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Oaktree's $10 Billion Distressed Fund Returns Investor Capital, Runs Out Of Investing Ideas

Tyler Durden's picture





 

And so our bureau of central planning has once again made distressed investing a relic of the past. Famous distressed PM  Bruce Karsh, who runs Oaktree's distressed investment fund, has just decided to return $3 billion of the fund's $10 billion previously raised from investors due to a lack of investing opportunities. Basically, in preventing failure for a select few, Bernanke made failure impossible for everyone (which begs the question: how long before the specialized restructuring boutiques of the world - the Houlihan Lokeys, the Miller Buckfires, and the Alix Partners, continue to exist, let alone sustain on IPO any time now hopes). So after Bernanke destroyed long/short, sometimes incorrectly called "value", investing, he has now eliminated another formerly profitable vertical of the market that rewarded spotting arbitrage opportunities. The only funds that will remain soon as the Long-onlies and the momos of the world - also known the dumbest money imaginable. And when this whole thing crashes, and only shorts would be able to make money, there will be no-one making money, as there will be no capital available to short strategies. Bernanke's plan of killing all the bears has succeeded. Next up: it's the bulls turn.

From the FT:

Fund managers rarely give investors their money back because it means forgoing fees. However, with more debt trading at 100 cents on the dollar and loan yields averaging about 6 per cent, Mr Karsh is handing back the money.

His strategy contrasts with some of his competitors, who are either trying to accumulate big positions in a dwindling number of distressed companies or, in the case of Carlyle, raising a new distressed fund.

Mr Karsh’s relatively cautious approach was also on display in his investment in Centro Properties, a distressed Australian shopping mall owner with $17bn in properties in the US and Australia. Oaktree bought Centro debt at about 40 cents on the dollar and sold when the price climbed above 50 cents. By contrast, some peers maintained big positions in the company.

In the past, Oaktree’s holdings have included positions in the debt of US finance company CIT and General Growth Properties, the US shopping mall owner.

With Apollo, it also took control of aluminium processor Aleris after another buy-out firm, TPG, let it go – for less than half of what TPG paid.

Fund managers remain divided on when distressed opportunities will return.

Some say this is the year that beleaguered European banks will finally start offloading assets. Others predict asset prices may fall after the US Federal Reserve finishes its second round of quantitative easing.

“Further liquidity measures are unlikely, and that lack of incremental liquidity is going to be a game changer,” said Robert Rauch, director of research at Gramercy.

Uh, no. Further liquidity measures are extremely likely if the Fed wishes to prevent America's insolvency, which now has in addition to endless money, also gotten addicted to even more endless debt monetization. As demonstrated earlier, China has now been a net seller of US debt for two years running. Who will replace them: Egypt? Iran? Greece? We can't wait to hear Mr. Rauch's answer.

 

 


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Tue, 02/15/2011 - 19:36 | Link to Comment tellsometruth
tellsometruth's picture

finish qe2 not likely

 

I got a strategy that been working well for me...

physical silver duh... support your local coin shop

Tue, 02/15/2011 - 19:37 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

so true - buying physical pms has been a no-brainer since March 2009 when Bernanke decided to corner the MBS market.

Tue, 02/15/2011 - 23:22 | Link to Comment Fish Gone Bad
Fish Gone Bad's picture

Kennedy once said (in discussing nuclear conflict), "The fruits of victory will taste like ashes in our mouth."  The longs will get pants'd, and the shorts will be villified and investigated. 

Tue, 02/15/2011 - 19:44 | Link to Comment tellsometruth
tellsometruth's picture

my avatar couldn't resist... I also love gold!

http://www.youtube.com/watch?v=DOFAnpb8I3E

goldmember

Tue, 02/15/2011 - 19:37 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

He should wait a few months - if/when Bernanke stops printing, or is forced to stop printing, there will be all kinds of distressed debt.

Tue, 02/15/2011 - 19:41 | Link to Comment william the bastard
william the bastard's picture

Nah, he got his fee rip for drumming the desk while looking for tee times. (98% back at cha).

Tue, 02/15/2011 - 19:38 | Link to Comment Misean
Misean's picture

Next up, Bernutty turns stone into bread.

Tue, 02/15/2011 - 19:37 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

so, this is what it looks like inside the event horizon.

Tue, 02/15/2011 - 19:43 | Link to Comment slaughterer
slaughterer's picture

What? they do not feel comfortable chasing NFLX and AAPL with their clients money like all the others?

