INVESTMENTS |
INVESTMENTS Corporate Investments Corporate investments may consist of investments in funds, companies in which the Company does not have a controlling financial interest, and non-investment grade debt securities. 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 | 2021 | | 2020 | Equity-method investments: | | | | Funds | $ | 915,185 | | | $ | 951,660 | | Companies | 36,225 | | | 4,863 | | Other investments, at fair value | 71,154 | | | 15,429 | | Total corporate investments | $ | 1,022,564 | | | $ | 971,952 | |
The components of investment income are set forth below: | | | | | | | | | | | | | | | | | | | Year Ended December 31, | Investment Income (Loss) | 2021 | | 2020 | | 2019 | Equity-method investments: | | | | | | Funds | $ | 203,142 | | | $ | 117,866 | | | $ | 68,145 | | Companies | 9,086 | | | 1,008 | | | 57,475 | | Other investments, at fair value | (9,187) | | | (15,046) | | | 20,949 | | Total investment income | $ | 203,041 | | | $ | 103,828 | | | $ | 146,569 | |
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 SEC. As of December 31, 2021 and 2020, or for the years ended December 31, 2021, 2020 and 2019, no individual equity-method investment met the significance criteria. Summarized financial information of the Company’s equity-method investments is set forth below: | | | | | | | | | | | | | As of December 31, | Statements of Financial Condition | 2021 | | 2020 | Assets: | | | | Cash and cash-equivalents | $ | 4,116,251 | | | $ | 3,627,763 | | Investments, at fair value | 52,629,756 | | | 42,314,215 | | Other assets | 1,216,301 | | | 1,512,269 | | Total assets | $ | 57,962,308 | | | $ | 47,454,247 | | Liabilities and Capital: | | | | Debt obligations | $ | 3,477,050 | | | $ | 5,959,409 | | Other liabilities | 8,112,941 | | | 3,018,263 | | Total liabilities | 11,589,991 | | | 8,977,672 | | Total capital | 46,372,317 | | | 38,476,575 | | Total liabilities and capital | $ | 57,962,308 | | | $ | 47,454,247 | |
| | | | | | | | | | | | | | | | | | | Year Ended December 31, | | 2021 | | 2020 | | 2019 | Statements of Operations | | | | | | Revenues / investment income | $ | 1,932,884 | | | $ | 5,061,676 | | | $ | 766,096 | | Interest expense | (184,829) | | | (341,823) | | | (150,078) | | Other expenses | (795,570) | | | (1,607,354) | | | (402,814) | | Net realized and unrealized gain on investments | 10,242,513 | | | 7,202,148 | | | 1,077,761 | | Net income | $ | 11,194,998 | | | $ | 10,314,647 | | | $ | 1,290,965 | |
Other Investments, at Fair Value Other investments, at fair value primarily consist of: (a) investments in certain Oaktree and non-Oaktree funds, (b) non-investment grade debt securities, and (c) 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, | | 2021 | | 2020 | | 2019 | | | | | | | Realized gain | $ | 9,306 | | | $ | 8,946 | | | $ | 7,763 | | Net change in unrealized gain (loss) | (18,493) | | | (23,992) | | | 13,186 | | Total gain (loss) | $ | (9,187) | | | $ | (15,046) | | | $ | 20,949 | |
