INVESTMENTS

12 Months Ended

Dec. 31, 2019

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 under the equity method of accounting and reflect the Company’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. The Company’s general partnership interests are substantially illiquid. While investments in funds reflect each respective fund’s holdings at fair value, equity-method investments in 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.

Corporate investments consisted of the following:



	As of December 31,
Corporate Investments	2019		2018
Equity-method investments:
Funds	$	670,348	$	1,089,068
Companies	3,855		45,797
Other investments, at fair value	34,934		74,899
Total corporate investments	$	709,137	$	1,209,764

The components of investment income are set forth below:



	Year Ended December 31,
Investment Income	2019		2018		2017
Equity-method investments:
Funds	$	68,145	$	66,922	$	138,465
Companies	57,475		73,868		71,311
Other investments, at fair value	20,949		16,320		(8,487		)
Total investment income	$	146,569	$	157,110	$	201,289

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, but 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 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.

Each reporting period, the Company evaluates each of its equity-method investments to determine if any are considered significant, as defined by the U.S. Securities and Exchange Commission (“SEC”). As of December 31, 2019 and 2018, or for the years ended December 31, 2019, 2018 and 2017, 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:



	As of December 31,
Statements of Financial Condition	2019		2018
Assets:
Cash and cash-equivalents	$	1,892,353	$	3,875,072
Investments, at fair value	25,213,422		39,711,382
Other assets	635,277		2,832,960
Total assets	$	27,741,052	$	46,419,414
Liabilities and Capital:
Debt obligations	$	3,558,139	$	7,234,596
Other liabilities	3,779,527		2,662,850
Total liabilities	7,337,666		9,897,446
Total capital	20,403,386		36,521,968
Total liabilities and capital	$	27,741,052	$	46,419,414



	Year Ended December 31,
	2019			2018			2017
Statements of Operations
Revenues / investment income	$	766,096		$	1,861,551		$	1,982,828
Interest expense	(150,078		)	(276,779		)	(235,266		)
Other expenses	(402,814		)	(876,627		)	(821,083		)
Net realized and unrealized gain on investments	1,077,761			1,087,345			3,795,102
Net income	$	1,290,965		$	1,795,490		$	4,721,581

Other Investments, at Fair Value

Other investments, at fair value primarily consist of: (a) investments in certain Oaktree and non-Oaktree funds for which the fair value option of accounting has been elected and (b) derivatives utilized to hedge the Company’s exposure to investment income earned from its funds.

The following table summarizes net gains (losses) attributable to the Company’s other investments:



	Year Ended December 31,
	2019		2018			2017

Realized gain (loss)	$	7,763	$	18,208		$	8,439
Net change in unrealized gain (loss)	13,186		(1,888		)	(16,926		)
Total gain (loss)	$	20,949	$	16,320		$	(8,487	)

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 December 31,				Fair Value as a Percentage of Investments of Consolidated Funds as of December 31,
Investments	2019		2018		2019		2018
United States:
Debt securities:
Communication services	$	464,356	$	543,948	6.4	%	8.4	%
Consumer discretionary	508,701		506,551		6.9		7.8
Consumer staples	92,102		112,197		1.3		1.7
Energy	223,671		204,568		3.0		3.1
Financials	355,113		332,240		4.8		5.1
Health care	512,864		537,592		7.0		8.2
Industrials	563,920		443,406		7.7		6.8
Information technology	524,390		536,000		7.1		8.2
Materials	294,300		289,499		4.0		4.4
Real estate	204,933		217,633		2.8		3.3
Utilities	216,053		137,031		2.9		2.1
Total debt securities (cost: $3,981,956 and $4,019,823 as of December 31, 2019 and 2018, respectively)	3,960,403		3,860,665		53.9		59.1
Equity securities:
Communication services	312		—		0.0		0.0
Consumer discretionary	658		1,915		0.0		0.1
Energy	256		131		0.0		0.0
Financials	—		837		0.0		0.0
Health care	—		1,348		0.0		0.0
Industrials	—		88		0.0		0.0
Utilities	130,671		1,107		1.8		0.0
Total equity securities (cost: $137,149 and $6,117 as of December 31, 2019 and 2018, respectively)	131,897		5,426		1.8		0.1
Real estate:
Real estate	230,741		—		3.1		—
Total real estate (cost: $230,741 and $0 as of December 31, 2019 and 2018, respectively)	230,741		—		3.1		—



