Oaktree Strategic Credit Fund's Assets Surge, Investment Income Jumps

TL;DR

**Oaktree Strategic Credit Fund is aggressively expanding its credit portfolio, but watch those unrealized losses – they could bite.**

AI Summary

Oaktree Strategic Credit Fund reported a significant increase in total assets to $6,998,196 thousand as of June 30, 2025, up from $5,223,366 thousand on September 30, 2024, primarily driven by a rise in investments at fair value to $6,362,926 thousand from $4,576,233 thousand. Net assets also grew substantially to $4,216,760 thousand from $3,164,340 thousand over the same period. The fund experienced a net increase in net assets from operations of $213,435 thousand for the nine months ended June 30, 2025, compared to $167,638 thousand for the prior year period. Total investment income for the nine months ended June 30, 2025, reached $441,769 thousand, a notable increase from $283,159 thousand in the comparable 2024 period, with interest income from non-control/non-affiliate investments rising to $419,229 thousand from $266,204 thousand. However, net realized and unrealized losses, net of taxes, amounted to $(18,980) thousand for the nine months ended June 30, 2025, a reversal from a gain of $16,264 thousand in the prior year. The fund's credit facilities payable increased to $1,638,900 thousand from $1,095,000 thousand, indicating increased leverage. Distributions to common shareholders also increased, totaling $(281,845) thousand for the nine months ended June 30, 2025, up from $(171,702) thousand.

Why It Matters

Oaktree Strategic Credit Fund's substantial growth in assets and investment income signals robust activity in the private credit market, which could attract more institutional and retail investors seeking alternative income streams. The increase in credit facilities payable suggests a strategic use of leverage to enhance returns, a common practice in the competitive credit fund landscape, but also introduces higher risk. For investors, the rising distributions are a positive sign, yet the shift from net realized and unrealized gains to losses warrants careful scrutiny, indicating potential volatility in portfolio valuations. This performance reflects broader market trends in credit, impacting how other funds and lenders structure their portfolios and manage risk.

Risk Assessment

Risk Level: medium — The fund's risk level is medium due to increased leverage, with credit facilities payable rising to $1,638,900 thousand from $1,095,000 thousand. Additionally, the shift from net realized and unrealized gains of $16,264 thousand in the prior year to losses of $(18,980) thousand for the nine months ended June 30, 2025, indicates potential volatility in asset valuations and market exposure.

Analyst Insight

Investors should closely monitor Oaktree Strategic Credit Fund's future filings for trends in net realized and unrealized gains/losses and the cost of its credit facilities. Consider the implications of increased leverage on potential returns and downside risk, especially given the current interest rate environment.

Financial Highlights

debt To Equity

0.66

revenue

$441,769 thousand

total Assets

$6,998,196 thousand

total Debt

$2,393,739 thousand

net Income

$213,435 thousand

eps

$23.14

cash Position

$423,229 thousand

revenue Growth

+56.1%

Revenue Breakdown

Key Numbers

• $6,998,196 thousand — Total Assets (Increased from $5,223,366 thousand on September 30, 2024, indicating significant growth.)
• $4,216,760 thousand — Total Net Assets (Increased from $3,164,340 thousand on September 30, 2024, reflecting capital growth.)
• $441,769 thousand — Total Investment Income (For the nine months ended June 30, 2025, up from $283,159 thousand in the prior year, showing strong income generation.)
• $(18,980) thousand — Net Realized and Unrealized Gains (Losses), net of taxes (For the nine months ended June 30, 2025, a reversal from a gain of $16,264 thousand in the prior year, indicating valuation challenges.)
• $1,638,900 thousand — Credit Facilities Payable (Increased from $1,095,000 thousand on September 30, 2024, reflecting higher leverage.)
• $281,845 thousand — Distributions to Common Shareholders (For the nine months ended June 30, 2025, up from $171,702 thousand in the prior year, indicating increased shareholder returns.)
• 182,204 — Common Shares Outstanding (As of June 30, 2025, up from 134,288 shares on September 30, 2024, reflecting share issuance.)
• $23.14 — Net Asset Value per Common Share (As of June 30, 2025, a slight decrease from $23.56 on September 30, 2024.)

