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Oaktree chief investment officer sees another wave of distressed debt coming

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Oaktree chief investment officer sees another wave of distressed debt coming

was able to make opportunistic trades during the volatile markets of the firstquarter, but executives on a conference call were reluctant to say such moveswould become a more important part of the firm's investment strategy.

Co-Chairmanand Chief Investment Officer Bruce Karsh said during a call to discussquarterly earnings that the firm was able to invest in a variety of public debtacross the energy, telecom and commodities sectors during the first six weeksof 2016, then resell the securities in March once prices snapped back.

"It'snot exactly our standard game plan," Karsh said. "But, as always, wetry to be opportunistic."

Oaktreealso exited one of its largest positions during the first quarter, a specialtynet lease REIT created in 2011. In March, the company sold its remaining sharesin the REIT near its all-time high, netting a $1 billion profit for its fundsand a 26% internal rate of return.

Anothervolatile cycle in credit markets is on the horizon, Karsh said. The proportionof bonds trading at a spread greater than 1,000 basis points over Treasuries, ahistorical indicator of defaults, is still elevated, he noted.

"Weare a big step closer to the next expanded distressed debt opportunity,"he said.

ButKarsh pushed back on the notion of Oaktree shortening its investment timelineto take advantage of another bout of short-term volatility in credit markets.

"We'rehoping for a longer, prolonged buying opportunity that will give us the chanceto put meaningful dollars to work, and we still believe that's coming," hesaid. "These are just cracks along the way that are getting a little bitbigger each time."

CEOJay Wintrob noted that the market downturn early in the quarter led to $3.7billion in net outflows for Oaktree's open-end funds for the year ended March31. That followed a $4.0 billion net inflow for the funds for the year endedMarch 31, 2015.