Sculptor Capital Management Inc (SCU) 2009 Q1 法說會逐字稿

Good morning, everyone, and welcome to the Och-Ziff Capital Management Group's 2009 first-quarter earnings conference call. My name is Mary and I will be your coordinator for today. At this time all participants are in listen-only mode. All lines have been placed on mute to prevent any background noise. (Operator Instructions)

I would now like to turn the presentation over to Ms. Tina Madon, Head of Investor Relations.

Great. Thanks, Mary. Good morning, everyone, and welcome to our first-quarter earnings call. With me today are Dan Och, our Chairman and CEO, and Joel Frank, our Chief Financial Officer. Dan will give you an overview of our business results and Joel will take you through the details of our quarterly financials. After that we will take your questions.

I would like to remind you that today's call may include forward-looking statements. These statements reflect the current views of management with respect to, among other things, assumptions with respect to levels of assets under management; future events and financial performance, many of which by their nature are inherently uncertain and outside of our control.

Actual results and financial conditions may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise.

During today's call we will be referring to certain financial measures not for prepared in accordance with US Generally Accepted Accounting Principles. Reconciliations of our non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release, which is posted on the For Shareholders page of our website. Further, no statements made during this call should be construed as an offer to purchase shares or any interest in any Och-Ziff fund.

Today's call is being recorded and is copyrighted material of Och-Ziff Capital Management Group LLC. Telephonic and webcast replays will be made available later today. You can find the details for both on our website at www.ozcap.com. Now let me turn the call over to Dan.

Thank you, Tina. Good morning, everyone, and thanks for joining us. This morning I will briefly review our assets under management as of May 1 and year-to-date investment performance. I will also share our perspective on the industry dynamics we are seeing and provide you with some additional context for understanding our competitive positioning.

As you all know, the global macroeconomic environment of the first quarter continued to be challenging on many fronts. At the same time the competitive landscape in the hedge fund industry continued to shift because of the reduction in overall assets and leverage and in a number of investment funds in existence. As I mentioned previously, we see the current market environment as an excellent one in which to continue to generate strong absolute returns for our fund investors, which is our main focus at Och-Ziff.

We believe this is the case for three reasons. First, the opportunity set for attractive investment ideas is more compelling than it has been in many years. Second, there is less competition pursuing those ideas; and third, the unique multi-strategy model that we employ at Och-Ziff is extremely well-suited to the current environment. We have a strong business model, capital to deploy, and are viewed as best positioned to generate strong returns.

Over the last few months we have seen financial institutions that provide services to hedge funds, putting a greater emphasis on these business and operational attributes. We are benefiting from this dynamic and are seeing increased deal flow as a result.

Against this backdrop we have delivered strong absolute returns during the first quarter and that continued in April. We maintained a disciplined focus on the investment and risk management processes that have always been integral to the way we manage our business. We continue to focus on our core investment strategies and are opportunistically and selectively deploying capital.

However, the differentiation that is occurring amongst the players in our industry reflects the fact that a solid performance track record is no longer sufficient on its own. Investment performance must also be accompanied by a robust and dynamic infrastructure inclusive of strong operational controls and compliance-related functions and by the ability to provide transparency to fund investors in relationship to the investment process, operational procedures, and portfolio exposures. These elements -- performance, infrastructure, and transparency -- have always been hallmarks of Och-Ziff and are central to our ability to align our interests with those of our fund investors.

We also believe that these elements will have a critical bearing on which alternative asset managers investors will select as they begin to reallocate capital.

Now let me turn to our business results beginning with assets under management. As we announced this morning, assets under management as of May 1 were $20.6 billion, which includes $2.3 billion of first-quarter redemption requests that were paid on April 1. Our redemptions remained elevated as global market conditions continued to be unsettled.

We also believe that our redemptions remained higher in the first quarter due to the continued effects of funds that imposed gates or otherwise restricted access to investor capital.

We provided and continue to provide liquidity to our fund investors in accordance with the predefined terms of our funds. As you have heard me say before, while providing liquidity to investors in our funds may adversely affect us in the short term, we believe it creates an important competitive distinction that will be integral to attracting new capital in the long term.

We believe that the redemption cycle has begun to moderate from first-quarter levels as market conditions have become more stable. However, it is still too early to discern any trends.

While it may take some time for capital inflows to return and become meaningful, we remain actively engaged in discussions with fund investors globally and those conversations continue to be very positive. We believe that as flows return we will be a leading beneficiary because of our track record, our infrastructure, the consistency and sustainability of our business, and our commitment to fund investors on transparency and overall financial controls.