Tue, 02/15/2011 - 19:43 | Link to Comment Buck Johnson
Buck Johnson's picture

The govt. has cornered the market and some are leaving because they either can't make money or they don't trust what is being said or seen.

Tue, 02/15/2011 - 19:45 | Link to Comment Hedge Jobs
Hedge Jobs's picture

its gone way beyong moral hazard now. Bernanke has in effect killed capitalism. Trade accordingly

Tue, 02/15/2011 - 22:47 | Link to Comment Founders Keeper
Founders Keeper's picture

[its gone way beyong moral hazard now.]---Hedge Jobs

And way past moral.

I like your line, Hedge.

[Bernanke's plan of killing all the bears has succeeded. Next up: it's the bulls turn.]---TD. Also, a very good line.

This week, I sold what's left of my last stock market trades. Time to close up shop and change gears.

I'm certain we're moving into the next phrase. Something different. Old tricks are expiring; new tricks are coming.

 

Tue, 02/15/2011 - 19:45 | Link to Comment topcallingtroll
topcallingtroll's picture

One of the things that really piss me off about the great rebalancing is that there is no real value out there as an asset class as a whole. Small houses at auction to fix up and rent are the only.value plays out there. When i mean value play i mean a.good priced.asset that will throw off an 8 percent return per year at least half cash.that is low risk. Anything else out there besides becoming a slumlord? Oil and gas trusts come close.

Wed, 02/16/2011 - 02:04 | Link to Comment trav7777
trav7777's picture

MLPs and exploration companies, and trusts...that's all I'm in anymore.  The price trends seem to suggest everyone is buying whatever yield they can find.  Some of the better coal trusts are now barely above the 10-yr yield (ARLP)

Tue, 02/15/2011 - 20:26 | Link to Comment slaughterer
slaughterer's picture

Well, can we consider silver still distressed?  

Tue, 02/15/2011 - 20:32 | Link to Comment The Navigator
The Navigator's picture

How does anyone value anything when the government enters the market(s) and distorts reality (financial: QE2 - autos: GM - Healthcare: Obamacare - housing/mortgages: FannieMae, Freddie Mac) - all realistic Price Discovery is thrown out the window.

Every possible investment idea has been bubbled away by the Fucked-me-in-the-ass Federal Reserve.

The ONLY thing I can think of is PHYSICAL gold/silver - the Fed can't print more money to buy gold without gold going up in value; so the Fed can't screw with gold/silver, they can only screw with their ass-wipe green paper bills - and that may be the last bubble they blow; one can only hope.

Tue, 02/15/2011 - 21:00 | Link to Comment JoeStocks
JoeStocks's picture

Here's what Greenspan said in 2002 right after program trading on the NYSE started climbing dramatically and all of a sudden JPM (who was rumored to be insilovent just months earlier) along with every other primary dealer bank starting making huge propfits in their proprietary trading units;

"But let us consider now another aspect of market regulation efforts: transparency. There should not be much dispute that markets function best when the participants are fully informed. Yet, paradoxically, the full disclosure of what some participants know can undermine incentives to take risk, a precondition to economic growth.

No one can deny that fully informed market participants will generate the most efficient pricing of resources and the most efficient allocation of capital. Moreover, it could be argued that, if all information held by individual buyers or sellers became available to all participants, the pricing structure would more closely reflect the underlying balance of supply and demand. Thus full information would appear to be the unambiguous objective. But should it be?"

Greenspan September 2002.

 

But should it be??

Tue, 02/15/2011 - 22:30 | Link to Comment The Navigator
The Navigator's picture

When some 'privileged' have advance info to trade on while the peons and peasants don't have the same info, that's a rigged casino.

Then you start wondering what else is rigged in favor of the elites; practically everything, is what I think. So fuck them - I participate in as few of their stupid ass games as is possible.

The problem is, you can burn their temple to the ground and they just build another one to us screw over and over again. Corruption is the name of their game and I don't know how any of us can prevent it arising after the temple is burned down.

Tue, 02/15/2011 - 20:44 | Link to Comment Miss Expectations
Miss Expectations's picture

I feel the same way.*  I use to go to storage auctions as a kind of hobby.  Ever since that reality show "Storage Wars" went on the air the whole thing has been ruined.  All these well-dressed jerks showed up with flashlights!!!  Use to be 10 or 15 people going, now there are well over 50.  Use to be able to buy a box for $2.00, now they're going for $25.  Get this, the auctioneer wants $15.00 just to sign up! Worse, the jerks bidding shout out a $20.00 starting bid for stuff that use to sell for about $3.00. 

