Sculptor Capital Management Inc (SCU) 2011 Q2 法說會逐字稿

Good morning, everyone, and welcome to the Och-Ziff Capital Management Group's 2011 second-quarter earnings conference call. My name is Anika and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent any background noise. (Operator Instructions). I would now like to turn the call over to Ms. Tina Madon, Head of Investor Relations at Och-Ziff.

Great. Thanks, Anika.

Good morning, everyone, and welcome. With me today are Dan Och, our Chairman and CEO, and Joel Frank, our Chief Financial Officer and Senior Chief Operating Officer.

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

Och-Ziff's actual results and financial condition may differ -- possibly materially -- from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of risks that could affect our results, please see the risk factors described in our 2010 annual report.

The Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

During today's call, we will be referring to economic income, distributable earnings, and other financial measures which are not prepared in accordance with US generally accepted accounting principles. Information about and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release, which is posted on the Class A Shareholders page of our website.

Furthermore, no statements made during this call should be construed as an offer to purchase shares of the Company or an 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.

With that, let me now turn the call over to Dan.

Thanks, Tina.

Good morning, everyone; we appreciate you joining our call today. This morning, I will give you a brief update on our year-to-date investment performance as of July 31, and assets under management as of August 1. I will also share our perspective on the current environment for capital flows, and touch on the investment landscape as we see it.

As you are all aware, market conditions globally became more difficult and volatile during the second quarter, and that has persisted into the summer. Economic conditions in the US and Europe in particular have become more fragile, and investor uncertainty has increased as a result.

Against this backdrop, we continued to preserve our fund investors' capital and generate consistent, risk-adjusted returns during the second quarter and through July. As always, our performance is a function of our disciplined approach to investing and actively managing risks, as well as our low use of leverage.

Our multi-strategy approach and international capabilities continued to enable us to be nimble in adjusting our portfolio allocations to take advantage of investment opportunities despite rapidly changing market conditions. These attributes are integral to maintaining broadly diversified portfolios.

As a result, we have continued to build on our long history of generating profits for our fund investors. We are able to capitalize on a broad range of opportunities in multiple geographies without excessive exposure in any one area.

We believe that institutional investor interest in Och-Ziff remains strong relative to the hedge fund industry. Investors continue to actively seek access to investment managers that generate risk-adjusted returns which have a low correlation with the equity markets and have also consistently protected capital.

We believe that this has led to increased allocations to the hedge fund industry and to Och-Ziff in the first half of this year, and we believe that this acceleration will continue.

Now let me briefly review our business results.

As we announced this morning, our assets under management as of August 1 totaled $29.9 billion, reflecting year-to-date growth of 7% or $2 billion from December 31. Of this amount, $1.1 billion was attributable to capital net inflows and $900 million to performance-related appreciation. These amounts included $600 million of net inflows on August 1.

We have maintained an active dialogue with a broad range of fund investors and we continue to see strong interest from a diverse mix of investors globally. Consistent with the last several quarters, we have seen particular interest from pension funds and private bank platforms. However, we anticipate that capital flows will continue to vary significantly month-to-month, as institutions remain cautious and deliberate in their selection of managers.

Now for a quick update on our funds' investment performance. Year-to-date through July 31, our Master Fund was up 3.4%, net. Our Europe Master Fund was up 0.2%, net. Our Asia Master Fund was up 2.2%, net. And our Global Special Investments Fund was up 6.1%, net. These returns were generated with less than half the volatility of the S&P 500 Index.

Our year-to-date performance was primarily driven by our credit-related and equity long/short strategies, as we saw a diverse range of high-quality investment opportunities worldwide. As I mentioned earlier, our performance reflects the benefit to our fund investors of our active risk-management process and the flexibility of our multi-strategy model.

In response to the higher level of economic uncertainty during the second quarter, we reduced exposures and increased our allocation to cash in the Master Fund to 7% as of July 1, from near 0% as of April 1.

We are continuing to see attractive opportunities in credit and equities, although we are being more selective. We believe that our global presence, flexibility and expertise, provide us with an advantage in identifying and capitalizing on investment themes as they evolve in this dynamic market environment.

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

Thanks, Dan.

Today I will review our 2011 seconds-quarter results and discuss how we are thinking about expenses for the third quarter.

For the 2011 second quarter, we reported a GAAP net loss of $93 million, or $0.96 per basic and diluted Class A share. For your reference, a discussion of our GAAP results is contained in our press release.

