INVESTMENTS

Corporate Investments

Corporate investments consist of investments in funds and companies in which the Company does not have a controlling financial interest. Investments for which the Company is deemed to exert significant influence are accounted for under the equity method of accounting and reflect Oaktree’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. Oaktree’s general partnership interests are substantially illiquid. While investments in funds reflect each respective fund’s holdings at fair value, equity-method investments in DoubleLine Capital LP and its affiliates (collectively, “DoubleLine”) and other 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.

The Company adopted the new consolidation guidance effective the first quarter of 2016, resulting in the deconsolidation of substantially all of Oaktree’s investment funds. Corporate investments consisted of the following:



	As of
Corporate Investments:	September 30, 2016		December 31, 2015

Equity-method Investments:
Oaktree funds	$	923,285	$	51,899
Non-Oaktree funds	—		65,901
Companies	19,952		28,562
Other investments, at fair value	97,757		67,626
Total corporate investments	$	1,040,994	$	213,988

The components of investment income (loss) are set forth below:



	Three Months Ended September 30,					Nine Months Ended September 30,
Investment Income (Loss):	2016		2015			2016		2015

Equity-method Investments:
Oaktree funds	$	47,323	$	(4,872	)	$	76,224	$	(4,545	)
Non-Oaktree funds	—		3,316			318		8,049
Companies	17,767		13,161			49,556		35,483
Other investments, at fair value	668		(1,263		)	10,107		(269		)
Total investment income	$	65,758	$	10,342		$	136,205	$	38,718

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 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 condensed 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. Equity-method investments in companies include the Company’s one-fifth equity stake in DoubleLine.

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 or for the year ended December 31, 2015, no individual equity-method investment met the significance criteria. As a result, separate financial statements were not required for any of the Company’s equity-method investments.

Summarized financial information of the Company’s equity-method investments is set forth below. Equity-method investments were not material for periods prior to adoption of the deconsolidation guidance in the first quarter of 2016, pursuant to the consolidation rules then in effect.



Statement of Financial Condition:	As of September 30, 2016
Assets:
Cash and cash-equivalents	$	3,721,911
Investments, at fair value	42,022,758
Other assets	1,707,581
Total assets	$	47,452,250
Liabilities and Capital:
Debt obligations	$	7,529,572
Other liabilities	1,699,642
Total liabilities	9,229,214
Total capital	38,223,036
Total liabilities and capital	$	47,452,250



Statements of Operations:	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenues / investment income	$	607,105		$	1,632,204
Interest expense	(48,851		)	(129,020		)
Other expenses	(207,052		)	(644,791		)
Net realized and unrealized gain on investments	1,771,018			2,609,742
Net income	$	2,122,220		$	3,468,135

Other Investments, at Fair Value

Other investments, at fair value primarily consist of investments in certain Oaktree and non-Oaktree funds for which the fair value option of accounting has been elected, as well as derivatives utilized to hedge the Company’s exposure to investment income earned from unconsolidated funds. The following table summarizes net gains (losses) attributable to the Company’s other investments:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015

Realized gain (loss)	$	104	$	—		$	(2,285	)	$	58
Net change in unrealized gain (loss)	564		(1,263		)	12,392			(327		)
Total	$	668	$	(1,263	)	$	10,107		$	(269	)

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				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015
United States:
Debt securities:
Consumer discretionary	$	580,562	$	3,387,072	15.8	%	7.5	%
Consumer staples	147,110		686,071		4.0		1.5
Energy	65,339		854,220		1.8		1.9
Financials	153,234		1,293,508		4.2		2.9
Government	—		95,508		—		0.2
Health care	323,849		1,135,799		8.8		2.5
Industrials	339,253		1,710,706		9.2		3.8
Information technology	260,100		1,293,815		7.1		2.9
Materials	215,124		1,393,521		5.8		3.1
Telecommunication services	81,692		471,711		2.2		1.0
Utilities	73,733		686,126		2.0		1.5
Total debt securities (cost: $2,254,149 and $15,304,870 as of September 30, 2016 and December 31, 2015, respectively)	2,239,996		13,008,057		60.9		28.8
Equity securities:
Consumer discretionary	680		1,813,832		0.0		4.0
Consumer staples	—		872,472		—		1.9
Energy	1,346		1,810,290		0.0		4.0
Financials	3,625		7,639,790		0.1		16.9
Health care	68		92,866		0.0		0.2
Industrials	1		1,728,086		0.0		3.8
Information technology	—		67,253		—		0.2
Materials	629		882,366		0.0		2.0
Telecommunication services	—		16,471		—		0.0
Utilities	—		156,865		—		0.3
Total equity securities (cost: $7,403 and $13,290,699 as of September 30, 2016 and December 31, 2015, respectively)	6,349		15,080,291		0.1		33.3



