Oaktree Sees 'Good Opportunities' in Credit Markets Amid Volatility

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00:00We are in a period of unprecedented uncertainty, but amid that and the volatility we've seen,

00:06we're finding good opportunities in credit, which is Oak Tree's focus.

00:10And what I would say about the credit markets today, you can characterize them as having

00:15attractive coupon income, relatively low defaults, but not that exciting of spread.

00:22If you think about the spread movement we've seen in credit, which can be a meaningful driver of

00:26total return, we've seen spreads as high as 460 basis points after the tariffs were announced.

00:34And we've seen the tights of 260 over the last year, who are right in the middle towards the

00:39lower end of the range at about 315 basis points today.

00:43So you're still able to get a pretty decent high income in the form of yield, but spreads are tight.

00:50And to me, that's saying that maybe there's a little bit of a disconnect with the market

00:54and what's happening with the economy.

00:56What is that disconnect, though?

00:58What is the risk with the disconnect being intact, especially if you consider a lot of

01:03the unknowns that are still in the face of geopolitically, economically, that we're faced right now?

01:09Yeah, I think you're seeing it in equity prices to have retraced those losses since Liberation Day

01:15and the spreads, you know, really coming in when there still is uncertainty with what may happen

01:21with policy.

01:22So we have seen a de-escalation, but we still know that some tariffs need to be negotiated,

01:28that we're in a period of pause.

01:30And what I think is actually happening in the real economy right now is consumers are starting

01:34to pull back on their spending and business owners are starting to push off capital expenditures

01:41and other things that are going to translate into slower growth, regardless of how things

01:45go with tariffs.

01:46And you're seeing that, right, with some of the slowdown in container shipping and less

01:52flows at some of our major ports.

01:54So I think it's possible that over the next couple of quarters, irrespective of what's

01:58going on, we're going to see a slowdown.

02:00The concern is then that that slowdown translates into potential job losses, potential recession.

02:07I don't think we're there yet.

02:09And I think in this type of an environment, you have to be flexible and nimble and really

02:14kind of cut through the noise because there are great opportunities for those that are investing

02:18capital right now.

02:19And let's talk about that because that's where I wanted to go with you next.

02:21We're obviously here in the Middle East.

02:23Is that where your focus is?

02:25Is that where you are seeing the most opportunity?

02:27Talk a bit about amid this uncertainty, where those opportunities lie.

02:31It's great to be here in Doha again.

02:34I'm having really energizing conversations about energy, investment, capital flows.

02:40This is a very important region.

02:41And I think that this conference in particular underscores the Gulf's influence on financial

02:47markets.

02:48And so a lot of good conversations are happening.

02:50We are a global investment firm.

02:52The global credit portfolio that I manage looks for opportunities on a relative value

02:57basis, whether that's in developed markets like the U.S., going into emerging markets,

03:04Asia, here in the Middle East.

03:06We're really open for business and looking for the opportunities that are going to provide

03:10that good high income with low default risk.

03:13And so for us in the public markets, that's high yield bonds, leveraged loans, structured

03:18credit.

03:19In the private markets, we're looking to do financings either directly originated with companies

03:24in the private non-sponsor market.

03:26Some sponsor-backed LBOs, though M&A activity has been a little bit light as of late.

03:31And then in more, I think, niche areas like asset-backed finance that will provide interesting opportunities.

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