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 | 2021 | | 2020 | | 2021 | | 2020 | United States: | | | | | | | | Debt securities: | | | | | | | | Communication services | $ | 635,930 | | | $ | 554,779 | | | 5.6 | % | | 7.1 | % | Consumer discretionary | 665,405 | | | 568,195 | | | 5.8 | | | 7.3 | | Consumer staples | 190,391 | | | 118,641 | | | 1.7 | | | 1.5 | | Energy | 354,585 | | | 232,309 | | | 3.1 | | | 3.0 | | Financials | 463,412 | | | 287,291 | | | 4.0 | | | 3.7 | | | | | | | | | | Health care | 459,713 | | | 410,317 | | | 4.0 | | | 5.3 | | Industrials | 891,850 | | | 727,471 | | | 7.8 | | | 9.3 | | Information technology | 685,959 | | | 504,442 | | | 6.0 | | | 6.5 | | Materials | 436,434 | | | 251,978 | | | 3.8 | | | 3.2 | | Real estate | 202,131 | | | 111,622 | | | 1.8 | | | 1.4 | | Utilities | 305,220 | | | 264,758 | | | 2.7 | | | 3.4 | | Other | 10,683 | | | 11,847 | | | 0.1 | | | 0.2 | | Total debt securities (cost: $5,303,858 and $4,064,289 as of December 31, 2021 and 2020, respectively) | 5,301,713 | | | 4,043,650 | | | 46.3 | | | 51.9 | | Equity securities: | | | | | | | | Communication services | 54,635 | | | 16,822 | | | 0.5 | | | 0.2 | | Consumer discretionary | 126,978 | | | 604 | | | 1.1 | | | 0.0 | | Energy | 369,912 | | | 21,747 | | | 3.2 | | | 0.3 | | Financials | 151,501 | | | 85,715 | | | 1.3 | | | 1.1 | | Health care | 33,475 | | | — | | | 0.3 | | | — | | Industrials | 246,856 | | | 8,752 | | | 2.2 | | | 0.1 | | Materials | 82,273 | | | — | | | 0.7 | | | — | | Utilities | 81,989 | | | 77,085 | | | 0.7 | | | 1.0 | | Total equity securities (cost: $1,086,667 and $282,682 as of December 31, 2021 and 2020, respectively) | 1,147,619 | | | 210,725 | | | 10.0 | | | 2.7 | | Real estate: | | | | | | | | Real estate | — | | | 6,879 | | | — | | | 0.1 | | Total real estate securities (cost: $— and $6,760 as of December 31, 2021 and 2020, respectively) | — | | | 6,879 | | | — | | | 0.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of December 31, | | Fair Value as a Percentage of Investments of Consolidated Funds as of December 31, | Investments | 2021 | | 2020 | | 2021 | | 2020 | Europe: | | | | | | | | Debt securities: | | | | | | | | Communication services | $ | 756,728 | | | $ | 471,595 | | | 6.6 | % | | 6.0 | % | Consumer discretionary | 915,535 | | | 755,084 | | | 8.0 | | | 9.7 | | Consumer staples | 206,590 | | | 219,934 | | | 1.8 | | | 2.8 | | Energy | 1,251 | | | 8,033 | | | 0.0 | | | 0.1 | | Financials | 98,126 | | | 75,988 | | | 0.9 | | | 1.0 | | Health care | 751,936 | | | 629,210 | | | 6.6 | | | 8.1 | | Industrials | 656,033 | | | 487,243 | | | 5.7 | | | 6.2 | | Information technology | 383,041 | | | 255,662 | | | 3.3 | | | 3.3 | | Materials | 466,181 | | | 303,468 | | | 4.1 | | | 3.9 | | Real estate | 34,116 | | | 26,100 | | | 0.3 | | | 0.3 | | Utilities | 1,777 | | | 9,397 | | | 0.0 | | | 0.1 | | Other | 15,049 | | | 4,628 | | | 0.1 | | | 0.1 | | Total debt securities (cost: $4,289,708 and $3,233,125 as of December 31, 2021 and 2020, respectively) | 4,286,363 | | | 3,246,342 | | | 37.4 | | | 41.6 | | Equity securities: | | | | | | | | Consumer discretionary | 102,919 | | | — | | | 0.9 | | | — | | | | | | | | | | | | | | | | | | Financials | 19,987 | | | 2,917 | | | 0.2 | | | 0.0 | | | | | | | | | | Industrials | 27,475 | | | — | | | 0.2 | | | — | | | | | | | | | | Total equity securities (cost: $119,114 and $2,919 as of December 31, 2021 and 2020, respectively) | 150,381 | | | 2,917 | | | 1.3 | | | 0.0 | | Real estate: | | | | | | | | Real estate | 33,834 | | | — | | | 0.3 | | | — | | Total real estate securities (cost: $34,927 and $— as of December 31, 2021 and 2020, respectively) | 33,834 | | | — | | | 0.3 | | | — | | Asia and other: | | | | | | | | Debt securities: | | | | | | | | Communication services | 6,087 | | | 18,741 | | | 0.1 | | | 0.2 | | Consumer discretionary | 71,082 | | | 35,580 | | | 0.6 | | | 0.5 | | Consumer staples | 13,378 | | | 23,755 | | | 0.1 | | | 0.3 | | Energy | 24,325 | | | 9,247 | | | 0.2 | | | 0.1 | | Financials | 14,739 | | | 12,335 | | | 0.1 | | | 0.2 | | | | | | | | | | Health care | 4,084 | | | 1,084 | | | 0.0 | | | 0.0 | | Industrials | 7,084 | | | 4,759 | | | 0.1 | | | 0.1 | | Information technology | 714 | | | 3,631 | | | 0.0 | | | 0.0 | | Materials | 121,151 | | | 68,791 | | | 1.1 | | | 0.9 | | Real estate | 131,155 | | | 75,187 | | | 1.1 | | | 1.0 | | Utilities | 3,743 | | | 9,619 | | | 0.0 | | | 0.1 | | Other | 9,482 | | | 26,067 | | | 0.1 | | | 0.3 | | Total debt securities (cost: $417,825 and $288,452 as of December 31, 2021 and 2020, respectively) | 407,024 | | | 288,796 | | | 3.6 | | | 3.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of December 31, | | Fair Value as a Percentage of Investments of Consolidated Funds as of December 31, | Investments | 2021 | | 2020 | | 2021 | | 2020 | Asia and other: | | | | | | | | Equity securities: | | | | | | | | | | | | | | | | Consumer discretionary | $ | 1,057 | | | $ | — | | | 0.0 | % | | — | % | | | | | | | | | Energy | 8,332 | | | — | | | 0.1 | | | — | | | | | | | | | | Industrials | 81,782 | | | — | | | 0.7 | | | — | | | | | | | | | | | | | | | | | | Real estate | 38,614 | | | — | | | 0.3 | | | — | | Utilities | 176 | | | — | | | 0.0 | | | — | | Total equity securities (cost: $120,308 and $0 as of December 31, 2021 and 2020, respectively) | 129,961 | | | — | | | 1.1 | | | — | | | | | | | | | | Total debt securities | 9,995,100 | | | 7,578,788 | | | 87.2 | | | 97.2 | | Total equity securities | 1,427,961 | | | 213,642 | | | 12.5 | | | 2.7 | | Total real estate | 33,834 | | | 6,879 | | | 0.3 | | | 0.1 | | Total investments, at fair value | $ | 11,456,895 | | | $ | 7,799,309 | | | 100.0 | % | | 100.0 | % | | | | | | | | | | | | | | | | |
As of December 31, 2021 and 2020, 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, | | 2021 | | 2020 | | 2019 | | 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 | $ | 25,599 | | | $ | 135,306 | | | $ | (8,926) | | | $ | (137,882) | | | $ | (11,227) | | | $ | 137,521 | | CLO liabilities (1) | (6,951) | | | (14,370) | | | (85,592) | | | (21,971) | | | — | | | (131,948) | | Foreign-currency forward contracts (2) | 6,232 | | | 4,477 | | | (11,184) | | | (23,813) | | | (6,546) | | | 4,364 | | Total-return and interest-rate swaps (2) | (92) | | | (57) | | | (148) | | | (69) | | | — | | | — | | Options and futures (2) | (2,550) | | | (3,697) | | | (107) | | | (112) | | | — | | | — | | Warrants (2) | — | | | 858 | | | — | | | — | | | — | | | — | | Total | $ | 22,238 | | | $ | 122,517 | | | $ | (105,957) | | | $ | (183,847) | | | $ | (17,773) | | | $ | 9,937 | |
(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 7 for additional information.
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