Cowen Inc (COWN) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for joining the Cowen Group, Inc. conference call to discuss financial results for the 2010 first quarter. By now you should have received a copy of the Company's earnings release, which can be accessed at the Cowen Group Inc. website at www.cowen.com. If you do not have access to the Internet and would like a copy of the press release, please call Cowen Group, Inc. investor relations at 646-562-1880.

Before we begin, the Company has asked me to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties described in the Company's earnings release and other filings with the SEC. Cowen Group, Inc. has no obligation to update the information presented on the call.

A more complete description of these and other risks and uncertainties and assumptions is included in the Company's filings with the SEC, which are available on the Company's website and on the SEC website at www.SEC.gov.

Also on today's call, our speakers will reference certain non-GAAP financial measures which the Company believes will provide useful information for investors. Reconciliation on these measures to GAAP is consistent with the Company's reconciliation as presented in today's earnings release.

Now I would like to turn the call over to Mr. Peter Cohen, Chairman and Chief Executive Officer, who is joined by Jeffrey Solomon, Chief Operating Officer; and Mr. Christopher White, Chief of Staff. Please proceed, sir.

Operator, thank you, and good morning, everyone. We have a lot to talk about and so I'm going to take you through our financial results for the quarter, try and bring you up to date on business opportunities that we are seeing and implementing, and then Jeff Solomon and Chris will take you through in more substance some of the granular information about the businesses and about the financials for the quarter.

For the first quarter of 2010 pro forma economic income, revenue, the revenue part increased by 10% to $61.7 million compared to $55.9 million last year. As you recall, we use pro forma because of the way our financials are set up today, it's only -- on a GAAP basis, it's only Ramius for the first quarter last year. So we have to include the count on a pro forma basis to give you an accurate picture of what's going on.

So revenue was $61.7 million compared to $55.9 million last year. The economic loss for the quarter was $11.1 million, which is down from last year's $15.7 million in the first quarter and excluding non-cash items, pro forma economic loss was $6.5 million compared to $3 million in the prior period last year, but substantially below the fourth quarter economic loss when you exclude the non-cash items.

The increase in revenue is primarily due to an increase in investment income, positive incentive fee income, and a slight increase in investment banking performance. These increases however were partially offset by lower management fees and a reduction in brokerage revenue as well as the average cash equity volumes in the quarter continued right through the end of March, so they have improved substantially since then.

Pro forma economic expenses were slightly lower in the first quarter of 2010 due to lower compensation and benefit expense, which is partially offset by modestly higher non-comp expense and lower reimbursements, which Chris White will take you through.

Before we go into the details of each business, I would like to make a few comments about how we are doing and how the combination of the two firms is going. Obviously it has been some time since I have done an acquisition in the brokerage business. In fact, it's over 20 years. Nonetheless, there are certain elements of the -- combining two firms that don't change.

The most difficult part of a merger is building the cultural fabric. We believe very much going into the merger that our two organizations were highly complementary and I think we are very pleased to say and believe that we have found that to be very much the case if not more so than we thought at the time. One of the early objectives was the captured value from increased communication between the two businesses and notwithstanding that, it's been a difficult quarter. A lot of that is going on and is accelerating.

We have established a very effective communication mechanism we believe in the form of the leadership counsel made up of many of the key people operating across all divisions of the firm who meet on a regular basis, talk about the opportunities, talk about how they perceive these problems and then reflect up to us their views and their recommendations on things we can do. And obviously it takes time for the recommendations to yield results, but we are feeling very good about being on the right path.

The other thing I want to mention is there is a propensity in mergers to want to make a lot of change all at once. I have learned over the too many years I think that the patience and thoughtfulness often lead to stronger decision-making and especially in this very volatile environment, we have decided that we were going to be very, very deliberate and take our time in making changes, kind of like when you buy and move into a new house. It's kind of intelligent to wait a while before you start redoing the house -- just getting to how it is to live in it.