Now let's turn to the details behind our 2011 second-quarter economic income, beginning with revenues.

Management fees totaled $125 million, of which approximately $120 million was attributable to the Funds segment, and $5 million to other operations, a 6% increase from the 2011 first quarter. This increase was attributable to approximately $1.4 billion of growth in our assets under management from January 1 to April 1. From April 1 to July 1, our assets under management grew an additional $300 million, to approximately $29.3 billion.

Our average management fee remains at approximately 1.7%. This is a blended rate that includes the effect of our non-fee-paying assets.

Incentive income totaled $7 million during the second quarter and was all attributable to the Funds segment. This total is related to redemptions.

Now let me turn to the 2011 second-quarter expenses.

Comp and benefits totaled $23 million, with $22 million attributable to the Funds segment and $1 million to other operations. Of the total, salaries and benefits were approximately $17 million attributable to the Funds segment, and $1 million to other operations. This amount reflected a 5% increase from the 2011 first quarter.

Second-quarter comp and benefits also included $5 million of bonus expense, primarily related to guaranteed bonuses, which was essentially all attributable to the Funds segment.

The ratio of salaries and benefits to management fees remained at 15% in the second quarter. We expect this ratio to remain at approximately 15% to 17% for the third quarter of this year.

Now turning to non-compensation expenses, non-comp expenses totaled $22 million in the second quarter, 6% higher than the 2011 first quarter, with approximately $21 million attributable to the Funds segment, and $1 million to other operations. The ratio of non-comp expenses to management fees remained at 18% in the second quarter, and we expect this ratio to remain at approximately 18% to 20% for the third quarter of this year.

Our 2011 second-quarter effective tax rate was 22%, compared to 19% in the 2011 first quarter. For the third quarter, we estimate that our effective tax rate will remain in the range of 19% to 22%. As a reminder, our 2011 full-year effective tax rate is subject to variables that we can't determine until the fourth quarter of this year. As a result, our full-year tax rate could vary significantly from our estimate.

Our 2011 second-quarter distributable earnings were $68 million, or $0.16 per adjusted Class A share. As you saw in our press release this morning, our dividend for the 2011 second quarter is $0.14 per Class A share. As we do each quarter, we use cash to fund items related to the operation of our business. The most significant of these continue to be withholding taxes to be paid the vesting of RSUs and principal repayments on our variable-rate borrowings.

Before closing, I'd like to emphasize that we believe it's most meaningful to evaluate year-to-date net capital flows in order to identify any trend in our organic asset growth. As we have said previously, our monthly net flows can vary, sometimes significantly, and are therefore not the best measure of growth momentum from our business.

Growth in assets under management is also a function of investment performance, including our ability to preserve capital in volatile or declining market conditions. Growth in our assets under management drives growth in management fees and incentive income, as we continue to generate consistent, positive risk-adjusted returns across market cycles.

As I have said before, we anticipate that growth in our total revenues will continue to more than offset any increase in our operating expenses over time. This operating leverage has been and will continue to be an important driver of earning power of our business.

With that, we are happy to take your questions.

Thank you. (Operator Instructions) Cynthia Mayer, Bank of America-Merrill Lynch.

Could you give us just some color on the types of fee schedules that are most popular these days, in terms of three-year lockup versus the more basic type of fee schedule?

The fees range, as you know, from 1.5% up to 2.5%. They are all popular; it all depends on an investor's preference and where they want to invest. So there's not any one particular focus on any fee structure; it's more on the overall structure and what they are interested in investing in.

So in terms of, for instance, the inflows you have this month, is it just -- shall we think of the mix as sort of 80/20, 50/50? Is there a way to look forward in terms of what you think the mix will be?

You know, we don't disclose the mix on a monthly basis, Cynthia, but no significant change from what you've seen historically.

Okay. And then I guess just one more fee question, which is, could you maybe give us a sense of whether there are any changes in trend in terms of sales and redemptions, as opposed to just fund flows -- net flows?

And then, for instance, in the July number, where you had a greater outflow than usual, following greater inflow, was that maybe a function of lower sales or was there a particular redemption in there? Thanks.

No dramatic change. I mean, I think for the past 12 months or so -- maybe even longer -- it's been clear that the flows are choppier than they have been historically. But the real key for us is both in the numbers we see in terms of inflows and in terms of the meetings we have and in terms of the product we are delivering. Our focus is always, are we giving investors reasons to stay with us and to join us? That's the focus.