Now let's turn to our funds' investment performance. Year-to-date through April 30 our Master Fund was up 6.3% net, our Europe Master Fund was up 2.5% net, our Asian Master Fund was up 7.5% net, and our Global Special Investments Master Fund was up 0.8% net. These returns represent strong absolute performance and we continue to significantly outperform major markets worldwide.

Moreover, it is important to note that the performance of our funds was positive in January and February while the major global equity indices were negative in each of those months.

Let me highlight some data that has become extremely important to investors globally. In the 10 years ended March 31 the S&P 500 had two declines of 40% or more. Over this same 10-year period the total return for the S&P 500 including reinvested dividends was negative 26%. During this same 10-year period the total net return for an investor in the OZ Master Fund was plus 145%.

One dollar invested in the S&P 500 for this period is worth $0.74 while $1 invested in the Master Fund is now worth $2.45, a differential of $1.71. This clearly illustrates our ability to provide positive risk-adjusted returns to investors and strengthens our appeal to fund investors as an institutional alternative asset manager.

Our year-to-date performance was driven primarily by improved investment opportunities in US and Asian equities, convertible arbitrage, and credit. Our Asia portfolio also benefited from steps we took at the end of last year. We continue to see an increasing number of investment opportunities in our core business. The magnitude of the market dislocation over the past 22 months was historic and the investment environment that has resulted is compelling.

We remain focused on ideas in a broad range of asset classes including global equities, convertible arbitrage, credit, and real estate and related financing. While we approach additional investments with patience and discipline, we have begun to slowly redeploy the cash in the Master Fund bringing our balance down from approximately 40% at year-end to 35% as of March 31.

In addition, we have been actively reallocating investments as appropriate. We remain intensely focused on generating strong investment performance and we are very active in pursuing opportunities in all of our core strategies. We also remain focused on the build out of our private investment platforms and the initiation of new platforms where we see opportunities.

With that let me now turn the call over to Joel.

Thanks, Dan. Today I will reveal our first-quarter 2009 results and talk a little bit about our ongoing focus on expenses. For the 2009 first quarter we reported a GAAP net loss of $82 million or $1.07 per basic and diluted Class A share. For your reference, a discussion of our GAAP results is contained in our press release.

Before getting into the details behind economic income, I want to briefly review the change we made this quarter in our presentation of economic income, distributable earnings, and distributable earnings per share. Prior to this year other operations, which includes our US real estate business and other joint ventures, was not significant due to the fact that these businesses were small and in the early growth stages. Therefore, only the Och-Ziff funds segment, which is our core business, was included in economic income and related measures.

However, as a result at our commitment to our Asia real estate joint venture and the development of these new businesses, we feel that the results of other operations should now be included in economic income and related measures on a comparable economic basis to the funds segment. Therefore, for prior periods economic income, distributable earnings, and distributable earnings per share conform to the new presentation.

Now let's turn to economic income and distributable earnings starting with revenues. Management fees totaled $94 million, of which $93 million was attributable to the funds segment and $1 million to other operations. Management fees were 30% lower than the fourth quarter of last year due to lower assets under management resulting from fourth-quarter redemptions which reduced AUM on January 1.

Our assets under management declined by $6.7 billion from December 31 to April 1 due to net outflows of $7.4 billion partially offset by the performance-related asset appreciation of $733 million. The net outflows include redemption requests for the 2008 fourth quarter, which were paid on January 1, and for the 2009 first quarter, which were paid on April 1.

As Dan mentioned, we believe that a major contributor to our redemptions in both quarters was the fact that we provided liquidity to our fund investors in accordance with the predefined terms of our funds. Our average management fee remained at approximately 1.7% after taking into account the impact of changes to assets under management as of April 1. This is a blended rate that includes the effect of our non-fee-paying assets.

Now let me turn to expenses. Operating expenses are comprised of compensation and benefits and non-compensation costs. Our first-quarter 2009 compensation and benefits totaled $24 million with $21 million attributable to the funds segment and $3 million to other operations.

Of the total salaries and benefits were $19 million with $16 million attributable to the funds segment and $3 million to other operations which relates to our Asia real estate joint venture. Total salaries and benefits were 8% lower than the 2008 fourth quarter, essentially all of which was due to a reduction in headcount in the funds segment in the first quarter.

