INVESTMENTS

9 Months Ended

Sep. 30, 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	September 30, 2020		December 31, 2019

Equity-method investments:
Funds	$	892,363	$	670,348
Companies	4,165		3,855
Other investments, at fair value	19,169		34,934
Total corporate investments	$	915,697	$	709,137

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


	Three months ended September 30,				Nine months ended September 30,
Investment Income (Loss)	2020		2019		2020		2019

Equity-method investments:
Funds	$	63,225	$	(12,106)	$	29,114	$	45,211
Companies	(13)		20,108		309		56,919
Other investments, at fair value	(2,916)		18,817		(11,393)		19,674
Total investment income (loss)	$	60,296	$	26,819	$	18,030	$	121,804

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 nine months ended September 30, 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 September 30,				Nine months ended September 30,
Statements of Operations	2020		2019		2020		2019
Revenues / investment income	$	268,389	$	353,289	$	1,057,398	$	1,584,552
Interest expense	(14,093)		(54,329)		(108,679)		(185,227)
Other expenses	(97,358)		(157,878)		(503,361)		(639,180)
Net realized and unrealized gain (loss) on investments	2,628,272		(204,820)		77,518		916,097
Net income (loss)	$	2,785,210	$	(63,738)	$	522,876	$	1,676,242

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 (b) non-investment grade debt securities, and (c) 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 September 30,				Nine months ended September 30,
	2020		2019		2020		2019

Realized gain (loss)	$	(1,479)	$	1,345	$	2,024	$	7,656
Net change in unrealized gain (loss)	(1,437)		17,472		(13,417)		12,018
Total gain (loss)	$	(2,916)	$	18,817	$	(11,393)	$	19,674

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, 2020		December 31, 2019		September 30, 2020		December 31, 2019
United States:
Debt securities:
Communication services	$	543,145	$	464,356	7.9	%	6.4	%
Consumer discretionary	522,455		508,701		7.6		6.9
Consumer staples	111,420		92,102		1.6		1.3
Energy	159,035		223,671		2.3		3.0
Financials	284,167		355,113		4.1		4.8
Health care	462,806		512,864		6.7		7.0
Industrials	611,730		563,920		8.9		7.7
Information technology	463,968		524,390		6.7		7.1
Materials	264,482		294,300		3.8		4.0
Real estate	107,667		204,933		1.6		2.8
Utilities	247,323		216,053		3.6		2.9
Other	6,479		—		0.1		—
Total debt securities (cost: $3,923,050 and $3,981,956 as of September 30, 2020 and December 31, 2019, respectively)	3,784,677		3,960,403		54.9		53.9
Equity securities:
Communication services	56		312		0.0		0.0
Consumer discretionary	208		658		0.0		0.0
Energy	644		256		0.0		0.0



Materials	177		—		0.0		—
Utilities	87,344		130,671		1.3		1.8
Total equity securities (cost: $151,756 and $137,149 as of September 30, 2020 and December 31, 2019, respectively)	88,429		131,897		1.3		1.8
Real estate:
Real estate	5,877		230,741		0.1		3.1

Total real estate securities (cost: $5,841 and $230,741 as of September 30, 2020 and December 31, 2019, respectively)	5,877		230,741		0.1		3.1


	Fair Value as of				Fair Value as a Percentage of Investments of Consolidated Funds as of
Investments	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Europe:
Debt securities:
Communication services	$	408,850	$	469,822	5.9	%	6.4	%
Consumer discretionary	662,805		659,001		9.6		9.0
Consumer staples	197,048		178,609		2.9		2.4
Energy	2,218		11,316		0.0		0.2
Financials	74,245		101,933		1.1		1.4
Health care	607,634		579,765		8.8		7.9
Industrials	414,309		362,120		6.0		4.9
Information technology	218,339		177,152		3.2		2.4
Materials	256,196		230,289		3.7		3.1
Real estate	17,196		96,315		0.2		1.3
Utilities	6,815		3,852		0.1		0.1
Other	3,771		—		0.1		—
Total debt securities (cost: $2,959,485 and $2,876,531 as of September 30, 2020 and December 31, 2019, respectively)	2,869,426		2,870,174		41.6		39.1
Equity securities:
Consumer discretionary	—		94		—		0.0




Total equity securities (cost: $0 and $1,227 as of September 30, 2020 and December 31, 2019, respectively)	—		94		—		0.0
Asia and other:
Debt securities:
Communication services	22,921		15,750		0.3		0.2
Consumer discretionary	34,482		40,073		0.5		0.5
Consumer staples	19,848		11,545		0.3		0.2
Energy	4,210		13,471		0.1		0.1
Financials	8,047		10,313		0.1		0.1
Government	—		917		—		0.0
Health care	3,360		8,923		0.0		0.1
Industrials	19,918		31,814		0.3		0.4
Information technology	2,754		5,639		0.0		0.1
Materials	4,132		5,604		0.1		0.1
Real estate	597		751		0.0		0.0
Utilities	5,862		20,300		0.1		0.3
Other	5,846		—		0.1		—
Total debt securities (cost: $136,417 and $164,650 as of September 30, 2020 and December 31, 2019, respectively)	131,977		165,100		1.9		2.2














Total debt securities	6,786,080		6,995,677		98.6		95.1
Total equity securities	88,429		131,991		1.3		1.8
Total real estate	5,877		230,741		0.1		3.1
Total investments, at fair value	$	6,880,386	$	7,358,409	100.0	%	100.0	%

As of September 30, 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 September 30,
	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	$	(19,781)	$	118,110	$	636	$	(14,910)
CLO liabilities (1)	—		(117,948)		—		(25,778)
Foreign-currency forward contracts (2)	192		417		(4,300)		(276)
Total-return and interest-rate swaps (2)	68		(6)		—		—
Options and futures (2)	(114)		(40)		—		—
Total	$	(19,635)	$	533	$	(3,664)	$	(40,964)


	Nine months ended September 30,
	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	$	(86,506)	$	(325,510)	$	(7,076)	$	137,322
CLO liabilities (1)	—		126,410		—		(119,767)
Foreign-currency forward contracts (2)	(11,200)		(23,483)		(1,960)		412
Total-return and interest-rate swaps (2)	68		(6)		—		—
Options and futures (2)	(4)		(157)		—		—
Total	$	(97,642)	$	(222,746)	$	(9,036)	$	17,967

(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.