	Fair Value as of				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015
Europe:
Debt securities:
Consumer discretionary	$	346,746	$	1,329,387	9.4	%	2.9	%
Consumer staples	99,628		222,789		2.7		0.5
Energy	6,111		144,742		0.2		0.3
Financials	10,917		808,568		0.3		1.8
Government	1,792		46,946		0.0		0.1
Health care	185,710		197,569		5.1		0.5
Industrials	64,741		291,950		1.8		0.7
Information technology	6,065		71,168		0.2		0.2
Materials	240,035		377,460		6.5		0.8
Telecommunication services	188,648		200,610		5.1		0.4
Utilities	—		18,028		—		0.0
Total debt securities (cost: $1,139,224 and $4,207,531 as of September 30, 2016 and December 31, 2015, respectively)	1,150,393		3,709,217		31.3		8.2
Equity securities:
Consumer discretionary	—		270,370		—		0.6
Consumer staples	—		145,108		—		0.3
Energy	—		21,791		—		0.0
Financials	1,309		6,239,424		0.0		13.8
Government	—		40,290		—		0.1
Health care	—		79,582		—		0.2
Industrials	—		1,499,142		—		3.3
Information technology	—		1,646		—		0.0
Materials	—		475,306		—		1.1
Telecommunication services	—		4,834		—		0.0
Utilities	—		344,736		—		0.8
Total equity securities (cost: $1,466 and $7,627,245 as of September 30, 2016 and December 31, 2015, respectively)	1,309		9,122,229		0.0		20.2
Asia and other:
Debt securities:
Consumer discretionary	10,384		102,531		0.3		0.2
Consumer staples	2,481		33,061		0.1		0.1
Energy	9,290		193,645		0.3		0.4
Financials	—		27,413		—		0.1
Government	—		6,974		—		0.0
Health care	9,756		47,010		0.3		0.1
Industrials	19,881		268,710		0.5		0.6
Information technology	3,319		31,983		0.1		0.1
Materials	12,317		248,830		0.3		0.6
Utilities	475		2,713		0.0		0.0
Total debt securities (cost: $74,014 and $1,090,867 as of September 30, 2016 and December 31, 2015, respectively)	67,903		962,870		1.9		2.2



	Fair Value as of						Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	September 30, 2016			December 31, 2015			September 30, 2016		December 31, 2015
Asia and other:
Equity securities:
Consumer discretionary	$	21,147		$	506,761		0.6	%	1.1	%
Consumer staples	5,613			29,863			0.2		0.1
Energy	11,027			192,844			0.3		0.4
Financials	57,038			986,753			1.5		2.2
Health care	2,548			18,535			0.1		0.1
Industrials	43,140			1,032,225			1.1		2.3
Information technology	31,558			244,433			0.9		0.5
Materials	31,614			96,326			0.9		0.2
Telecommunication services	2,348			34,678			0.1		0.1
Utilities	4,429			154,824			0.1		0.3
Total equity securities (cost: $198,896 and $3,370,406 as of September 30, 2016 and December 31, 2015, respectively)	210,462			3,297,242			5.8		7.3
Total debt securities	3,458,292			17,680,144			94.1		39.2
Total equity securities	218,120			27,499,762			5.9		60.8
Total investments, at fair value	$	3,676,412		$	45,179,906		100.0	%	100.0	%
Securities Sold Short
Equity securities (proceeds: $54,823 and $102,236 as of September 30, 2016 and December 31, 2015, respectively)	$	(57,133	)	$	(91,246	)

As of September 30, 2016 and December 31, 2015, 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 condensed 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:



	Three Months Ended September 30,
	2016						2015
	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	$	1,267		$	56,490		$	351,272		$	(2,160,995	)
Measurement guidance for CLO liabilities ⁽¹⁾	—			(46,553		)	—			—
Foreign-currency forward contracts ⁽²⁾	368			(465		)	(60,419		)	177,621
Total-return and interest-rate swaps ⁽²⁾	(2,395		)	683			10,129			(387,399		)
Options and futures ⁽²⁾	(676		)	76			17,291			12,849
Swaptions ⁽²⁾⁽³⁾	—			—			(6		)	(65		)
Total	$	(1,436	)	$	10,231		$	318,267		$	(2,357,989	)



	Nine Months Ended September 30,
	2016						2015
	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	$	13,589		$	83,913		$	1,226,498		$	(2,622,650	)
Measurement guidance for CLO liabilities ⁽¹⁾	—			(98,927		)	—			—
Foreign-currency forward contracts ⁽²⁾	(132		)	(8		)	410,891			(141,443		)
Total-return and interest-rate swaps ⁽²⁾	(3,285		)	(713		)	2,955			(503,625		)
Options and futures ⁽²⁾	(1,525		)	(7		)	13,314			(3,450		)
Swaptions ⁽²⁾⁽³⁾	—			—			(3,013		)	2,277
Total	$	8,647		$	(15,742	)	$	1,650,645		$	(3,268,891	)


(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 6 for additional information.


(3)	A swaption is an option granting the buyer the right but not the obligation to enter into a swap agreement on a specified future date.