Key Players & Entities

• Oaktree Strategic Credit Fund (company) — Registrant
• $6,998,196 thousand (dollar_amount) — Total assets as of June 30, 2025
• $5,223,366 thousand (dollar_amount) — Total assets as of September 30, 2024
• $6,362,926 thousand (dollar_amount) — Investments at fair value as of June 30, 2025
• $4,576,233 thousand (dollar_amount) — Investments at fair value as of September 30, 2024
• $4,216,760 thousand (dollar_amount) — Total net assets as of June 30, 2025
• $3,164,340 thousand (dollar_amount) — Total net assets as of September 30, 2024
• $213,435 thousand (dollar_amount) — Net increase in net assets from operations for nine months ended June 30, 2025
• $167,638 thousand (dollar_amount) — Net increase in net assets from operations for nine months ended June 30, 2024
• $1,638,900 thousand (dollar_amount) — Credit facilities payable as of June 30, 2025

FAQ

Risk Factors

• Increased Leverage and Credit Facility Dependence [high — financial]: The fund has significantly increased its reliance on credit facilities, with 'Credit facilities payable' rising to $1,638,900 thousand from $1,095,000 thousand. This substantial increase in leverage amplifies both potential returns and risks, making the fund more sensitive to interest rate fluctuations and credit market conditions.
• Valuation Volatility and Unrealized Losses [medium — market]: The fund experienced a net realized and unrealized loss of $(18,980) thousand for the nine months ended June 30, 2025, a reversal from a gain of $16,264 thousand in the prior year. This indicates challenges in asset valuation and a shift in market sentiment impacting the fair value of investments.
• Increased Distributions Amidst Valuation Challenges [medium — financial]: Distributions to common shareholders increased to $(281,845) thousand from $(171,702) thousand. This rise in payouts, while beneficial for shareholders, occurs concurrently with negative unrealized gains, potentially drawing down capital if investment performance does not keep pace.
• Dilution from Share Issuance [medium — financial]: The number of common shares outstanding increased significantly from 134,288 to 182,204. While this contributed to asset growth, it also led to a slight decrease in Net Asset Value per Common Share from $23.56 to $23.14.

Industry Context

The strategic credit fund industry operates in a dynamic environment characterized by fluctuating interest rates and credit market conditions. Funds like Oaktree Strategic Credit Fund typically invest in a diversified portfolio of debt instruments, seeking to generate income and capital appreciation. Competition is intense, with many funds vying for attractive credit opportunities, often employing leverage to enhance returns.

Regulatory Implications

As a registered investment company, Oaktree Strategic Credit Fund is subject to regulations governing asset management, disclosure, and investor protection. Changes in accounting standards or regulatory requirements could impact reporting and operational procedures. The fund's use of leverage also brings it under scrutiny regarding risk management and capital adequacy.

What Investors Should Do

1. Monitor leverage levels closely.
2. Analyze the drivers of unrealized losses.
3. Evaluate the sustainability of distributions.
4. Assess the impact of share issuance on NAV.

Key Dates

• 2025-06-30: End of Nine-Month Period — Reporting period for significant increases in assets, income, and leverage, alongside a shift to net unrealized losses.
• 2025-06-30: Net Asset Value per Common Share — Reported at $23.14, a slight decrease from the prior period, reflecting share issuance and valuation changes.
• 2024-09-30: Prior Fiscal Year End — Baseline for comparison, showing lower asset levels, income, and leverage.

Glossary

Non-control/Non-affiliate investments

Investments where the fund does not have control or a significant affiliate relationship, typically representing a substantial portion of a credit fund's portfolio. (The fair value and income generated from these investments are the primary drivers of the fund's performance and asset growth.)

Credit facilities payable

Short-term and long-term borrowings from banks or other financial institutions, used to leverage investment activities. (A significant increase in this liability indicates higher leverage, amplifying both potential gains and risks.)

Net realized and unrealized losses

The sum of losses from selling investments (realized) and the decrease in value of investments still held (unrealized). (A negative figure here indicates a decline in the portfolio's fair value, impacting overall performance.)

Accumulated distributable earnings (loss)

The cumulative net income or loss of the fund that has not yet been distributed to shareholders. (A negative balance suggests that distributions may have exceeded earnings, or that prior losses have not been fully offset.)

Year-Over-Year Comparison

Compared to the prior fiscal year ending September 30, 2024, Oaktree Strategic Credit Fund has experienced substantial growth in total assets, increasing from $5,223,366 thousand to $6,998,196 thousand, primarily driven by a rise in investments. Total investment income also saw a significant jump, from $283,159 thousand to $441,769 thousand, fueled by interest income. However, this period also saw a concerning reversal in investment performance, moving from a net gain of $16,264 thousand to a net loss of $(18,980) thousand. Furthermore, the fund has substantially increased its leverage, with credit facilities payable rising from $1,095,000 thousand to $1,638,900 thousand, alongside a notable increase in distributions to shareholders.

