net change in the fair value of CLO liabilities based on the more observable fair value of CLO assets, as measured under the measurement alternative guidance for CLOs. Please see note 2 for more information.


(2)	Please see note 6 for additional information.


(3)	A swaption is an option granting the buyer the right but not the obligation to enter into a swap agreement on a specified future date.