This reduction reflects both our lower level of assets under management and a strategic realignment of resources based on investment opportunities that we see and the requirements of our business. First-quarter compensation and benefits also included approximately $5 million of bonus expense in the funds segment. This amount is 40% lower than the bonus expense in the first quarter of 2008, which reflects a lower level of one-time non-recurring payments.

Salaries and benefits expense totaled 20% of management fees in the first quarter. For the second quarter of 2009, assuming assets remain flat relative to the current level, we expect salaries and benefits to be approximately 20% to 22% of management fees.

Now turning to non-compensation expenses. First-quarter 2009 non-comp expenses totaled $25 million with $24 million attributable to the funds segment and $1 million to other operations. Total non-comp declined 29% for the 2008 fourth quarter driven by lower expenses in the funds segment. The two largest components of quarter-over-quarter decrease were a reduction in professional service fees and lower interest expense on our term loan due to the decline in three-month LIBOR.

While our non-comp expense reflects lower activity levels in light of the prevailing market environment, we continue to manage these expenses in relation to the economics of our business. For the 2009 first quarter non-compensation expenses totaled 27% of management fees. For the second quarter of 2009, assuming assets under management remain flat relative to the current level, we expect this ratio to be approximately 30% to 32%.

We always evaluate our business in terms of providing resources for available opportunities in relation to the current and expected economic results of the business. Our goal, as always, is to manage our business to provide the maximum value to our fund investors and shareholders. While we believe that conditions are becoming somewhat more stable, it remains difficult to conclude any pattern in relation to the current environment and therefore difficult to fully assess the resulting impact on our revenues and expenses over the balance of the year.

Our first-quarter 2009 effective tax rate was 39% and we expect an estimated tax rate of 35% to 40% in the second quarter of the year. Taxable income will be comprised only of management fees less operating expenses during this period, but the tax rate will be affected by how these items flow through our legal entity structure and by the expense associated with divesting of RSU grants, the impact of which is dependent on our stock price on the relevant vesting day.

First-quarter 2009 distributable earnings were $27 million or $0.07 per unadjusted Class A share. As you saw in our press release this morning, our dividend for the fourth quarter will be $0.05 per Class A share. As in prior periods we use the cash to fund items related to the operation of our business. The most significant of these were principal and collateral payments related to our borrowings and prepayment of certain taxes.

I want to close by highlighting that we have always focused on a robust and dynamic infrastructure with an emphasis on strong financial-, operational-, and compliance-related controls. Being a public company provides enhanced benefits to our fund investors by requiring us to identify and document key processes and controls, such as those related to valuation and existence of assets and having these processes subject to multi-level independent review and testing by our internal audit staff and by our independent auditors.

In a world where infrastructure is very important to fund investors this is a differentiating factor for our business. With that we will be happy to take your questions.

(Operator Instructions) Roger Freeman, Barclays Capital.

Good morning, it's Stephen here for Roger. I was just curious to hear a little bit more about the long-term investing opportunities, particularly as it relates to, say, distressed assets, corporate credit, and mortgage-backed securities and what is going on with [Patel]?

Sure. We have been saying since the beginning of the year that we see an excellent multi-year opportunity for Och-Ziff to generate strong returns for our fund investors. This is a combination of an extremely attractive opportunity set largely caused by dislocations in the market, a reduced level of competition that is a result of a smaller hedge fund universe using less leverage as well as a reduction in the proprietary debts at investment banks as well as the fact that the Och-Ziff multi-strategy model and the uniqueness of how we compensate our people and focus our risk management is extremely well suited.

So far during the first four months of this year we feel we have executed. We feel particularly good about January and February where the market was down approximately 10% each month and we were able to generate positive returns. We expect to be able to continue to do so.

Very importantly it is not a bet on the one sector or one asset class performing. It is a global effort. It is across all investment disciplines. That has been the case so far this year and we expect it to be going forward.

In terms of the specific areas you asked for, we do feel that there are some very attractive opportunities in credit. To us that includes not just corporate credit but mortgage-backed securities as well as real estate-related areas. We do feel that some have overstated the simplicity starting in the fall of 2007 where I think you know many firms were very aggressive in the leveraged loan area. But we feel very good about our global opportunity in a number of different investment disciplines.

Okay, thanks. Can you update us on your asset mix? You mentioned that cash was now at 35%. What about some of the other asset classes?

Sure. Cash as you know, as you said, is 35%, equity restructuring around 17%, our convertible arbitrage around 17%, private investments around 14%, credit around 15%, and merger arbitrage around 2%.