Well, we have been living in this house for over six months and we have accomplished a lot of things. We've brought in a lot of new people. Some people have exited and we have spent an enormous amount of time talking to colleagues, clients, and really determining how to best implement the next steps for our businesses, which Jeff Solomon is going to get into in more detail.

There's an enormous amount of client interaction going on, travel by people all over the firm, and then we are getting a lot of traction. We have also sort of been very deliberate in sort of taking steps to streamline and merge the infrastructure of the two firms or the business operation of the two firms, but that's starting to move along at an accelerating pace now also. And we think that we will come out of this and are coming out of this with a very strong foundation and an organization that we can grow our revenue on without adding a lot of incremental expense.

Jeff Solomon, as many of you know from the press release, was appointed Chief Operating Officer. Jeff has got the greatest kind of breadth and depth of knowledge across both platforms and has kind of delved into his job with great vigor. Chris White, who held that position since the time of the merger, is now acting as Chief of Staff for the entire firm and is going to be helping Jeff, myself, and other senior management implement the changes we identified.

I want to now sort of turn this over to Jeff Solomon to talk about what's going on in the business, and then I will come back and give some closing comments later on and tell you about some of the things that have actually occurred across the platform that has been a result of the skill sets of the two firms combining. Jeff?

Thank you, Peter, and thank you, everybody, for dialing in. I will start by talking about our alternative investment management group. Assets under management increased to $7.8 billion as of April 1, 2010 compared to about the same amount on January 1 of 2010. The increase resulted from performance-based appreciation in assets of about $88 million, partially offset by net redemptions of $71 million including redemptions effective on April 1, 2010.

Looking at our investor results for the first quarter, I am pleased to report that we booked our second consecutive quarter with positive incentive fee income. As we reported on our last call, this rebound is largely a result of certain fund of funds products that went through their high water marks in December as well as the winding down of the impact of the real estate claw back and subordination provisions.

We also made good progress during the quarter on getting our value and opportunity fund closer to its high water mark. As of the end of the month, this fund was less than 20 basis points away from the high water mark as compared to 800 basis points away at 2009 year-end.

We are all well aware there's been significant change in the alternative investment industry over the last two years. The demand by clients to be smarter, flexible, innovative, and transparent. We believe the time has passed where clients can set it and forget it with their asset allocations. So we began the process of streamlining and refocusing our efforts to address these new realities so that we can take advantage of emerging opportunities in 2009. We continued to do so this year.

The management changes that Ramius announced in February, in which Tom Strauss was appointed CEO of the alternative asset management business with oversight of both hedge funds and fund of funds activities were made with this evolving client need in mind. Indeed, this change has enabled Morgan Stark to focus more time and energy on his investment responsibilities for clients and for the firm.

While we are seeing inflows and winning mandates for some of the initiatives we began last year, namely in our value and opportunity fund, credit platform, replication and overlay multi-manager products, we've also begun to address certain products that have limited growth potential and have continued to receive redemption requests. This will enable us to continue orienting our organization and headcount to the areas most likely to meet our client needs and produce positive financial results.

As such, we have made the decision to close the Ramius multi-strategy and Ramius enterprise funds. The strategy mix, targeted returns, and historical volatility as well as the investment structure of these two products are no longer appealing to a significant investor base going forward. It has become clear that there is little if any appreciable growth potential for these products as they are currently configured.

As a fiduciary, we have always been willing to take the necessary steps to address or take action when we no longer see adequate client demand for a product, but we do so with the best interests of our existing clients in mind. Consistent with that philosophy and given the potential impact of currently known and expected redemptions on remaining clients, we are presenting those clients with a variety of options in regards to the liquid portion of their investment in each fund taking into consideration that not all clients have elected to redeem and being respectful of the fact that there is great value in maintaining their high water marks.