Game over for the bottom feeders...especially hard on the folks who sell the stuff at flea markets.

*I'm not returning $3 Billion to anyone.

Tue, 02/15/2011 - 20:50 | Link to Comment co2010
co2010's picture

Christian Louboutin Leopard Print Slingback Sandal Dllian Flower Pumps Silver-grayChristian Louboutin High heels are famously one of the ways which women suffer for fashion, although luxury christian louboutin  are often assumed to be more comfortable. Louboutin discussed comfort, but it seems that isnt his main concern.It is important because a woman doesnt look good if shes not comfortable. But I wouldnt take it as a compliment if someone looked at one of my shoes and said, that looks like a comfortable shoes. Its not like shes going to suffer for it. Throughout the interview he stressed that he never wanted to be part of the fashion world. He commented, I never was interested in being part of the fashion world – I just wanted to design shoes. Christian Louboutin Libelle Sandals are adored by celebrites like Madonna, Carla Bruni and Lady Gaga, but he revealed that the woman hed really like as a customer is The Queen of England.Footwear genius Christian Louboutin gave an interview to The Guardian this weekend where he spoke candidly about the comfort of heels, who hed like to dress and those Barbie rumours. Get a pair of Christian Louboutin Leather Tall Boots Brown, of course comes at a price. However, if you buy them via the Internet, you can find a pair of Christian Louboutin Light Green Reticular discount at a fraction of the price you would pay for them originally. http://www.louboutinshoes4lady.com/

Tue, 02/15/2011 - 22:14 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

yo, Tyler! trolls are back........

Tue, 02/15/2011 - 20:50 | Link to Comment co2010
co2010's picture

MBT simulates natural conditions for your feet to walk and run farther and longer. The MBT Womens Koshi Sandals Brown do work. MBT writes unbalance for your body and feet so you have to react to receive adapted to it,read more. So,Ive been being amazed what on earth population are thinking come seal MBT shoes Chapa Coffee.From my very bodily perspective outlook, Id consider that for bulk people,MBT shoes and Masai Barefoot Technology immobile remain a high suspect tag in their heads.What what what How how how Indeed, Womens MBT Shoes VOI is a very decorative invention. Karl Mull,who is the inventor,unveiled to us the sighting that had been through stared for hundreds (if not thousands) of years. The sighting is, human feet are not arranged for even ground. For too prolonged have we been walking on bathe, flat and hard grounds. For too prolonged have we been riding horses and buses, or flying. We forgot that we are immobile what we are: vibrant being in the nature.We Womens MBT Sirima Shoe sacrificed ourselves to let go of machines. We sacrificed our feet for aesthetic reasons. We sacrificed our medicinal for convenience.

Tue, 02/15/2011 - 22:15 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

yo, tyler! trolls are back....

Tue, 02/15/2011 - 21:02 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Who needs China when the FED is buying. No, but seriously. Really.

Tue, 02/15/2011 - 21:46 | Link to Comment treemagnet
treemagnet's picture

I don't understand the "there won't be any money for shorting" by TD.  Like, literally or are we just just going big to make a point.  Otherwise, what about buying puts, selling calls, etc.  Why wouldn't volatility stocks explode?

Tue, 02/15/2011 - 21:48 | Link to Comment Caveman93
Caveman93's picture

Long silver, freeze dried food, whiskey and of course, porn DVD's for when they shuts down the internets.

Tue, 02/15/2011 - 23:25 | Link to Comment Village Smithy
Village Smithy's picture

Maybe he means that all of the anti-shorting rules will be back in play and short plays will be severely restricted. If the PDs are anticipating that scenario, wouldn't it make sense for them to have already taken short positions? Perhaps they have already decided on a top and are just waiting for the right "black swan" news event that they can use as cover as they prick the bubble. Is there any money flow or trading data that might shed some light on this?

Wed, 02/16/2011 - 04:11 | Link to Comment ebworthen
ebworthen's picture

 

When all else fails they will confiscate IRA's, pensions, 401K's with euphemisms such as "American Reinvestment Act" or "Retirement Stabilization Measures" and let J.P Morgue and Cryptibank oversee the "funds".

 

What depravity is left to the masters of depravity?

 

Wed, 02/16/2011 - 05:54 | Link to Comment robertocarlos
robertocarlos's picture

Is it impossible to make a return on money? Honestly, yes.

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