Okay, thanks. One more question just in terms of tone of the market with the March and April rally and Och-Ziff continues to be very, very consistent. What is the tone with investors right now and how has risk appetite changed, particularly as we saw, say, in mutual funds flows going into equities and bonds?

Well, the tone of our investors -- we think our investors, in terms of Och-Ziff, we think they are generally pleased with how we are doing, what we are doing, the returns we generated, and the defensive posture and low risk with which we are able to do it.

In terms of what you seem to be referring to in terms of mutual funds and the inflows they are seeing, it does appear that the macro factors, whether it's the economy, the general fear in the environment, flows into riskier assets, it does appear that that is moving in a more positive direction. And we hope to see that impact flows in a positive way during the second half of this year.

Okay, very good. Thank you.

Cynthia Mayer, Bank of America Merrill Lynch.

Good morning. I have a question on the flow patterns. As I understand it some investors have only annual liquidity and it falls on different months for different investors. So I am wondering if you could just give us a sense of how many of your investors have not yet had the chance to redeem and what percentage of AUM that represents?

Sure. Virtually none -- it depends on what time period you are referring to. But you are correct that some of the investors have quarterly liquidity, some have annual liquidity which is dispersed throughout the year. Certainly every investor has had an opportunity to withdraw during the financial crisis.

If you want to start with the fourth quarter of last year when things changed dramatically, the vast, vast majority have had a opportunity to withdrawal should they choose to.

Great, thanks. Then since you added the real estate business can you maybe give some more color on what that represents? How much is US, how much is Asia, and how much is equity, how much is credit?

Sure. We have two real estate businesses. We have a US real estate business, which has been operational for five years. We had raised a fund in that area some number of years ago and the fund is doing very well.

In addition, last year we added an Asian real estate group. It was a group from the Morgan Stanley Real Estate Fund. It's a group that we feel very strongly about. We think it's an example -- we have mentioned the ability to add world-class talent around the globe and this is one example of that.

The third area we refer to is that we believe that commercial real estate will represent a credit-related opportunity. We think that going forward there is going to be at issue where supply of credit to commercial real estate is going to be substantially less than the demand during a period of deteriorating fundamentals. And we will pursue that from a credit point of view as well.

That is a very good example of where our model -- I referenced that our model is so well-suited to this environment. Having a dedicated real estate team, having a credit team, having a team focused on the financial service entities that own and structure these products and have them all work together on one P&L has been and will be extremely advantageous going forward.

Okay. Finally just on the expenses, Joel, it sounds like the non-comp will go up a little bit in this quarter and I was just wondering what the extra expense represents?

Non-comp won't necessarily go up a little bit. What we are doing is as we see opportunities in the business there is a possibility that those expenses will increase. We are going to continue to manage them as we always do based on the economics of the firm and the opportunities that we see and that will always be the case as we run the business. So, again, it's all opportunity based and that will drive the expenses.

Okay, thanks a lot.

Marc Irizarry, Goldman Sachs.

Great, thanks. Can you guys just provide us with a current breakdown of the investor types in your fund? And then also can you talk about what is happening in terms of the different investor types' appetite for investing in alternatives right now?

Yes, let me give you the breakdown on types and then Dan can comment on that. Fund-to-fund is about 23%, pension and profit sharing around 20%, foundations and endowments around 19%, other corporate and institutional 12%. Of course they are affiliated, which is us, is 11%. Family office and individual about 9% and what we call private banks around 5%.

In terms investor appetite on the direct institutional side, the pension funds and other direct investors, we think that there is going to be strong interest from that group in the absolute return hedge fund space. They look at the numbers. They look at the ten-year performance I mentioned and they look at the fund and say to have $2.45 in value instead of $0.74 in value is obviously compelling.

They look at the one-year returns. They look at, most importantly, I think, our ability to generate returns going forward because investors only use the track record as a guesstimate of what you can do going forward. So between conversations, what we are hearing from consultants, what we are reading in the press, and a general improvement in the environment we are optimistic about flows into the industry. And most importantly, feel very good about how we will do assuming we continue to stay focused on generating returns, which is what we are all about.

Okay. Then just on fees, obviously always a lot of discussion about performance fees and aligning client interest with the fee structures. Can you talk about how you guys have clearly provided liquidity? You didn't invoke any gates and you have obviously aligned liquidity interest. But what is happening in terms of performance fee, are you having discussions regarding the one-year high-water mark heading into next year?