Clients will either have the option to transfer their capital and their high water marks into other existing Ramius products or products that we are currently developing, or they can participate in a measured return of their capital over time. Since a large portion of the current assets under management in Ramius Enterprise represents the firm's balance sheet, which is the capital belonging to the firm, it will be retained in the same securities or assets and actively managed by the same existing investment professionals in substantially the same investment strategies.

Additionally, redemptions in the multi-strategy fund triggered certain contractual rates held by affiliates of Unicredit, which would have allowed them to withdraw their assets in that fund upon 30 days notice. Unicredit has instead agreed to extend the time period pursuant to which the Company must return the bulk of its investments in our funds to the end of 2010.

In addition, the remaining 50% of Unicredit's Cowen Group shares that were not released in the lockup at the beginning of May will be released from the existing lockup agreement. The financial impact resulting from Unicredit's redemption of $668 million, which will come from a variety of Ramius products including fund of funds but by the end of the calendar year, is estimated to be approximately $2.1 million of management fee revenue for the remainder of the year.

Outside the Unicredit assets, we have $394 million of client funds and liquid part of Ramius multi-strategy and enterprise funds. Until we have a better sense of the number of clients who choose to transfer their capital and high water marks to other of our products, we are not in a position to provide any additional detail on the financial impact of the closing of these funds.

Due to the retention of both core trading positions and the investment professionals, as mentioned earlier, along with the more liquid nature of the assets involved, we believe the process of returning capital to investors in the multi-strategy funds, those that choose not to transfer their capital, will not have any effect on our other products.

While we believe that we have performed well and we are proud of our long-term investment track record for our investors in these funds, the overall repositioning of our new product array reflects an evolution of the Ramius alternative investment management business to address the market opportunities I outlined earlier. Our actions will not only consolidate our product and business development efforts, but also address a client and market-driven preference or a clear distinction between liquid strategies and longer-term investments.

Our institutional and private clients will continue to have access to a premiere suite of products and solutions to meet their needs. We believe that our liquid investment strategies, which included the Value Creation Activist Fund and the Global Long Short Credit Funds have exemplary performance records and meaningful pipelines.

In addition, we are in exploratory discussions with certain clients about launching a more liquid multidisciplinary vehicle with an event driven orientation. We are confident that we will continue to convert that pipeline into mandates from a number of prospective clients. Already this year, we have been awarded a $100 million plus allocation to our value and opportunity strategy from a large state pension fund which is subject to final documentation. And as mentioned on our last call, we closed on $100 million managed account from another state pension fund for our credit product in the first quarter.

Our fund of funds alternative solutions business, which offers customized portfolios, hedging strategies, and hedge fund replication vehicles as well as hybrid products that combine the resources of our internal hedge fund group with the fund of funds area also has a robust pipeline that we are converting into assets under management. We recently announced the partnership between Ramius and Perpetual Investment Management, Limited, an Australia-based investment manager that offers a broad range of products for personal investment, superannuation, and retirement as well as corporate funds management.

Perpetual, if you don't know them, is one of Australia's largest and notably one of its most conservative asset managers. They are a true market leader and we are very pleased to have been selected at the end of a very competitive global process. Under the terms of the partnership, Ramius will advise Perpetual's multi-manager group on two separate customized fund of hedge funds products, specifically designed to complement two multi-asset alternatives portfolios, their defensive alternatives fund and their growth alternatives fund.

We have also been awarded a $225 million mandate for a fund of funds managed account from a large multinational financial institution, which is subject to documentation. We are launching a replication mutual fund and we have already lined up about $100 million of investors, including a well-known asset management firm that is interested in the strategy as a highly liquid access vehicle for incorporating alternatives into clients' portfolios. Finally, we have been awarded two hedging solution assignments on over $700 million of notional exposure.

Finally, in March we announced the formation of the Ramius trading strategies, a concentrated single strategy, multi-manager portfolio trading across 250 markets in commodities, currencies, equities, and fixed income. In conjunction with the launch of this strategy, the firm made a seed investment which has already contributed to our investment performance as a firm.

