Oaktree acquires majority of 17Capital in pref equity and debt play

Oaktree's parent company, Brookfield, has opened another front in its expansion strategy, having entered the real estate and infrastructure secondaries markets beginning in 2020.

Oaktree is set to acquire preferred equity pioneer 17Capital, around three months after Secondaries Investor revealed the firm was up for sale.

The Los Angeles-headquartered debt manager, which was acquired by Brookfield Asset Management in 2019, cited 17Capital’s role as a market leader in the net-asset-value-backed finance sector and a shared emphasis on “risk control” as key drivers of the deal, according to a statement.

London-based 17Capital will continue to operate as an independent business with its own product offerings and investment, marketing and support teams, according to the statement.

“The market for NAV financing is growing at a double-digit rate, with increased adoption by private equity managers and investors alike. We look forward to strengthening our position as a leader in the fund finance market by working with Oaktree’s extensive network in North America and around the globe,” said 17Capital managing partner Pierre-Antoine de Selancy in the statement.

Secondaries Investor reported in December that 17Capital was in talks with potential buyers, one of which was a large global asset manager. The firm has raised five preferred equity funds since 2010, its most recent being the $2.9 billion 17Capital Fund 5, according to Secondaries Investor data.

It is in market with a “NAV-based lending platform” targeting $1 billion, affiliate title PEI noted in 2020. The fund was set to close in the next quarter, according to a source with knowledge of the matter.

Brookfield has been growing its secondaries assets under management across various asset classes, beginning with real estate in 2020 when it hired Fabian Neuenschwander and Marcus Day from Partners Group.

Secondaries Investor reported last year that it was to begin accepting outside capital for its infrastructure secondaries strategy in late 2021.

In October 2020, Brookfield chief executive Bruce Flatt said secondaries could be worth $50 billion for the firm in line with the growing proportion alternatives have come to represent of institutional clients’ portfolios.

“These are long-term commitments they’ve [investors] made. As a result of that, a whole business has emerged of secondaries and trading the LP commitments that are in funds. We think this can be very significant,” he said.