We are not having any significant discussions on any aspects of our fees. The discussions we have generally relate to institutions who talk about making longer-term commitments and in those cases discussing ways to further align interest. But we think investors feel very good about our 15-year record of managing our business in a way that protects them.

We have been leaders -- the areas they care about -- performance, risk management, financial controls, compliance, transparency -- these aren't new to us. These are areas that we have been focused on since inception. We have always worked with our investors to develop the best methodologies and we continue to do that.

Okay. Then just in terms of opportunities for investing, where do you see Och-Ziff, if at all, participating in DIP financing as corporate bankruptcies start to mount? And then can you just give a little more color on the competitive landscape, with prop desks kind of out of the business where you are seeing the greatest opportunity there?

Sure. DIP financing is one area of the credit spectrum. It is substantially more attractive than it has been historically. There is greater demand for it and there is less of it. So we look at each investment on a case-by-case basis. We don't have any definitive plans to necessarily allocate, which is the case for everything that we do, but we are very focused and we expect that to be an area of opportunity.

In terms of your question about competition, the reduction comes from two places. There is less capital in the hedge fund universe, but at least as important many of our competitors were very highly levered for a long period of time. And the availability of that leverage and the willingness of investors to let them utilize that leverage has been substantially reduced.

Proprietary desks in general -- I am not going to offer specific comments because I don't know exactly what each bank's rules are and we are not going to comment on specifically what someone is doing -- but I think it's fair to say that in general there has been a substantial reduction in proprietary activity by investment banks and commercial banks. That has created a very strong dynamic for us where the deal flow from those entities has gone from good to even better and created more opportunities.

Okay. And then what about some of the government programs -- TALF, PPIP, etc. -- what is the outlook there for Och-Ziff's participation?

We judge all those programs in the same way we judge every investment. We are fiduciaries; we look at investments and judge the risk/return for our investors. If the risk/return for our investors is positive then we pursue an investment. If not, then we don't. And that would be our posture.

Great, thanks.

Dan Fannon, Jeffries.

In terms of distribution are you guys doing anything to potentially change the way you market yourselves and position yourselves for the environment when it does get better to gain share and kind of brand and market yourselves differently than you have done in the past?

Well, we did discuss -- as far back as the IPO we talked about the fact that we thought there were opportunities that existed for Och-Ziff, assuming we continued to generate the risk-adjusted returns that we felt we could generate. So the number one thing we are doing to increase distribution is focusing on generating returns for our fund LPs.

The numbers we went through today, whether it's the 10-year return, the one-year return, the quarterly return, the positive performance in January and February, ultimately that is and will continue to be the best way for us to grow assets and generate any type of distribution that exists. We do believe that over time there will be an evolution and that high-quality alternative products will be distributed in different ways. Our goal is to have one of the best products such that we can participate in that distribution.

But at Och-Ziff we are focused on performance and investment opportunity, not on creating new types of distribution.

Okay. Then just in terms of -- you talked about discussions with some of your investors and a potential outlook for flows returning to alternative managed in the second half of this year. Has the dialogue from an institutional perspective improved here in the last six-week time period? Just given what the market has done, are there a lot more incoming calls in terms of -- or RFPs out there in recent weeks? Just wondering if there has been a more recent change.

Well, the dialogue has certainly improved. I don't want to put an exact time frame on it, but the world has been moving quickly. The fourth quarter -- in general, institutions were shocked by what was occurring in markets. I think during the first quarter many of them were recapping some of their negative surprises from the fourth quarter.

We have seen more of a focus on how do we generate returns, how do we take advantage of this opportunity, etc.? It is too early to discern the trend and there are a number of factors that go into it, but we think it's fair to say that there has been an improvement in the dialogue.

Okay, thank you.

Ken Worthington, JPMorgan.

Hi, good morning. First to follow up on Marc's question on fees, were you trying to imply that you would negotiate fees lower but only in exchange for longer-term commitments?

No, no, there was no indication of anything. We have had a limited number of discussions with investors, some dating back to prior to the financial crisis, with the concept of longer lockups than our current structure and potential adjustments accordingly. But we were not meaning to imply that.

Okay, thank you. And then just broadly, talk about morale and how you are doing in terms of attracting and retaining talent.

Sure, we think morale is very good. Obviously, for everyone on Wall Street 2008 was a difficult year, but morale at our firm was very good. Retention has been very good. Our ability to attract new people has been extremely good. Morale is not something we take for granted.

