INVESTMENTS

3 Months Ended

Mar. 31, 2020

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 the Company’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. The Company’s general partnership interests are substantially illiquid. While investments in funds reflect each respective fund’s holdings at fair value, equity-method investments in 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	March 31, 2020		December 31, 2019

Equity-method investments:
Funds	$	600,133	$	670,348
Companies	3,983		3,855
Other investments, at fair value	29,736		34,934
Total corporate investments	$	633,852	$	709,137

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


	Three months ended March 31,
Investment (Loss) Income	2020		2019

Equity-method investments:
Funds	$	(105,634)	$	39,320
Companies	128		17,111
Other investments, at fair value	(4,167)		5,719
Total investment (loss) income	$	(109,673)	$	62,150

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.

Each reporting period, the Company evaluates each of its equity-method investments to determine if any are considered significant, as defined by the SEC. For the three months ended March 31, 2020, no individual equity-method investment met the significance criteria.

Summarized financial information of the Company’s equity-method investments is set forth below.


	Three months ended March 31,
Statements of Operations	2020		2019
Revenues / investment income	$	197,281	$	891,961
Interest expense	(16,170)		(70,857)
Other expenses	(120,974)		(361,900)
Net realized and unrealized gain (loss) on investments	(3,633,708)		1,005,147
Net income (loss)	$	(3,573,571)	$	1,464,351

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 its funds.

The following table summarizes net gains (losses) attributable to the Company’s other investments:


	Three months ended March 31,
	2020		2019

Realized gain	$	87	$	—
Net change in unrealized gain (loss)	(4,254)		5,719
Total gain (loss)	$	(4,167)	$	5,719

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	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
United States:
Debt securities:
Communication services	$	414,411	$	464,356	6.1	%	6.4	%
Consumer discretionary	395,933		508,701		5.9		6.9
Consumer staples	83,805		92,102		1.2		1.3
Energy	139,358		223,671		2.1		3.0
Financials	322,200		355,113		4.8		4.8
Health care	408,204		512,864		6.0		7.0
Industrials	515,056		563,920		7.6		7.7
Information technology	435,559		524,390		6.4		7.1
Materials	245,224		294,300		3.6		4.0
Real estate	188,440		204,933		2.8		2.8
Utilities	195,365		216,053		2.9		2.9
Total debt securities (cost: $3,898,370 and $3,981,956 as of March 31, 2020 and December 31, 2019, respectively)	3,343,555		3,960,403		49.4		53.9
Equity securities:
Communication services	96		312		0.0		0.0
Consumer discretionary	399		658		0.0		0.0
Energy	164		256		0.0		0.0
Financials	9		—		0.0		0.0


Utilities	99,856		130,671		1.5		1.8
Total equity securities (cost: $138,387 and $137,149 as of March 31, 2020 and December 31, 2019, respectively)	100,524		131,897		1.5		1.8
Real estate:
Real estate	269,404		230,741		4.0		3.1
Financials	3,048		—		0.0		0.0
Total real estate securities (cost: $272,433 and $230,741 as of March 31, 2020 and December 31, 2019, respectively)	272,452		230,741		4.0		3.1


	Fair Value as of						Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Europe:
Debt securities:
Communication services	$	438,481	$	469,822	6.5	%	6.4	%
Consumer discretionary	541,908		659,001		8.0		9.0
Consumer staples	175,128		178,609		2.6		2.4
Energy	5,764		11,316		0.1		0.2
Financials	95,392		101,933		1.4		1.4
Health care	522,664		579,765		7.7		7.9
Industrials	313,784		362,120		4.6		4.9
Information technology	212,444		177,152		3.1		2.4
Materials	210,159		230,289		3.1		3.1
Real estate	97,655		96,315		1.4		1.3
Utilities	4,545		3,852		0.1		0.1
Total debt securities (cost: $3,051,994 and $2,876,531 as of March 31, 2020 and December 31, 2019, respectively)	2,617,924		2,870,174		38.6		39.0
Equity securities:
Consumer discretionary	46,181		94		0.7		0.0
Consumer staples	337		—		0.0		0.0
Health care	1,676		—		0.0		0.0
Industrials	189,717		—		2.8		0.0
Real estate	26,602		—		0.4		0.0
Total equity securities (cost: $264,908 and $1,227 as of March 31, 2020 and December 31, 2019, respectively)	264,513		94		3.9		0.0
Asia and other:
Debt securities:
Communication services	17,061		15,750		0.3		0.2
Consumer discretionary	31,759		40,073		0.5		0.5
Consumer staples	12,859		11,545		0.2		0.2
Energy	16,802		13,471		0.2		0.1
Financials	8,423		10,313		0.1		0.1
Government	—		917		0.0		0.0
Health care	6,342		8,923		0.1		0.1
Industrials	41,045		31,814		0.6		0.4
Information technology	2,532		5,639		0.0		0.1
Materials	5,219		5,604		0.1		0.1
Real estate	738		751		0.0		0.0
Utilities	12,398		20,300		0.2		0.3
Total debt securities (cost: $186,212 and $164,650 as of March 31, 2020 and December 31, 2019, respectively)	155,178		165,100		2.3		2.2














Total debt securities	6,116,657		6,995,677		90.6		95.1
Total equity securities	365,037		131,991		5.4		1.8
Total real estate	272,452		230,741		4.0		3.1
Total investments, at fair value	$	6,754,146	$	7,358,409	100.0	%	100.0	%

As of March 31, 2020 and December 31, 2019, 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 March 31,
	2020						2019
	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	$	(27,274)	$	(895,927)	$	(7,945)	$	129,670
CLO liabilities ⁽¹⁾	—		593,054		—		(72,083)
Foreign-currency forward contracts ⁽²⁾	(12,077)		(23,073)		2,126		(470)

Options and futures ⁽²⁾	104		(121)		—		—
Total	$	(39,247)	$	(326,067)	$	(5,819)	$	57,117

(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 7 for additional information.