Oaktree Diversified Income Fund

Available to: Non-accredited investors; $25,000 minimum investment for Class D

Verdict

• ALIGNMENT: Below Average

  • The fund’s base management fee appears modest at 1.25%, but with additional performance and administrative fees, total annual expenses approach 9%—significantly eroding investor returns. This elevated fee stack favors management over shareholders and lessens the appeal for long-term wealth building.
  • There is little evidence that portfolio managers have personally invested a meaningful amount in the fund, which weakens alignment. Without “skin in the game,” investors may question whether management’s interests are fully tied to their own financial success or downside risk.

• Performance: Below Average

  • Since inception, annualized returns have averaged 4.78%, with most gains delivered through recurring income rather than capital growth. While this offers steady payouts, long-term capital appreciation has been limited compared to equity or aggressive credit alternatives.
  • Recent 2024 results were robust at 12.11%, and the fund’s 9.64% current yield stands out for income-focused investors. Still, the lack of meaningful long-term growth limits its appeal for HENRYs building generational wealth rather than just harvesting yield.

• Market Risk: Average

  • The fund’s 68% allocation to floating-rate instruments helps dampen interest rate risk and keeps current income competitive in rising rate cycles. This defensive tilt performed well during periods of rate volatility, supporting portfolio stability.
  • Despite diversification, exposure to credit markets—particularly through CLOs that benefited in 2024—leaves the fund vulnerable to increased volatility or losses should credit market conditions deteriorate. Investors must remain alert to cyclical headwinds and sector swings.

• Business Risk: Below Average

  • Oaktree’s global platform and team expertise anchor the fund’s research process and underwriting quality, reducing risks tied to deal sourcing or operational missteps. Their established industry presence supports access to complex credit opportunities worldwide.
  • However, the fund’s intricate blend of public and private credit strategies introduces meaningful operational complexity. The challenge of managing a multi-layered portfolio increases the potential for execution errors and complicates investor oversight.

• Debt Risk: Average

  • Conservative use of leverage (0.47x) offers downside protection in severe market selloffs or liquidity events. This modest gearing keeps the fund’s risk profile balanced and helps minimize the drag on NAV during turbulent periods.
  • The flipside is that with such moderate debt, the fund’s returns are less amplified in strong markets. Investors looking for leveraged growth will see upside capped, but defensive-minded HENRYs may appreciate the controlled risk exposure.

• Liquidity Risk: Above Average

  • Quarterly redemptions up to 10% of shares outstanding provide more liquidity than many interval funds, but access is not always assured in times of market stress, when redemption requests may exceed available capacity.
  • The small August 2023 payout (under $1 million) highlights the risk: should many investors seek to exit, there could be delays or prorated redemptions. Those with near-term liquidity needs should recognize the constraints versus more liquid credit funds.

• Transparency: Above Average

  • Oaktree stands out for comprehensive, timely reporting via its platform—offering daily NAV updates, full portfolio disclosures, and regular regulatory filings for investor review. These resources make it easier for HENRYs to monitor fund health and identify risks.
  • While investor communications cover portfolio and risk details well, responsiveness from investor relations can lag, so patience may be required for direct queries. Overall, transparency exceeds most private fund standards, but investor service could be improved.

• Disclaimer

  All Rights Reserved. The data and analyses contained herein are the property of Noyack and are protected by copyright and other intellectual property laws. The information provided is intended solely for informational purposes and should not be construed as investment advice. It is not an offer to buy or sell a security, and it is not intended to be used as the sole basis for any investment decision. The information contained in this document is believed to be accurate and reliable based on sources believed to be reliable, but Noyack makes no representation or warranty, express or implied, as to its completeness, accuracy, or timeliness. The data and analyses are subject to change without notice and Noyack is not obligated to update this information. The use of the information contained in this document is at the sole risk of the reader, and Noyack shall not be responsible for any losses, damages, or expenses incurred by any person as a result of reliance on the information contained herein. Noyack does not endorse or approve any investment or trading strategy and does not guarantee any specific outcome or profit. The reader should always conduct their own independent analysis and consult with a qualified financial advisor before making any investment decisions. This document may contain forward-looking statements and projections which are subject to risks and uncertainties, and actual results may differ materially. Past performance is not indicative of future results. This document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Noyack reserves the right to modify or discontinue the provision of the information contained in this document, in whole or in part, at any time and without notice. The information contained in this document is provided “as is” and Noyack makes no representation or warranty of any kind, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of the information contained in this document. Noyack shall not be liable for any errors or omissions contained in this document or for any damages whatsoever arising out of or in connection with the use of this document.