	Fair Value as of December 31,				Fair Value as a Percentage of Investments of Consolidated Funds as of December 31,
Investments	2019		2018		2019		2018
Europe:
Debt securities:
Communication services	$	469,822	$	530,337	6.4	%	8.1	%
Consumer discretionary	659,001		545,324		9.0		8.3
Consumer staples	178,609		160,406		2.4		2.5
Energy	11,316		15,260		0.2		0.2
Financials	101,933		48,545		1.4		0.7
Health care	579,765		418,516		7.9		6.4
Industrials	362,120		246,640		4.9		3.8
Information technology	177,152		194,988		2.4		3.0
Materials	230,289		221,660		3.1		3.4
Real estate	96,315		30,045		1.3		0.5
Utilities	3,852		1,559		0.1		0.0
Total debt securities (cost: $2,876,531 and $2,477,821 as of December 31, 2019 and 2018, respectively)	2,870,174		2,413,280		39.0		36.9
Equity securities:
Consumer Discretionary	94		—		0.0		—
Consumer staples	—		38		—		0.0
Health care	—		948		—		0.1
Total equity securities (cost: $1,227 and $320 as of December 31, 2019 and 2018, respectively)	94		986		0.0		0.1
Asia and other:
Debt securities:
Communication services	15,750		12,069		0.2		0.2
Consumer discretionary	40,073		36,822		0.5		0.6
Consumer staples	11,545		11,867		0.2		0.2
Energy	13,471		20,594		0.1		0.3
Financials	10,313		13,995		0.1		0.2
Government	917		12,155		0.0		0.2
Health care	8,923		9,633		0.1		0.1
Industrials	31,814		40,468		0.4		0.7
Information technology	5,639		1,887		0.1		0.0
Materials	5,604		15,516		0.1		0.2
Real estate	751		38,592		0.0		0.6
Utilities	20,300		14,870		0.3		0.2
Total debt securities (cost: $164,650 and $233,603 as of December 31, 2019 and 2018, respectively)	165,100		228,468		2.2		3.5



	Fair Value as of December 31,					Fair Value as a Percentage of Investments of Consolidated Funds as of December 31,
Investments	2019		2018			2019		2018
Asia and other:
Equity securities:
Consumer discretionary	—		874			—		0.0
Consumer staples	—		997			—		0.0
Energy	—		382			—		0.0
Financials	—		2,935			—		0.0
Industrials	—		11,265			—		0.2
Information technology	—		1,725			—		0.0
Materials	—		4,382			—		0.1
Total equity securities (cost: $0 and $22,977 as of December 31, 2019 and 2018, respectively)	—		22,560			—		0.3
Total debt securities	6,995,677		6,502,413			95.1		99.5
Total equity securities	131,991		28,972			1.8		0.5
Total real estate	230,741		—			3.1		—
Total investments, at fair value	$	7,358,409	$	6,531,385		100.0	%	100.0	%
Securities Sold Short
Equity securities (proceeds: $0 and $2,644 as of December 31, 2019 and 2018, respectively)	$	—	$	(2,609	)

As of December 31, 2019 and 2018, 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 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:



	Year Ended December 31,
	2019						2018						2017
	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			Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation (Depreciation) on Investments
Investments and other financial instruments	$	(11,227	)	$	137,521		$	(26,109	)	$	(252,038	)	$	27,910		$	(1,151	)
CLO liabilities ⁽¹⁾	—			(131,948		)	—			85,014			—			53,351
Foreign-currency forward contracts ⁽²⁾	(6,546		)	4,364			513			2,327			(2,917		)	1,909
Total-return and interest-rate swaps ⁽²⁾	—			—			858			29			232			378
Options and futures ⁽²⁾	—			—			1,210			76			(4,825		)	574
Total	$	(17,773	)	$	9,937		$	(23,528	)	$	(164,592	)	$	20,400		$	55,061


(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 CLO measurement guidance. Please see note 2 for more information.

(2)

Please see note 8 for additional information.