And we think that everything we are doing is making us stronger and stronger on that front. We think you are seeing it in the numbers -- as I said, sometimes they are choppier. We always say, don't get too focused on month-to-month, but obviously, plus $600 million for this month is something we are very pleased with.

But most importantly, whether it's in the numbers themselves or the meetings we are having, or more importantly, how we are measuring ourselves and what we are delivering, we think the recent market volatility, the recent global uncertainty, our ability to navigate that, our 17-year history of performing throughout that is becoming more and more differentiated.

Great, thanks a lot.

Roger Freeman.

Just maybe a follow-up on Cynthia's flow questions. Could you maybe give us a sense of, with the inflows that came in here for July, the August 1 flows, maybe how many investors total that included, maybe what percentage of those were new to Och-Ziff versus existing?

And then, for those that were new, when did that -- when did those discussions begin? How long would you say that the lead time is now?

Well, look -- we are not going to disclose -- we don't disclose the details, but I will tell you, it is mixed across the board in types of investors who came in. So -- and it's mixed amongst new and additions, so it's actually a good mix amongst all. And I think that's the way it's been all year, and I think it's going to continue to be that way.

And Roger, in terms of your question about leadtime, look, that varies. And that's why it is so crucial for us to just continue to be in front of the best investors, to be continuing to deliver.

You know, we all -- we've been very consistent that the main marketing focus of Och-Ziff is delivering the product and being clear about what that product is. And so, we feel very confident that we are doing that and that people are seeing it.

And in terms of month-to-month flows, you know, we don't really have a good reason as to why they are a little bit choppier. We think it's a combination of the [things] we mentioned. But the most important thing is that the numbers are there and the investors are there.

You know, in the last couple of months, as we've kind of gotten into a higher degree of risk aversion for the macro issues, have you noticed any change in tone? On the one hand, there seems to have been some pullback on alternative flows across the industry -- not necessarily with you. But given what you sell, i.e. low-volatility returns and protection of principle, does that -- do you find that actually resonates more with people in this kind of environment?

I think that's likely to be the case. I mean, when you say "this environment", as I said, I don't want to get too wrapped up in month-to-month. But there's no doubt that difficult periods tend to accentuate the value of what we do. And we think that investors -- the longer investors tend to focus, the more experience they have in the market -- not just with us, but in the market -- the more they tend to understand the value of what we do, the more they tend to understand that not everyone who says they deliver it, can deliver it, the more the longevity of the track record matters, the more they understand the value of our international franchises, of our ability to move the capital around, et cetera.

So you are correct; we have heard anecdotally some of the things you've mentioned about flows being somewhat difficult in this environment. And we think that the numbers that we've put up on the performance and the numbers that we've put up in terms of the flows continue to differentiate.

Okay. Then I guess just lastly, on your AUM mix, can you give that by asset class? I'm just curious where you are with respect to -- also your cash holdings, I believe you had taken some risk off earlier in the quarter.

So, long/short equities, about 35%; convertible arbitrage 16%; structured credit 19%; other credit 15%; our private investments just 7%; merger [are] 2%. And as Dan mentioned, cash is 7%.

Cash at 7%, okay. And then just last, by customer -- by investor type.

Sure. Pension is 25%; funds of funds is 20%; foundation endowment 14%; corporate/institutional 13%; private banks 12%; affiliated capital 9%; and family office/individual 7%.

Bill Katz, Citigroup.

Just to come back to the flows for another moment, it seems that we are talking in circles a little bit in terms of the outlook. But just qualitatively or quantitatively, specifically to Och-Ziff, how is your RFP pipeline today versus either three months ago or six months ago? Is it higher, lower, or sideways?

Well, I'm not sure RFP pipeline is something that can be measured. That's not really how it works in our business.

As an example, if we meet with an investor, we can meet with one investor who says we've made a decision to allocate to hedge funds; we are likely to do something in the next 3 to 6 months. We could meet with another investor who says, our Board is about to focus on the issues in three months, and the ultimate investment could come in 12 months. And then, that process can vary.