For those clients interested in our longer-term investments, Ramius will continue to offer specialized vehicles targeting the real estate sector. Our real estate team and its RCT Longview platform, which has successfully focused on longer dated assets since the firm's inception, has developed currently available products for patient investors to take advantage of aberrational values in the real estate marketplace. We are pleased to report that our marketing efforts directed towards financial platforms is making progress as we recently started working with a large financial institution in marketing that real estate product.

In addition, we held a first closing on the new Cowen Healthcare Royalty Partners Fund, which targets opportunities derived from commercial stage biopharmaceutical products during the first quarter.

Turning to our balance sheet activities, we ended the quarter with approximately $465 million of equity, of which a significant portion is invested across a broad range of our investment strategies. As I mentioned on the last call, the majority of our invested capital is in liquid trading strategies with a blended leverage ratio of about 2 times. The remainder is invested in private investment strategies, which we do not leverage.

During the quarter, our returns on these investments were an integral complement to our year-over-year revenue growth. We recorded investment income of about $11.4 million compared to an investment loss of $400,000 in the first quarter of 2009. Our performance in April continued to be positive and while May has been a bit more difficult, we have done well despite the turmoil in the equity markets.

I would now like to highlight some of the recent developments in our broker-dealer area. In February of this year, Scott Ryles became the head of our investment banking effort after the retirement of Don Melzer. Scott had been the co-head of investment banking since last summer and we remain engaged in active dialogue internally regarding the steps we are taking to reinvigorate our efforts in investment banking more broadly.

Our capital raising and M&A backlog continues to show incremental improvement. In terms of the number of transactions, our underwriting backlog is up 70% since 2009 year-end and has increased threefold over the past nine months. Similarly, we have grown our M&A backlog by 20% since the start of the year and it has improved by nearly 50% in the past nine months.

As it stands today, our backlog consists of 22 underwriting transactions including eight file transactions. We are a lead manager on approximately 20% of these transactions, most of which are IPOs.

On the advisory side of our business, we are currently -- we currently have 26 transactions in our backlog. Our backlog of assignments emanating from China has tripled since the beginning of the year. And that backlog currently stands at 12 transactions and they include capital raising and M&A assignments both.

As can be observed in our banking performance, equity financing market conditions were not ideal in the first three months of 2010. During this period, there was a 20% decline in public underwriting transactions across the Cowen growth sectors as compared to the fourth quarter of 2009. However, we believe that recent trends in our backlog should soon translate into an improvement in revenue in the second quarter and back half of 2010. In that regard, we have already executed three public equity transactions in the second quarter and have five transactions that are expected to launch over the next month and have added to our backlog even as the pace of executions has increased.

We also recently announced the hiring of a senior professional focused on financial sponsors as well as a senior professional focused on technology M&A. These hires are part of our efforts to refocus and strengthen investment banking in our areas of core competency.

Turning to sales and trading, volumes in the first quarter continued to trend downward as Peter mentioned for everyone in our business. NASDAQ and NYSE volumes were off approximately 26% on an aggregate basis compared to the first quarter of 2009. However, activity levels on the floor have picked up in the second quarter as volatility has increased with the mix increasing from 17.5 at the beginning of April to 28 as of May 10.

In the research group, we've made significant progress in growing our footprint. During this period, we announced the hiring of two senior research analysts in our technology and telecom sectors. We also took steps to expand our FIG platform by adding an analyst focused on US banks and thrifts.

In summary, while 2010 has shown some volatility in the beginning of the year, we are pleased with our strong backlog, a pick up in activity thus far in the second quarter as well as our execution on the floor and in research. While we have seen some positive indicators for each of these businesses, we certainly think there's much more to be done to shape the groups and position them to gain market share and increase revenues.