I think people have known since Och-Ziff was founded 15 years ago that our focus has been on hiring, training, and retaining the best people. Our people know how much we value them and how important they are. We are making sure to deliver that message even more clearly. We are making sure to be consistent and deliver messages about the firm's strategy about the firm's focus, about issues the firm is facing, about how we are dealing with the crisis. Communication is obviously more important than ever and we are focused on that.

Okay, thank you.

Robert Lee, KBW.

Thanks. Good morning, everyone. Dan, I have a quick question for you. There has obviously been a lot written in the press about more institutional investors' pensions looking to go to the separate account route versus kind of the co-mingled fund route if you will. Is there anything about -- assuming that some large investors end up preferring that route is there anything about the way you kind of run your model that would make adopting that more challenging for you?

You have to remember that when investors focus on separate accounts or I should say (inaudible) on separate accounts, they are talking about transparency. They are talking about investor understanding about the underlying investment strategy. They are talking about control of assets to prevent managers from freezing or suspending access to capital.

These have been things that we have focused on at Och-Ziff since inception and we think we have performed extremely well. And we believe that is the most important thing to focus on.

Our multi-strategy model is very, very well-suited to be run in our fund format. It has been run that way for 15 years. It has worked extremely well for investors and aligned interests extremely well. You have to remember that myself and my partners are the largest investors in our funds side by side with our investors and we intend to maintain that.

Okay. Maybe you are talking about potential new product rollouts. Obviously, you have the special investments fund and the new platforms you are developing there. But do you feel you are getting closer at this point to possibly rolling out some new products and new funds that may be a little bit more narrowly focused going forward?

We continue to be extremely focused in the private investment platforms that we have been speaking about since the IPO. Clearly the change in the investment environment and the change in the investor environment made raising capital for new funds much more difficult than it has been in the past. Our focus has been on making our products better and better, making our businesses stronger and stronger, making sure that we are focused on the right areas.

So real estate both in the US and Asia, energy and alternative energy and emerging markets, amongst others, continue to be our areas of focus. We think our businesses are getting stronger. We still have our partners' capital ready to commit to these areas and we are committed on a long-term basis.

Okay, thank you very much.

Cynthia Mayer, Bank of America Merrill Lynch.

Thanks a lot. I just wanted to just circle back a little bit to the fund-to-fund, it sounds like it's down to 23% of your assets but you talked a little about the better tone with your institutional clients. I am just curious about how the tone is in the fund-to-fund's world. And also going forward are you going to make any changes in terms of the way the redemptions are structured from that?

I think it's a little bit difficult to say the fund-to-funds world since there are a number of different fund-to-funds. Some have retail and high-net worth investors, some have institutional investors. Investors come from different geographic regions.

We feel that our fund-to-fund investors are extremely high-quality, institutional investors. We think that they add value to their underlying investor based on the research they do, the due diligence they do, and the discipline that they show.

Our belief is that those -- the fund-to-funds who add value to investors will continue to grow going forward. We don't have any plans to change anything in our structure. We can't comment on what others are going to do.

Great. Thanks a lot.

That concludes the question-and-answer session today. I will now turn the call over to Mr. Och for closing remarks.

Thank you. On our last earnings call we highlighted the opportunities we were seeing to generate returns for our fund investors. Year-to-date we are participating in and beginning to see benefits from those opportunities.

In that context I want to reiterate a few points that we think are important to keep in mind when evaluating our firm and its growth potential. First, both the expanding opportunities set and the changing competitive landscape are positive factors for our fund investors and in turn our Class A shareholders. We believe that our investment performance, our multi-strategy approach, and our operational capabilities have led to an important competitive differentiation for our firm positioning us in the current environment to gain market share.

Second, the magnitude of the market dislocation over the past 22 months has created compelling investment opportunities across all of our investment strategies. We have a significant amount of cash that we can deploy and this will allow us to participate in opportunities which will contribute to our ability to generate high-quality, risk-adjusted absolute returns for our fund investors.

And third, while it may take time for capital inflows to become meaningful for the hedge fund industry, we believe that we will be a leading beneficiary, not only because of our track record and our business model, but also because of our consistent adherence to the liquidity terms of our funds. Joel and I look forward to updating you on our progress throughout this year.

With that let me now turn the call back to Tina.

Thanks, Dan. Thank you everybody for joining us today and for your interest in Och-Ziff. If you have any questions, please don't hesitate to contact me at 212-719-7381. Media inquiries should be directed to Steve Bruce at 212-371-5999.

This concludes our call. You may now disconnect.

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