So we don't have -- and I hope we've been clear about that -- we don't have a forward-looking pipeline that we can delineate month-to-month. But I will say this -- in terms of the number of quality institutional investors we are meeting with globally, what we are hearing from consultants, that pipeline, as you call it, looks very good. And so we believe that if we can continue to execute and perform and offer the other things that are relevant -- let's not forget -- transparency, infrastructure, controls, reputation, et cetera -- that we are very well-positioned.

Okay, that's helpful.

We are optimistic about the future flows; I want to be clear about that. Everything that we are seeing causes us to be optimistic about the future flows.

This period is a great example. This is obviously a difficult period in the market, but our -- Go back to what we've shown over years and years and years. We always show people not just our performance, but also our performance during down months. There's a reason why that matters, and investors know that.

Okay, that's helpful. Just a couple more questions.

Just given what is turning out to be relatively nominal return backdrop at the moment, and maybe if you sort of combine in the specter of low rates, a two-part question. One, is there any thoughts -- notwithstanding your discussion on some of the new business -- but is there any thoughts of potentially closing any of the funds to try and bolster returns at all? And/or, how are you thinking about returns against sort of budgeting on a go-forward basis? What kind of absolute returns might be reasonable to conclude?

The first part of your question about the absolute level of returns, that's a function of the environment. It's a function of the binary nature in certain markets.

You know, when one is looking to preserve capital in an environment where events in Europe have the potential to be very, very negative if they go one way, or the potential to be very positive if they go another way, and then events in Washington have the potential to be very negative if they go one way, and the potential to be very positive if they go another way, when one's primary goal is to preserve capital, that's a difficult environment to -- especially when markets ultimately decline -- that's a difficult environment to generate the positive absolute returns, and that's generally more of a preservation of capital environment.

We constantly evaluate where we are in our funds. I mean, Joel gave you the numbers. And one thing that hasn't changed at all -- our nimbleness -- when you look at how much we have allocated to each strategy and how much we have allocated to each geography, we recognize that our total AUM makes us one of the larger firms in the world.

But in each area -- and we monitor this very, very closely -- in each area, our resources, our level of personnel, the capabilities that the firm has, we believe is amongst the highest in the world. And in each area, our dollars allocated is nowhere near that level. So what we are -- that ratio, which we basically call our capability to our flexibility, remains extraordinarily high.

Okay. That's helpful. And just one last one -- thanks for taking all my questions. For Joel perhaps, in terms of the guaranteed bonus savings, about $5 million, where are you in terms of headcount and what might that look like -- what are the plans over the next sort of 6 to 12 months? And is there any kind of sort of impact on incremental margins as a result of that?

Well, 421 people overall in the firm. Obviously, that's grown a bit. And the scalability of the model, I think, is important. Because as you've seen, the ratios for expenses have stayed pretty much static, which means as assets grow, management fees grow to cover most of those expenses.

We will hire as the business needs people, because that's what we do; as the business grows, we will hire. But as I said, the growth in assets and the growth in management fees will cover those -- more than cover those fixed expenses.

Okay, thank you.

Dan Fannon, Jefferies.

I guess looking at the flows again and slightly differently, maybe, and trying to get a sense of what some of the negatives are that clients are saying to you. Are you getting any pushback, potentially, on capacity issues or your size? Is that a limiting factor for some potential new clients?

No. I mean, if you look at our flows, our flows have been very good and we think the -- not just the -- the meetings, the potential, the actual numbers have been very good. I mean, as I said, as one of your colleagues alluded, in an environment that has been difficult for flows and flows into alternatives, we still took in a large amount of capital.

So if anything, investors are more and more understanding of the differentiation of what we do. They also understand that when you mention capacity, we are not just one strategy or one geography. And as I said, this capability, the flexibility is really important. And they see that we just keep doing it.

And we are very transparent. Every month, our investors get a transparency report that shows them where the portfolio is allocated. And so they see that our capacity capabilities in each region, in each investment discipline, they see that our nimbleness has not changed. And we think that's actually a strength and they are seeing that as a strength.

Okay, great. And then I think the question was asked earlier that there was no change in the fee-related -- but I believe you've given the percentage before of the longer-term lockup versus the traditional, and I am assuming then that that's -- is it still kind of that 11%-12% range? Is that about right?

Actually, last Q, it was up to 15%. It's around 16% right now.

Okay, thank you.

Ken Worthington, JPMorgan.

Hi, good morning. I think we've beaten the sales to death, so maybe I will turn to returns. Returns in the quarter were reasonably good. Returns in July looked to be very good. I think you guys mentioned that long/short in credit were really the drivers.