The decisions we are making to reshape and integrate the firm are deliberate and not every one of them will be popular, but our goals and objectives are clear. We will continue to identify new revenue opportunities to build upon our core business and our ability to work collectively. We will work to effectuate -- to continue to effectuate change in a way we attack those opportunities by leveraging the collective strength of our people from both organizations. We will continue to allocate our resources to the businesses most likely to succeed in the near term while at the same time continuing to invest in our franchise for the long-term.

I will now turn over the call to Chris, who will provide an overview of the results for the 2010 first quarter.

Thank you, Jeff. I would like to start by noting that the result of the Cowen and Ramius merger which closed in November of 2009, the first quarter 2009 GAAP financial results reflect three months of stand-alone Ramius only. The 2010 GAAP results reflect the performance of the combined Company.

For the three months ended March 31, 2010, we reported a GAAP loss of $13 million or $0.18 a share, compared to a loss of $8.8 million in 2009 or $0.23 a share. As expressed previously, management utilizes economic income when analyzing our business performance as we believe that economic income provides a more complete view of how we generate revenue and where we incur expenses.

More specifically, economic income excludes the impact of consolidating any of our funds and it excludes expenses associated with one-time equity awards made in connection with the transaction. Those awards totaled $2.1 million in the quarter.

In an effort to provide more detailed disclosure, we have made pro forma adjustments to economic income for the 2009 period such that you see in our release and we will discuss today fully combined results for both periods, meaning three months of operations of both Cowen and Ramius for the first quarter of 2009 and 2010.

For the three months ended March 31, 2010, the Company reported a pro forma economic loss of $11.1 million or $0.15 per share compared to a loss of $15.7 million or $0.32 a share in the prior year period. Excluding certain non-cash items, pro forma economic loss for the first quarter of 2010 was $6.5 million compared to $3 million in the first quarter of 2009.

Non-cash items include deferred compensation expense of $2 million and $8.5 million in the 2010 and 2009 periods respectively. Also depreciation and amortization expense of $2.5 million and $2 million in the respective periods. These figures also include $100,000 and $2.1 million non-cash negative incentive fee impact in 2010 and 2009 first quarters respectively. These negative fees relate to our real estate funds.

We would now like to run through the different components of pro forma economic income, starting with revenues. In the first quarter, revenues were $61.7 million, up 10% or $5.8 million as compared to the first quarter of 2009.

Turning to specific revenue line items, investment banking revenues were $6 million during the quarter, an increase of nearly $1 million or 15% from the prior year period. The increase was driven by higher M&A revenue, which increased by approximately 30% year-over-year. On the underwriting side of our business, revenues were $1.4 million for the quarter or relatively flat year-over-year. All of our underwriting revenue was generated in the final month of the quarter.

Despite the slowdown in equity markets at the start of the year, we've seen a continuation of the pickup that started in March. In that regard, our underwriting revenues in the second quarter have already surpassed those of the entire first quarter. Barring a continuation of the extreme volatility witnessed last week, we believe this rebound should continue in the second half of the quarter and in the remainder of 2010.

Moving to our sales and trading business, revenue decreased by approximately $6 million or 18% to $29.6 million compared to $36 million in the first quarter of 2009. We, like others, suffered as volumes continued to decrease. As previously mentioned, aggregate volumes were down 26% on a year-over-year basis.

Activity levels have increased thus far in the second quarter as we've seen increased levels of volatility through April and May. We're also seeing sustained inflows into equity mutual funds for the first time in over a year, which we believe is a positive indicator for our brokerage business.

On the alternative asset management side of our business, we recorded management fees of $12.6 million in the first quarter of 2010, a decrease of approximately $4.2 million or 25% as compared to the first quarter of 2009. The decrease in fees was a result of a net decline in assets under management over the course of the year as well as lower fees charged to affiliates of Unicredit in the first quarter of 2010 relative to those charged in the 2009 period.

On a blended basis over the quarter, our average management fee was 65 basis points including lower fee-paying products such as our cash management business and mortgage advisory business, where we do not collect management fees.

As Jeff discussed, we continue to be pleased with the interest we are seeing in our single strategy hedge fund products as those tend to be among the higher management fee products we offer.

