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.

Corporate investments consisted of the following:



	As of
Corporate Investments:	September 30, 2017		December 31, 2016

Equity-method Investments:
Funds	$	910,454	$	981,209
Companies	24,242		34,932
Other investments, at fair value	120,291		107,591
Total corporate investments	$	1,054,987	$	1,123,732

The components of investment income are set forth below:



	Three Months Ended September 30,					Nine Months Ended September 30,
Investment Income:	2017			2016		2017			2016

Equity-method Investments:
Funds	$	34,733		$	47,323	$	104,216		$	76,542
Companies	17,441			17,767		52,164			49,556
Other investments, at fair value	(1,113		)	668		(5,762		)	10,107
Total investment income	$	51,061		$	65,758	$	150,618		$	136,205

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 but 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, 2016, 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.



	As of
Statement of Financial Condition:	September 30, 2017		December 31, 2016
Assets:
Cash and cash-equivalents	$	2,913,015	$	3,713,045
Investments, at fair value	42,048,647		43,084,842
Other assets	2,193,194		1,994,304
Total assets	$	47,154,856	$	48,792,191
Liabilities and Capital:
Debt obligations	$	8,445,799	$	7,372,063
Other liabilities	2,361,925		2,028,065
Total liabilities	10,807,724		9,400,128
Total capital	36,347,132		39,392,063
Total liabilities and capital	$	47,154,856	$	48,792,191



	Three Months Ended September 30,						Nine Months Ended September 30,
Statements of Operations:	2017			2016			2017			2016
Revenues / investment income	$	387,281		$	607,105		$	1,464,961		$	1,632,204
Interest expense	(62,636		)	(48,851		)	(167,507		)	(129,020		)
Other expenses	(205,998		)	(207,052		)	(618,255		)	(644,791		)
Net realized and unrealized gain on investments	1,066,616			1,771,018			2,933,914			2,609,742
Net income	$	1,185,263		$	2,122,220		$	3,613,113		$	3,468,135

Other Investments, at Fair Value

Other investments, at fair value primarily consist of (a) investments in certain Oaktree and non-Oaktree funds for which the fair value option of accounting has been elected and (b) 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,
	2017			2016		2017			2016

Realized gain (loss)	$	3,697		$	104	$	5,252		$	(2,285	)
Net change in unrealized gain (loss)	(4,810		)	564		(11,014		)	12,392
Total gain (loss)	$	(1,113	)	$	668	$	(5,762	)	$	10,107

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, 2017		December 31, 2016		September 30, 2017		December 31, 2016
United States:
Debt securities:
Consumer discretionary	$	742,463	$	628,621	14.3	%	16.5	%
Consumer staples	125,829		123,395		2.4		3.2
Energy	97,887		55,655		1.9		1.5
Financials	292,701		182,685		5.6		4.8
Government	1,516		5,234		0.0		0.1
Health care	445,347		337,138		8.6		8.9
Industrials	439,609		379,122		8.5		10.0
Information technology	445,148		272,637		8.6		7.2
Materials	358,342		237,417		6.9		6.2
Telecommunication services	154,516		93,893		3.0		2.5
Utilities	112,107		76,920		2.2		2.0
Total debt securities (cost: $3,214,637 and $2,378,759 as of September 30, 2017 and December 31, 2016, respectively)	3,215,465		2,392,717		62.0		62.9
Equity securities:
Consumer discretionary	2,032		711		0.0		0.0
Energy	1,865		2,002		0.0		0.1
Financials	7,912		3,977		0.2		0.1
Health care	320		343		0.0		0.0
Industrials	406		1		0.0		0.0
Materials	138		691		0.0		0.0
Telecommunication services	268		—		0.0		—
Total equity securities (cost: $9,327 and $5,462 as of September 30, 2017 and December 31, 2016, respectively)	12,941		7,725		0.2		0.2



