HONG KONG: Howard Marks, co-founder and chairman of Oaktree Capital, the world's largest distressed debt investor, said on Thursday he expects to raise more funds from Chinese high net worth investors to buy distressed debt overseas.
Speaking at the AVCJ Private Equity & Venture Forum 2015 in Hong Kong, Marks said Oaktree was looking at opportunities in the global energy sector, which he said was the most "stressed" in the world today due to the plunge in oil prices.
"We're willing to invest in oil, oil services, other extractive commodities, allowing for the uncertainty in prices and hopefully staying senior in the capital structure. It's where the opportunity is today," he added.
In China, Oaktree was eyeing potential investments in the domestic stock market after so-called A-shares plunged over the summer, Marks said. The fund also expects "substantial defaults" in the real estate sector, he added.
"A lot of lending was done, a lot of building was done and we all know that a lot of buildings were built that are not occupied and it's hard to get money out of an unoccupied building," he said.
Oaktree was among a few foreign funds and private equity managers that gained approval earlier this year to enter a pilot scheme for the so-called Qualified Domestic Limited Partner (QDLP) programme. Marks said funds raised from Chinese investors went to the Oaktree Opportunities Fund 10 and are being used to buy distressed assets in Europe and the United States.
"We're about done fundraising for that fund," Marks said. "We're absolutely open to doing more. They should be done on a gradual basis."
Most foreign asset managers seeking to distribute investment products in China have to do so through minority-owned joint ventures with domestic firms, although regulators are gradually loosening these restrictions.
Unveiled in 2012, the QDLP programme was designed to allow foreign alternative asset managers, namely hedge funds, to raise funds onshore to invest offshore. The first round of licences was granted in 2013. - Reuters
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