We booked incentive fee income for the second straight quarter. The primary contributor of incentive income was one of our larger fund of fund products which went through its high water mark in December. We also booked incentive fee income in the quarter from our value and opportunity and credit funds.

Incentive fee income also benefited as the impact of the real estate claw back and subordination provisions wound down. As Jeff noted, good progress was also made during the quarter on getting the remainder of our value and opportunity fund back to its high water mark.

Investment income improved dramatically in the first quarter of 2010 as we recorded revenue of $11.4 million compared to an investment loss of $400,000 in the first quarter of 2009. Investment income was driven by positive performance across all of our investment strategies, partially offset by certain hedging activities. A portion of our investment performance in the quarter was related to positive developments with regard to certain identified assets held by Lehman Brothers International Europe, which resulted in marketing these positions up from $0.20 on the dollar to $0.72 on the dollar during the quarter.

As a result of this markup, we now expect to receive assets valued as of the end of the quarter at approximately $8.6 million. We expect to receive these assets from LBIE later this quarter.

On the expense side, compensation and benefits expense for the first quarter of 2010 was $41.3 million, a 6% decrease as compared to $44.1 million in the first quarter of 2009. Our compensation to revenue ratio was 67% for the quarter. This ratio as well as economic income excludes one-time equity award expense of $2.1 million from grants made in connection with the transaction.

During the quarter, we increased our headcount by approximately 1% to 583 full-time employees. The net increase was driven by the addition of revenue producing professionals only.

Non-compensation expense in the first quarter of 2010 were $33.3 million, a 7% increase from $31 million in the first quarter of 2009. Non-compensation expenses were down approximately 6% from the fourth quarter of 2009. The year-over-year increase was primarily due to an increase in trade related expenses associated with our brokerage business and an increase in travel and entertainment expenses.

Trade related expenses increased over the course of 2009 and continued to be a focus of cost reduction efforts internally. We expect these costs to be lower in the second quarter. Travel and entertainment expenses have increased with the increase in investment banking and marketing activity. While we expect travel to remain at an elevated level compared to 2009, our costs should move lower as more transactions are executed.

We also expect to realize non-compensation expense savings over the remainder of the year as cost-cutting measures taken in connection with the transaction and over the first portion of this year take effect. Excluding the increased trade related expenses, our annual run rate is over $5 million below 2009 levels.

I would like to spend one second on taxes. Although economic income is a pretax measure, we wanted to let everybody know that we recorded an approximately $270,000 tax benefit which equates to an effective tax benefit of under 1%. Based on existing tax assets, we can generate meaningful pretax income before we are required to pay taxes.

I would also note that we are able to take advantage of a change in the tax law such that we were able to carry back losses for five years rather than two years. As a result, we expect to receive a refund of over $4 million during the second quarter.

Finally, turning to the balance sheet, book value per share was $6.22 at the end of the quarter and tangible book value was $5.65 as at the end of the quarter.

With that, I would like to turn it back over to Peter for closing remarks.

Thanks, Chris. I think in summary what I would like to say is that we're going to continue to take steps to get this firm more focused, more efficient. Notwithstanding my remarks about being cautious and deliberate, you just heard from Jeff and Chris about a lot of change that took place. I want to emphasize that with all the people that came in during the first quarter, our headcount essentially was unchanged. I think we were up by three people in the quarter and if you really look at our non-comp expenses and back out the variable portion, which is trade-related, non-comp expenses are down substantially from the fourth quarter and are going in the right direction but we have a long way to go.

I would also like to mention without being specific that during the quarter there were four transactions that were a direct result of the collaboration of the two firms that resulted in revenue -- which will result in revenue in the future as this integration of intellectual capability between the two firms accelerates and referrals back and forth are taking place and relationships are being established.

So with that, I would like to end and now open it up for questions.

(Operator Instructions) Devin Ryan, Sandler O'Neill.

