Oaktree raises $1.1bn for transportation fund but drops energy strategy

The Los Angeles-based firm has stopped fundraising for an energy infrastructure vehicle and disclosed that its Highstar Fund IV is underperforming.

Oaktree Capital Management announced the $1.1 billion first close of its transportation infrastructure fund, but has decided to stop fundraising for a proposed energy infrastructure vehicle.

Jay Wintrob, the firm’s chief executive, said on an earnings call on Thursday that its transportation fund’s first close makes him believe Oaktree’s infrastructure business is “moving in the right direction”. He said the firm will raise the fund, which is looking at investments in the US to start deploying capital, until early next year.

He added Oaktree is “no longer pursuing” an energy infrastructure fund, which began in 2016 as part of a larger infrastructure fundraising along with the transportation vehicle. In April 2017, the firm said it would reposition the fundraising into two separate funds, with one vehicle focusing on transportation assets while the other on investments in North American power and midstream infrastructure.

During the call, Wintrob also said the one of the funds it acquired through its 2014 purchase of Highstar Capital is performing “below-expectations”. Highstar Fund IV is generating a net 1.6 percent return, which the chief executive described as an “area of underperformance”, which is “based on the returns of its energy holdings”.

Oaktree acquired infrastructure management firm Highstar Capital in 2014 for an undisclosed amount, including Highstar’s fourth fund, which had $2.3 billion in assets at the time of Oaktree’s transaction. The fund generated a 5.9 percent gross and 1.6 percent net internal rate of return, according to earnings results from Oaktree.