Brookfield Oaktree Wealth Solutions kicks off Australian expansion with private credit fund

Brookfield Oaktree Wealth Solutions is expanding into Australia’s crowded private credit market with a fund it says can respond to benign or dislocated market conditions.

Influential billionaire, US investor and founder of Oaktree Capital, Howard Marks. Picture: Jane Dempster

Brookfield Oaktree Wealth Solutions is pushing into Australia’s crowded private credit market with a fund that can respond to benign or dislocated market conditions, even as the firm tips a soft or no-landing scenario in the US economy this year.

New York-listed investment giant Brookfield, which has more than $US1 trillion ($1.6 trillion) of assets under management and owns a majority stake in Oaktree Capital Management, expanded into the global private wealth market in 2021.

That led to the creation of Brookfield Oaktree Wealth Solutions which draws on the heft of Brookfield and Oaktree, co-founded by billionaire and renowned markets guru Howard Marks.

Brookfield Oaktree Wealth Solutions is now expanding into Australia, first with the Oaktree Strategic Credit Fund for wholesale investors in this market through an Aussie dollar open-ended vehicle, that is hedged to the US dollar.

It feeds into the underlying Oaktree Strategic Credit Fund, which focuses on private credit investments and direct lending, with some optionality to allocate funds to public debt and other opportunistic lending during ­periods of market dislocation. The underlying fund is mandated to invest at least 70 per cent of assets in US companies.

Brookfield Oaktree Wealth Solutions’ head of international, Jeremy Hall, said while there were a spate of private credit vehicles already in Australia, he labelled many of them “quite concentrated” and leveraged to the residential and commercial real estate cycles.

“We think that’s a pretty concentrated bet if something does go wrong around defaults,” he added.

Jeremy Hall, head of international at Brookfield Oaktree Wealth Solutions, said the new fund offered diversified exposures to the global private credit market.

Mr Hall said the Oaktree fund was diversified across sectors including software, financial services, real estate, insurance, healthcare and life sciences.

A FitchRatings report on the underlying Oaktree Strategic Credit Fund highlighted “strong portfolio diversification”, but identified a number of constraints including that the commitment to tender for shares on a quarterly basis was capped at 5 per cent and subject to board approval, which could curtail investor liquidity.

Mr Hall noted the firm expected a soft or no-landing scenario – where inflation is close to targeted levels and economic growth is at or above previous trend estimates – suggesting a shallow US interest rate easing cycle.

“We have had some yield compression but it’s still offering very, very attractive income relative to other fixed income proxies,” he said.

Mr Marks dispatched a memo in early January titled “On Bubble Watch”, causing some consternation given he foresaw the dot.com crash in a memo in 2000.

The global private credit market has swelled in the past five years and is estimated to amount to more than $US3 trillion, according to the Alternative Credit Council. The rapid growth has piqued the interest of central banks and regulators across various jurisdictions.

The International Monetary Fund last year noted the migration of lending from regulated banks to the “more opaque world” of private credit created potential risks, particularly given valuations were more infrequent and there wasn’t always clarity around credit quality.

The Reserve Bank separately last year cautioned while risks to financial stability were contained presently, private credit markets remained “opaque” and were expected to grow rapidly.

Mr Hall said Brookfield and Oaktree were supportive of further regulation in the sector.

“It’s good that regulators are taking a closer look,” he added. “We think the most important thing is education around these vehicles … it’s not appropriate for all. It’s appropriate for it to certain type of investor, which is the professional investor.”

Mr Hall highlighted the firm’s track record on credit losses and loan default rates as indicating a prudent approach to risk assessment and management.

“Howard Marks often quotes Warren Buffett saying when the when the tide goes out you’ll know who isn’t swimming with trunks on. And I think, you know for us, all we can do is stay very disciplined to our underwriting skills,” he said.

“Our loss rate is very low at 0.009 per cent versus the broader industry of 1 per cent-plus.

“We’re very, very selective of who we will lend to, very conservative on the covenants, very conservative on the leverage.”

Mr Hall said in 2024 the underlying fund assessed 1200 lending opportunities and took 20 per cent to formal due diligence, but less than 4 per cent made it into the portfolio.

Despite those numbers, he outlined that given Oaktree’s experience in distressed debt and restructuring situations the fund would be well positioned for any “shake out” in credit markets.

Brookfield has, however, more broadly had a string of troubled investments and exposures in Australia in recent years. It’s investment arm owns under-pressure private hospital operator Healthscope, and the firm’s Hartree unit got caught up in the tangled web of companies of failed agriculture baron Sam Mitchell.

Already this year has seen a flurry of private credit activity globally and domestically as players rush to cash in on bumper growth.

MA Financial upsized a raising for its credit income trust to $330m earlier this month, ahead of its listing on the ASX in March.

Asset management firm Realm Investment House also fielded strong demand for the ­initial public offering of its listed Dominion income trust.

Macquarie Group chief executive Shemara Wikramanayake this week flagged the potential for a significant scaling up in the company’s private credit operations.

Ms Wikramanayake identified opportunities in Europe as the most compelling, given the sheer quantum of funds being raised in the space in the US.

Last week, Coller Capital launched a private credit secondaries fund in Australia.

The strategic moves in 2025 follow a period of frenetic activity last year, including funds manager HMC Capital outlining plans to set up a $5bn private credit business.

Mr Hall also expects a continuation of strong growth in the private credit sector.

“We think we’re at the beginning of a long runway for the growth of alternatives, not just in Australia but globally.”

The Brookfield Oaktree private wealth unit is aiming to have $US100bn in assets over the next five years.

Following the private credit fund, Mr Hall said an infrastructure investment vehicle was in the pipeline for Australian investors.

Channel Investment Management is the responsible entity and investment manager for the new Oaktree Strategic Credit Fund targeting wholesale investors in Australia.

Originally published as Brookfield Oaktree Wealth Solutions kicks off Australian expansion with private credit fund