Good morning. Thanks for all the color on the investment banking outlook and the backlog. I appreciate it. But obviously the outlook is somewhat market dependent. So with that in mind, I just want to get a sense of what banking clients are saying and doing currently in the wake of the volatility that we've seen in the past couple of weeks over the market. So have things changed materially in terms of how clients are thinking, just given what we've seen in the last couple of weeks in the markets?

Well, clearly it's not just clients. I think everybody is very concerned about what's going on in the markets and in a broader sense, as I've traveled around in the first quarter, I did an enormous amount of traveling, seeing people in California and I spent a week in Asia where we are getting a lot of traction. But people are worried about this whole European thing and its potential effect on the United States. They are worried about the slowdown in China and kind of the overheating of China and what impact that could have on us.

They are worried about the sort of continuing tension between the US, Israel, and Iran, and our kind of inability to have a position there. They're worried about financial reform and what that's going to mean. The Goldman Sachs stuff has not been helpful to anybody's mind set, you know.

But on the other hand, companies are growing. They are lean. They need to finance. There's a lot of good stuff going out, going on out there in the technology world and in the healthcare world, and notwithstanding companies -- as [precisely] our backlog, increasingly want to finance, want to do M&A transaction.

And I think there's a real inclination and maybe you guys see this at Sandler O'Neill, to kind of want to have relationships with firms where they really get to know the senior management and the senior bankers and be involved. So clearly the market environment is going to have an impact. It's beyond anyone's control. I think it's a little bit disconcerting that here we are on Tuesday and no one yet knows what happened last Thursday. And I am not sure that anyone is ever going to know what happened last Thursday. Let's just hope it doesn't reoccur.

You know, that bothers people because they want to finance. They want to grow their business and take advantage of what has been an open -- essentially open capital market opportunity.

Right. I guess just thinking about that, are deals that maybe we thought were going to get done over the next couple of weeks on hold until we get some more visibility to those items that you just walked through?

You know, Thursday night we would've said probably that's going to happen. Today we would say it's not going to happen. It seems that there is an inclination to continue to move forward. Obviously pricing is kind of up in most people's minds.

But if you need capital, you need capital and if you can -- you have the luxury of being sort of patient about the markets, you can do that. But I think a lot of people are worried about if the market is closed and they can't get in there for another year or two, that that is a worse scenario than taking some more dilution right now. So we keep our fingers crossed that people continue to plod down the road they are on with new financing.

I think as far as M&A is concerned, we're not seeing risk capital come off the table in our [venturing] strategies. I think we've seen some spread widening, so if that's an indication as to people's belief that we're going to continue to move forward, it's not -- while we've seen some widening in that area, that hasn't been so dramatic. And I think if you start to continue to see some of these deals that are already announced close in the next couple of months and we don't have another shock to the system like we had last Thursday, I think things will continue.

And do you have -- you guys mentioned 26 advisory deals, is that a -- the right number?

That's the number, yes.

Is that a record number? That just sounds like a heck of a lot of advisory transactions. Are those all announced or just things that you are working on potentially and would like to get announced shortly?

They are not all announced. I think we've got currently two announced transactions that have not yet closed. Those are transactions that we are working on that we think have a reasonable chance of getting done. There are other things in the backlog that we don't think are as likely to get done, so we don't actually include them in that number.

It is a -- I don't know if it is a record number, but it's a pretty healthy number.

It's the best number we've seen in two years, that's for sure.

Got you. And then just on the Ramius side, with the closing of the multi-strategy and enterprise funds, you mentioned that clients are going to have the option to move into other Ramius products. Have you already been having conversations with clients and have any sense or early feedback on how this option is being received?

We just started to have conversations with clients. We don't have any indication yet. Those will be ongoing. Over the next couple of weeks, we'll have a better idea.

Look, there are actually in a credit -- it will be a substantial number that will stay and move into new products. You know, it's -- you can't be too specific, but as we sit here today, I can say that we believe and I want to emphasize we believe that when we get to the end of the year, our assets under management will be higher than they were at the end of last year.