Any flavor you can give us on why things are doing particularly well in those strategies for you right now? Any color on how you are positioned? I don't know to what extent you can give us a little flavor without giving away too much would be helpful, too. Thanks.

In the credit area, I think it's a combination of our breadth and our capabilities, and that's just -- it's a great segue from the question about capacity and flexibility. We have capabilities in all three geographic regions. We're doing a lot in the US and a lot in Europe. We're not doing a lot in Asia on the credit side right now because of the supply, but our capabilities there are still quite strong.

We have capabilities not only in the corporate distressed area, but over the past four years, we've built what we think is one of the strongest capabilities both in the US and Europe in the structured credit area. And so that gives us so much to choose from.

In addition, our size is often an advantage -- the size of the firm is often an advantage in that area because, in some of those areas, getting the call, being in the flow and having the capability is very, very important. So all of that comes to play and works to the advantage of our investors.

The teams have also done a good job in terms of the portfolio. I'm sure you've read certain areas of credit declined dramatically during certain parts of mid-June and July. And I think our teams did a very good job on an individual security selection basis in avoiding most of those areas.

On the long/short equity side, the key is our resources. We've got a very long history of combining our industry analysts with our event-driven analyst. We are very good at hedging the portfolio, so it's about generating alpha as opposed to taking any directional exposure. And the current volatility that you are seeing works to create opportunities for us, the dislocations often create opportunities for us.

It's just blocking and tackling. It is strength and breadth of the team, it is adherence to our investment discipline, and it's utilizing all the resources of the organization to bring opportunities to the individual teams and make them stronger.

Great. And then can you just give us maybe your macro outlook for the second half of the year, what you're positioning your funds and your portfolio for as you look out into the second half? Thanks.

In our firm, we don't so much have a macro outlook as much as a focus on understanding what are all the variables and pieces, where are the risks, what are others maybe too concerned about, what are others not as concerned about? What are some things going on globally that are very important?

We are worried about a lot of the same things others are worried about. We've clearly noted that the US economy over the past two or three months appears to be weaker than it had been. You've seen that in jobs numbers, you've seen it in GDP revisions, you've seen it in some other numbers. That is something that is -- that's a very important area of focus for us. We see that as -- while everyone tends to focus on what's right in front of them, whether it's the Greek debt crisis and what will happen next week at the meeting in Europe; or the US debt ceiling and what will happen over the weekend in Washington.

While, of course, we are very focused on that, we try and look ahead and think about what else is going on. And the world is a very -- the world is not synchronized. So while in the US a lot of the focus is on the declining -- the recent decline in economic growth. In Asia, the focus tends to be economic growth perhaps being too strong, inflation being higher than they would like, and their currencies being too strong.

So having all of these international capabilities is incredibly important to letting us get ahead, not so much predicting what's going to happen, but in understanding where the dislocations are going to be.

Great, thank you very much.

Marc Irizarry.

Great, thanks. Dan, can you just give a little more color on what's happening for flows for Europe Master? And it looks like a couple of difficult months there. How have sort of your European exposures in Master Fund held up, i.e. are you pretty much seeing the same impact on Master from sort of the European exposures? Maybe you can just take us through what's happening there.

Well, in terms of performance, you can see the arithmetic. The European fund is roughly flat on the year. So you can do the arithmetic. Obviously, that, at the margin, has reduced the overall performance in the Master Fund when you blend the three regions.

Having said that, our European business has been a very important part of the firm since we opened the office back in the late 1990s. We've got about 65 people. We think we have perhaps the strongest franchise in the region. And right now, investor interest in Europe is relatively low because of all the uncertainty and all the issues.

Having said that, we are already beginning to see some of the forward-thinking investors start to ask, okay, if everyone is underweight Europe and everyone is afraid of Europe and everyone wants to be out of Europe, usually that's where smart people can make money. And they are starting to come to us and ask, how should we be thinking about this? How should we be looking at all the assets that are held by European banks? How should we be looking at all the changes that are occurring? How should we be looking at equity markets, which have suffered relative to global equity markets?

So it's early to get -- it's early to start thinking about allocations being made, but we do believe that investors will start thinking that way, and we believe that we are extremely well positioned. I will say that obviously the performance of the fund -- being flat is not as good as being up, but when one looks at what's happened in that region, we think the team has done an excellent job and we are extremely confident in the capabilities.

