| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Oaktree identifies a new era of dispersion across financial markets where index averages mask sharp bifurcation between winners and losers. In credit markets, this manifests as CCC-rated loans trading over 1,000 bps outside BBs with recovery rates well below historical averages. The firm sees excellent income opportunities in performing credit while stressed assets create substantial dislocation opportunities. AI-related stocks have driven three quarters of S&P 500 returns since ChatGPT launch, creating extreme concentration with the top 10 companies representing nearly 40% of the index. The U.S. economy shows K-shaped characteristics with high-income consumers driving aggregate spending while low-income segments reduce expenditure. Private credit markets remain competitive but may see supply-demand rebalancing in 2026. Commercial real estate shows stabilization following Fed rate cuts. The dispersed environment requires nuanced management rewarding both prudent risk control and opportunistic positioning, as relying on index averages will no longer suffice in this more interesting investment landscape.
Credit markets are entering a new era of dispersion where buoyant index averages mask sharply bifurcated cohorts of winners and losers, creating opportunities for sophisticated investors who can navigate beyond averages to capitalize on both performing credit income and distressed dislocations.
The firm expects to enter a new era of dispersion where averages shouldn't be relied upon, with both performing bulk and stressed subset of credit markets offering significant absolute volume opportunities. The next phase is set to be more interesting with mistakes being punished and potentially capitalized on.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 3 2026 | 2025 Q4 | - | AI, credit, dispersion, private credit, real estate, Recovery, Spreads | - | Credit markets show significant dispersion with CCC-rated loans trading over 1,000 bps outside BBs, recovery rates well below long-term averages at 37.7% versus 62.3%, and… |
| Sep 30 2025 | 2025 Q3 | - | credit, healthcare, private equity, real estate, valuation | - | Oaktree emphasizes the late-cycle opportunity set in credit markets shaped by higher interest rates, refinancing stress, and capital scarcity. The firm highlights disciplined underwriting, downside… |
| Jul 1 2025 | 2025 Q2 | - | credit, Debt, distressed, global | - | - |
| Mar 31 2025 | 2025 Q1 | - | - | - | - |
| Jan 30 2025 | 2024 Q4 | - | - | - | - |
| Oct 27 2024 | 2024 Q3 | - | - | - | - |
| Jul 30 2024 | 2024 Q2 | - | - | - | - |
| Feb 15 2024 | 2023 Q4 | - | - | - | - |
| Oct 26 2023 | 2023 Q3 | - | - | - | - |
| Jul 27 2023 | 2023 Q2 | - | - | - | - |
| Apr 17 2023 | 2023 Q1 | - | - | - | - |
| Oct 28 2022 | 2022 Q3 | - | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Credit StressThe fund is responding to historically low credit spreads by reducing exposure to high yield and other lower-rated debt. They believe current spreads offer insufficient compensation for credit risk and increase the risk of permanent impairment of capital. The managers are downside-focused and do not share the market's optimism needed to justify such low spreads. |
Credit spreads High yield Credit risk Permanent impairment Risk compensation | |
Private CreditThe space has become very popular with lots of LP money chasing returns. Some sponsors have paid extremely high prices and lent on unfavorable terms. Many have also lent into the AI/data-center space to businesses with questionable futures. |
Credit Lending Risk | |
Real EstateThe portfolio includes exposure to various real estate segments including self-storage (CubeSmart facing occupancy pressures), wireless tower infrastructure (SBA Communications), life sciences real estate (Alexandria Real Estate), and single-family rentals (Invitation Homes). The sector faces headwinds from higher interest rates and housing market challenges. |
REITs Interest Rates Housing Infrastructure Occupancy | |
| 2025 Q3 |
CreditFund focuses on elevated carry in high yield credit markets with spreads remaining range bound below 300 basis points. Manager believes high yield credit is fundamentally strong but valuations are tight, particularly in higher quality BBs. Strategy emphasizes sourcing positions with higher income levels given limited price appreciation opportunities. |
High Yield Credit Spreads Carry Investment Grade |
HealthcareHealthcare was the strongest relative contributor in the quarter with holdings increasing nearly +16% compared to benchmark returns of roughly +12%. Exact Sciences was acquired for a significant premium by Abbott Laboratories resulting in an +86% return, while other strong performers included Tarsus Pharmaceuticals, Glaukos following approval of a new product, Penumbra, and Repligen driven by strong earnings results. |
M&A Product Approval Earnings Biotech | |
Private EquityDiscounts for funds of funds are still far too wide and persistently so. Stark arbitrage available from selling underlying third-party fund interests at tight discounts in secondary market to fund share buybacks at much wider discounts. HVPE announced $300m sale at 6% discount to fund debt repayment and buybacks. |
Private Equity Discount Arbitrage Secondary Market Share Buybacks Fund of Funds | |
Real Estate |
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ValuationAI-related companies continue to command premium valuations while other sectors remain reasonably priced. This valuation divide continues to guide investment activity, with the fund remaining wary of companies trading at exceedingly high valuations that imply exceptional multi-year earnings growth. |
Premium Divide Discipline Stretched Reasonable | |
| 2025 Q2 |
CreditFund focuses on elevated carry in high yield credit markets with spreads remaining range bound below 300 basis points. Manager believes high yield credit is fundamentally strong but valuations are tight, particularly in higher quality BBs. Strategy emphasizes sourcing positions with higher income levels given limited price appreciation opportunities. |
High Yield Credit Spreads Carry Investment Grade |
DistressedThe cannabis industry is experiencing widespread distress driven by oversupply, falling prices, and capital scarcity. This creates opportunities for operators with cost advantages to acquire distressed assets and restart defunct facilities at substantially lower capital expenditures with materially higher returns on invested capital. |
Distressed Assets Oversupply Capital Scarcity Consolidation Returns |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
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| TICKER | COMMENTARY |
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