Key Financial Figures

• $0.01 — Class I shares of beneficial interest, $0.01 par value 133,345,665 Class S shares

Filing Documents

• oscf-20250630.htm (10-Q) — 7212KB
• exhibit31_oscf4thardeclara.htm (EX-3.1) — 261KB
• exhibit32_oscfbylawsaugust.htm (EX-3.2) — 117KB
• oscf-ex311_2025063010xq.htm (EX-31.1) — 8KB
• oscf-ex312_2025063010xq.htm (EX-31.2) — 8KB
• oscf-ex321_2025063010xq.htm (EX-32.1) — 4KB
• oscf-ex322_2025063010xq.htm (EX-32.2) — 4KB
• 0001872371-25-000014.txt ( ) — 30449KB
• oscf-20250630.xsd (EX-101.SCH) — 85KB
• oscf-20250630_cal.xml (EX-101.CAL) — 92KB
• oscf-20250630_def.xml (EX-101.DEF) — 448KB
• oscf-20250630_lab.xml (EX-101.LAB) — 833KB
• oscf-20250630_pre.xml (EX-101.PRE) — 627KB
• oscf-20250630_htm.xml (XML) — 7814KB

Consolidated Financial Statements

Item 1. Consolidated Financial Statements: 2 Consolidated Statements of Assets and Liabilities as of June 30, 2025 (unaudited) and September 30, 2024 2 Consolidated Statements of Operations (unaudited) for the three and nine months ended June 30, 2025 and 2024 4 Consolidated Statements of Changes in Net Assets (unaudited) for the three and nine months ended June 30, 2025 and 2024 5 Consolidated Statements of Cash Flows (unaudited) for the nine months ended June 30, 2025 and 2024 6 Consolidated Schedule of Investments (unaudited) as of June 30, 2025 7 Consolidated Schedule of Investments as of September 30, 2024 20

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 31

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 72

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 95

Controls and Procedures

Item 4. Controls and Procedures 96 PART II

Legal Proceedings

Item 1. Legal Proceedings 97

Risk Factors

Item 1A. Risk Factors 97

Unregistered Sales of Securities and Use of Proceeds

Item 2. Unregistered Sales of Securities and Use of Proceeds 97

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 97

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 97

Other Information

Item 5. Other Information 97

Exhibits

Item 6. Exhibits 98

Signatures

Signatures 99 1 PART I

Financial Statements and Supplementary Data

Item 1. Financial Statements and Supplementary Data Oaktree Strategic Credit Fund Consolidated Statements of Assets and Liabilities (in thousands, except per share amounts) June 30, 2025 (unaudited) September 30, 2024 ASSETS Assets: Investments – Non-control/Non-affiliate, at fair value (cost June 30, 2025: $ 6,315,137 ; cost September 30, 2024: $ 4,530,412 ) $ 6,362,926 $ 4,576,233 Cash and cash equivalents 423,229 480,836 Restricted cash 48,070 43,328 Interest receivable 40,354 34,549 Receivables from unsettled transactions 69,188 45,731 Deferred financing costs 19,371 20,150 Deferred offering costs 1,201 554 Derivative assets at fair value 15,079 21,546 Other assets 18,778 439 Total assets $ 6,998,196 $ 5,223,366 LIABILITIES AND NET ASSETS Liabilities: Accounts payable, accrued expenses and other liabilities $ 2,255 $ 2,886 Dividends payable 37,039 26,238 Base management fee and incentive fee payable 17,675 17,395 Payable for share repurchases 175,010 14,635 Due to broker 1,410 4,040 Due to affiliates 3,729 3,727 Interest payable 27,639 26,370 Payables from unsettled transactions 102,430 97,396 Director fees payable — 116 Derivative liabilities at fair value 20,475 11,927 Deferred tax liability 35 8 Credit facilities payable 1,638,900 1,095,000 Unsecured notes payable (net of $ 7,126 and $ 8,526 of unamortized financing costs as of June 30, 2025 and September 30, 2024, respectively) 754,839 759,288 Total liabilities 2,781,436 2,059,026 Commitments and contingencies (Note 12) Net assets: Common shares, $ 0.01 par value per share; unlimited shares authorized, 182,204 and 134,288 shares issued and outstanding as of June 30, 2025 and September 30, 2024, respectively 1,822 1,343 Additional paid-in-capital 4,291,097 3,170,746 Accumulated distributable earnings (loss) ( 76,159 ) ( 7,749 ) Total net assets (equivalent to $ 23.14 and $ 23.56 per common share as of June 30, 2025 and September 30, 2024, respectively) (Note 10) 4,2

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