Okay, great. And then can you just -- just staying along the theme of non-US investors, how much of your AUM is sourced overseas? And then I guess relatedly, maybe you can give us an update on Ucits and also maybe distribution efforts outside the US and how those are progressing.

Yes, let me give you the breakdown -- the investor breakdown by geography so it will give you a sense -- the AUM breakdown by geography. About 71% North America, 18% Europe, and then the remainder is throughout Asia, the Middle East and mixed amongst that.

And in terms of Ucits, Ucits is a slow process. We knew that when we went into it; that's what we've been told by other outside advisers, that has been the case historically. We view that as a long-term, as a long-term opportunity to expand Och-Ziff's brand amongst a universe that didn't have exposure to us prior to the Ucits [product].

And then how about investments to grow your distribution with investors outside North America and Europe? Do you see sort of headcount or relationship-driven distribution efforts in the future?

We haven't made any significant change there. Over time, we have an investor relations presence in our Hong Kong office. Some number of years ago, we didn't have that. We had a dedicated capability in our London office some number of years ago, we didn't have that. So international continues to be important. We have invested in and grown our business there, but we have not made any dramatic changes in that area.

Okay, and then just, Joel, on the incentive fee that came through this quarter, how should we think about the incentives outside of the year-end? Is this sort of just redemption-related and should we expect that to continue into next quarter as well?

Well, yes, this was redemption-related, and I wouldn't assume anything in relation to what's happened in this quarter. So nothing to predict; it's just related to redemptions or past redemptions this quarter.

Okay, great, thanks.

Roger Freeman.

I just had two follow-ups. I guess -- and Dan, you partly answered this, but just wanted to go into a little more detail. Just on structured credit, as you noted, there were some pretty dramatic declines, just looking at ABX for example, off the highs earlier in the year, 15% to 20%. And yet you've never really seemed to impact your returns to significantly, and I believe you had been a buyer of some of the European structured credit that has been sold out of the bank there.

Has it just been a function of kind of superior risk management around that? Because I know the credit is kind of the one area where you have a net long exposure as opposed to hedging, right? It's just -- it's hard to reconcile the decline in the asset and relative -- lack of impact on your overall returns.

Well, I think you just highlighted another of the capabilities and resources that works for our investor. The combination of securities selection and risk management by the teams in those areas work well. You can call that alpha generation, you can call it securities selection, you can call it anything in that area, but it did work well, and I think it is noted by investors.

And I think investors also note that here's an area that, prior to the crisis, we did not have a business in. And we have methodically and carefully built in both the US and Europe what we think is one of the best businesses in that area. That's manifesting itself in terms of our ability to make significant allocation to the portfolio, the returns we are generating, where we are -- have positioned ourselves in terms of flow and in terms of the calls that we are receiving. And hopefully, the outperformance that you mentioned will continue and work to the benefit of our investors.

Okay, that's helpful, thanks. And then just the last question is, on Global Special, I was just looking at the returns there. I mean it's really been pretty solid returns, positive every single month. Can you just remind us what's in that? I believe that that had more emerging markets in it, but -- actually I take that back; it was negative in July, but all the other months were positive. What is that comprised of at this point?

That fund, as you remember, is a longer-term lock-up fund, so it tends to be more weighted towards credit and other private investments with a longer-term lock-up.

Okay. Do you think that you would -- I believe -- and correct me if I'm wrong -- that you had moved -- that's largely the partner principle in there at this point? I don't think there's a lot of third-party client money in there. But given how well that's done, is that anything that you would look to sort of resume capital raising for at some point?

Well, if investors -- if that's where investors wanted to put capital, of course, they've always had the ability to do it. We are definitely seeing interest in some of our credit capabilities. We are seeing interest in -- because investors are noticing what you're noticing -- that our ability is not just on a multi-strategy approach and not just an equity approach, but also in the credit and structured area are quite strong.

So we are seeing some interest by investors in our credit and structured credit products, but whether that manifests itself into the special investment fund or in other vehicles is going to be up to the clients and what they want to do.

Okay, great. Thanks a lot.

That concludes the question-and-answer session today. I will now turn the call over to Ms. Madon.

Thanks, Anika. Thanks, everyone, 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 George Sard or Jonathan Gasthalter at 212-687-8080.

Ladies and gentleman, this concludes the presentation. You may now disconnect. Thank you and have a great day.