	Fair Value as of				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Europe:
Debt securities:
Consumer discretionary	$	494,501	$	374,627	9.5	%	9.8	%
Consumer staples	102,862		92,750		2.0		2.4
Energy	6,314		13,274		0.1		0.3
Financials	28,858		13,822		0.6		0.4
Government	—		1,996		—		0.1
Health care	319,397		210,078		6.1		5.5
Industrials	145,796		54,578		2.8		1.4
Information technology	57,092		23,832		1.1		0.6
Materials	282,079		226,961		5.4		6.0
Telecommunication services	234,445		214,182		4.5		5.6
Utilities	1,540		—		0.0		—
Total debt securities (cost: $1,663,145 and $1,214,068 as of September 30, 2017 and December 31, 2016, respectively)	1,672,884		1,226,100		32.1		32.1
Equity securities:
Energy	3,032		—		0.1	%	—
Financials	4,081		1,605		0.1		0.0
Health care	635		—		0.0		—
Materials	4,067		—		0.1		—
Total equity securities (cost: $9,278 and $1,494 as of September 30, 2017 and December 31, 2016, respectively)	11,815		1,605		0.3		0.0
Asia and other:
Debt securities:
Consumer discretionary	2,720		3,145		0.1		0.1
Consumer staples	2,238		5,994		0.0		0.2
Energy	5,022		9,570		0.1		0.3
Financials	4,305		—		0.1		—
Government	—		1,506		—		0.0
Health care	1,185		1,245		0.0		0.0
Industrials	18,119		15,450		0.3		0.4
Information technology	447		409		0.0		0.0
Materials	8,013		10,245		0.2		0.3
Telecommunication services	15,571		4,809		0.3		0.1
Utilities	—		928		—		0.0
Total debt securities (cost: $59,156 and $57,400 as of September 30, 2017 and December 31, 2016, respectively)	57,620		53,301		1.1		1.4



	Fair Value as of						Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	September 30, 2017			December 31, 2016			September 30, 2017		December 31, 2016
Asia and other:
Equity securities:
Consumer discretionary	$	17,337		$	7,639		0.3	%	0.2	%
Consumer staples	6,837			3,786			0.1		0.1
Energy	5,731			6,978			0.1		0.2
Financials	104,569			44,328			2.0		1.2
Industrials	45,173			21,564			0.9		0.6
Information technology	20,948			16,642			0.4		0.4
Materials	17,744			19,697			0.3		0.5
Telecommunication services	3,316			4,296			0.1		0.1
Utilities	3,145			1,856			0.1		0.1
Total equity securities (cost: $203,465 and $118,292 as of September 30, 2017 and December 31, 2016, respectively)	224,800			126,786			4.3		3.4
Total debt securities	4,945,969			3,672,118			95.2		96.4
Total equity securities	249,556			136,116			4.8		3.6
Total investments, at fair value	$	5,195,525		$	3,808,234		100.0	%	100.0	%
Securities Sold Short
Equity securities (proceeds: $71,554 and $41,541 as of September 30, 2017 and December 31, 2016, respectively)	$	(74,228	)	$	(41,016	)

As of September 30, 2017 and December 31, 2016, 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,
	2017						2016
	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	$	3,839		$	2,012		$	1,267		$	56,490
CLO liabilities ⁽¹⁾	—			1,595			—			(46,553		)
Foreign-currency forward contracts ⁽²⁾	(555		)	200			368			(465		)
Total-return and interest-rate swaps ⁽²⁾	70			(185		)	(2,395		)	683
Options and futures ⁽²⁾	38			40			(676		)	76
Total	$	3,392		$	3,662		$	(1,436	)	$	10,231



	Nine Months Ended September 30,
	2017						2016
	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	$	6,075		$	10,941		$	13,589		$	83,913
CLO liabilities ⁽¹⁾	—			44,943			—			(98,927		)
Foreign-currency forward contracts ⁽²⁾	(945		)	(210		)	(132		)	(8		)
Total-return and interest-rate swaps ⁽²⁾	(1,398		)	813			(3,285		)	(713		)
Options and futures ⁽²⁾	(1,977		)	306			(1,525		)	(7		)
Total	$	1,755		$	56,793		$	8,647		$	(15,742	)


(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.