Oaktree Capital Co-CEO: Market pricing is puzzling, fundamental risks are severely underestimated.

Armen Panossian, Co-CEO of Oaktree Capital Management, warned that the market is digesting a series of fundamental issues too quickly, prompting his company to choose to hold cash and wait for the right time to adjust. Panossian pointed out that the "extremely abundant" liquidity post-pandemic, the market's willingness to stay invested, and strong historical corporate performance have collectively driven investors to selectively overlook potential economic data. He stated that the market generally believes that US President Trump will not take any measures that fundamentally damage the economy, further strengthening market resilience. Panossian said, "When you factor in the impact of the Iran war, as well as the expected software industry pain that will be gradually revealed in the coming years, it is somewhat puzzling why the market is so strong." He warned that investors are underestimating the fundamental risks facing the credit market. Oaktree Capital is owned by Brookfield Asset Management, which reached an agreement at the end of last year to acquire the remaining shares of this distressed debt specialist. Panossian said that both parties are "building pipelines" to combine Oaktree Capital's credit capabilities with Brookfield's asset management capabilities to explore global investment opportunities. Currently, Oaktree Capital is in a state of readiness. Panossian pointed out that there are not many "great bargains" in the current market meaning discounted debt or equity assets worth buying in bulk. The company is looking for high-quality enterprises with subpar balance sheets but strong fundamentals, while also stocking up on sufficient "dry powder." Regarding the recent wave of Business Development Company (BDC) redemptions caused by concerns in the software industry and valuations, Panossian expressed surprise that banks have not tightened their lending of private credit tools more aggressively. "There has been some tightening, but the extent is far below my expectations." This article was originally published on Wall Street View by author He Hao, and edited by Huang Xiaodong.