Got you. And then maybe along the same lines, just thinking about the mandates that you have been awarded in the Ramius business, I don't know if there's any way to size the potential AUM that this represents just to give us some flavor for how large some of these mandates are.

I think Jeff actually painted a little bit of a specific picture for you. We had this one state fund came in in the first quarter, that's $100 million. We have another one that's over $100 million that is in documentation. We have another one that is not yet in documentation that could exceed $100 million.

I think Peter's comment is the right one. What we're seeing is -- an ability, we think, to close on some of the things in the pipeline that would put us in a position where if -- and we were able to convert on them that our assets under management would actually be up between now and the end of the year.

And I don't know if we can be more specific than that. These things take time. A lot of these we have been working on for a long time. The one that we announced in the beginning of the fourth quarter, some of these we have been working on since the end of '08, beginning of '09. So they take some time.

Let me just reemphasize one point that was in Jeff's script that -- there was so much said. Clients one very specific strategies, very narrowly focused. They want a lot of transparency. Our client basis is very institutional, so the size of the mandates are quite large. But the reason multi-strategy is going to wind down is because it's quite the opposite of what they want today. They want very specific strategy. We are seeing an appetite for separate accounts, something that we are quick to do and the nature of the business is changing.

Right, okay, great. Then just lastly on the expense side, you guys made some progress from last quarter and it sounds like there's still a ways to go. So I guess I just want to make sure I am interpreting things right that there may be even some room from I guess -- call it this quarter's non-comp run rate to bring that down over the remainder of the year.

We think so, yes.

Okay, great. Thanks a lot. I will hop back into the queue.

Errol Rudman, Rudman Capital.

Hi, this is Gloria sitting in for Errol. Just one quick question. Any notable new hires that will be coming on board in the next couple of quarters? And also if there are any meaningful revenue generators expected what the comp trend is going to be like for the next couple of quarters, any uptakes?

So we are obviously in active dialogs all the time. We do have people that we think we can bring into the organization that could be meaningful contributors, and we are certainly focused on those. We are not at liberty right now to give you any details but we are working on that.

I think that as often -- and have been written in the last quarter, you can see that's the comp trends have gone the other way from where they were going last year in terms of talent on the street. I think we will be making some technical investments in individuals and teams and those will be competitive.

Okay, thank you.

[Ryan Keeley], KBW.

Good morning, guys. Quick question. On the agreement with Unicredit, in the release it says that it is estimated to be approximately $2.1 million of management fee revenue upon redemption. So is that saying if they do redeem that $668 million at year-end, or that's what it will be for the rest of the year?

That's what we think the financial impact will be for our numbers for the remainder of the year.

Okay, so for modeling purposes over the next three quarters, it will reduce management fees by $2.1 million?

For the rest of the year, yes.

Okay, and then just in closing, the two funds [to] investors now talking about opening new liquid type strategies, will that have any impact on the firm-wide realization rate in terms of the asset base? So will the realization rate be lower because these products are more liquid or not necessarily?

I'm not sure I follow the --

Do you mean fee income on -- realized fee income?

Yes.

I think that in terms of closing on people in the pipeline, in the mandates, there weren't mandates that were teed up for these two products. So I think part of our decision, I know part of our decision was predicated on the fact that we didn't see growth potential in these two products.

But I think the answer to the question is that historical (inaudible) fee income will -- the realization rate on the new stuff will exceed what is leaving.

All right, great. Thanks for taking my questions.

At this time, there are no further audio questions. I would now like to turn the call over to management for closing remarks.

Well, if there are no further questions, thank you all for your attention this morning and for those of you who are our shareholders, for your confidence in us. I promise you that we are working about as hard as -- certainly I am working as hard as I have every worked in my career and I am probably as excited as I have ever been in my career about the opportunities that lie ahead for us.

So we will work hard to reward you and thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.