barclays global financial services conference

september 9, 2013

Managing Money in Uncertain Times

Howard Marks, Chairman Oaktree Capital Group, LLC

Managing Money in Uncertain Times

Theres no doubt that the world has become more uncertain than it used to be. Most people are aware of these realities.

Nevertheless, many markets are rising.

Why?

Managing Money in Uncertain Times

Whats driving the markets?

A great deal of money has been created to stimulate the worlds economies.
Money has to go someplace. The central banks have lowered the return on Treasurys and other safe investments.

This has caused people to look to risky markets for the returns they crave.
The returns on risky assets have been good in recent years. Default experience has been unusually benign for four years. All things equal, psychology becomes more positive after markets rise.
Even though people may not be thinking bullish, many are acting bullish. The price for pursuing safety appears high today, and the price for accepting risk has been low of late. This combination encourages risk-taking.
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Managing Money in Uncertain Times

Choosing Your Direction Move Forward

The U.S. economy is recovering

Psychology is restrained Prices are moderate Safety is priced too high to pursue it to the exclusion of risk bearing
Apply Caution

The level of uncertainty is very high The economic recovery is sluggish Theres the possibility of highly significant negative developments Providers of capital are exhibiting risk-tolerant behavior
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Managing Money in Uncertain Times

Setting Strategy

Do you expect prosperity or not?

o Yes? equities, growth, cyclicals, risk, leverage

o No? debt, value, stability, safety, less leverage Which risk should you worry about more? o The risk of losing money? o The risk of missing opportunity? Which attributes should you favor? o Aggressiveness and risk bearing? o Caution, conservatism, selectivity and risk control?

Managing Money in Uncertain Times

A Prescription for an Uncertain World

Make sure your expectations are moderate

Emphasize corporate investments

Commit to active decision making even doing nothing is doing something Remember that the reasons for caution arent imaginary the improbable disaster isnt
impossible

Balance the many pros and cons its not supposed to be easy
The outlook certainly isnt so propitious (and assets arent so cheap) as to call for investing aggressively. But at the same time, conditions arent so bad and prices arent so high that its time for extreme risk aversion.

My bottom line: move forward, but with caution

Managing Money in Uncertain Times

Oaktree has consistently performed for its clients over multiple cycles.

Since inception, our U.S. high yield bond and U.S. convertibles strategies have outperformed their
benchmarks by 110 and 200 basis points on a gross basis, respectively. Their Sharpe ratios versus benchmarks have been 0.80 vs. 0.54 and 0.48 vs. 0.31, respectively.

Since inception, Oaktrees closed-end funds have generated an aggregate IRR of 19.9% on a gross
basis, while the S&P 500 returned only 9.7% over the same period.

All 48 pre-2012 closed-end funds have positive gross IRRs. All 19 distressed debt funds have double-digit gross IRRs. 84% of pre-2012 incentive-creating committed capital has a net IRR over the 8% preferred return
threshold.

Weve distributed over $40 billion to clients since 2008, while still growing AUM by 50%.

Note: Unless otherwise indicated, all data in this presentation is as of June 30, 2013
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Managing Money in Uncertain Times

Few managers have comparable records in terms of client satisfaction: o The records of our open-end strategies include 129 full calendar years.

118 of those years, or 91%, were good years, in which we either beat our benchmark or
delivered a high return.*

For an extreme case, we have a 27-year record in U.S. high yield bonds without a single
bad year by this standard.

High level of service and reporting Low incidence of portfolio manager turnover Strong reputation for integrity and putting the client first

References to performance are on a gross basis. High return is defined as 7% or more for senior loans and 9% or more for all other strategies.
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Managing Money in Uncertain Times

Strong investment returns have driven fundraising success.

Since January 1, 2007, we have raised more than $81 billion of gross capital.

Weve raised $9.8 billion or more for 6 years in a row. We are on the same pace in 2013, through
the first half of the year, without the benefit of a distressed debt Opportunities fund.

78% of our AUM is from clients who are invested in multiple strategies, with 39% from clients in
4 or more.

Oaktrees diversified client base includes more than 1,800 LPs: o 100 of the 300 largest global pension funds o 75 of the 100 largest U.S. pension funds o 38 states o Over 300 universities, endowments and foundations o 10 sovereign wealth funds
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Managing Money in Uncertain Times

We continue to innovate and develop step-out strategies to capitalize on new opportunities. In the last 16 months we have raised $4.3 billion for strategies that did not exist at the time of our IPO:

Enhanced Income Fund Senior loans, using modest leverage

Strategic Credit Stressed corporate credits that are too risky for our high yield bond and senior
loans strategies but dont offer sufficient prospective return for our distressed debt strategy

Real Estate Debt Diversified real estate debt instruments, including CMBS, commercial
mortgages, subordinated secured debt, mezzanine loans, corporate debt and residential mortgage pools

Emerging Market Opportunities Emerging market stressed and distressed corporate debt Emerging Markets Equity Long-only strategy European Dislocation Fund Lending opportunities resulting from the retrenchment by
European banks

Disclosures and Forward-Looking Statements

This presentation may not be copied, reproduced, republished, posted, transmitted, disclosed, distributed or disseminated, in whole or in part, in any way without the prior written consent of Oaktree Capital Group, LLC (together with its affiliates, Oaktree) or as required by applicable law. This presentation contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, each as amended, which reflect the current views of Oaktree, with respect to, among other things, its future results of operations and financial performance. In some cases, you can identify forward-looking statements by words such as anticipate, approximately, believe, continue, could, estimate, expect, intend, may, outlook, plan, pot ential, predict, seek, should, will and would or the negative version of these words or other comparable or similar words. These state ments identify prospective information. Important factors could cause actual results to differ, possibly materially, from those indicated in these statements. Forwardlooking statements are based on Oaktrees beliefs, assumptions and expectations of its future performance, taking into account all information currently available to Oaktree. Such forward-looking statements are subject to risks and uncertainties and assumptions relating to Oaktrees operations, financial results, financial condition, business prospects, growth strategy and liquidity, including, but not limited to, changes in our anticipated revenue and income, which are inherently volatile; changes in the value of our investments; the pace of our raising of new funds; the timing and receipt of and impact of taxes on carried interest; distributions from and liquidation of our existing funds; changes in our operating or other expenses; the degree to which we encounter competition, and general economic and market conditions. The factors listed in the section captioned Risk Factors in Oaktrees Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on March 14, 2013, which is accessible on the SECs website at www.sec.gov, provide examples of risks, uncertainties and even ts that may cause Oaktrees actual results to differ materially from the expectations described in its forward-looking statements. Forward-looking statements speak only as of the date the statements are made. Except as required by law, Oaktree does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. This presentation and the information contained herein are for educational and informational purposes only and do not constitute and should not be construed as an invitation, inducement or offer to sell or solicitation of an offer to buy any securities or related financial instruments in any jurisdiction in which such offer or solicitation, purchase or sale would be unlawful under the securities, insurance or other laws of such jurisdiction. Responses to any inquiry that may involve attempting to effect transactions in securities will not be made absent compliance with relevant broker-dealer, investment advisor, broker-dealer agent or investment advisor representative registration requirements, or applicable exemptions or exclusions from such requirements.

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