Sculptor Capital Management Inc (SCU) 2013 Q4 法說會逐字稿

Good morning everyone and welcome to the Och-Ziff Capital Management group's 2013 fourth-quarter and full-year earnings, conference call. My name is Emma and I will be your coordinator for today.

(Operator Instructions)

I would now like to turn the call over to Tina Madon Head of Investor Relations at Och-Ziff.

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

As a reminder today's call may include forward-looking statements. Among other things these statements reflect management's views on assets under management, the capital flow environment, expense levels, financial performance, investment opportunities, and strategic business priorities many of which are inherently uncertain and outside of our control. Och-Ziffs actual financial results investment performance and assets under management may differ possibly materially from those indicated in these forward-looking statements.

Please see our 2012 annual report for a description of the risk factors that could affect our financial results and our business. The company does not undertake any obligation to publicly update any forward-looking statement whether due to new information, future developments, or otherwise.

During today's call, we will be referring to economic income, distributable earnings, and other financial measures that are not prepared in accordance with US GAAP. 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 our website at www.ozcap.com. 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. With that, let me now turn the call over to Dan.

Thanks Tina. Good morning everyone and thank you for joining us. This morning I will review our investment performance for 2013 in January of this year, I'll discuss our assets under management. I'll touch on our strategic growth priorities for 2014 and update you on our capital flows and what we are hearing from our fund investors. After that Joel will review our financial results and then we will take your questions.

2013 was an outstanding year for us, and demonstrated the strength of our firm globally. Last year was also reflective of the significant progress we've made towards our strategic goal of becoming a global multi-product alternative asset manager. We grew to a record level of assets under management, earned record revenues and distributable earnings, and paid a record full-year dividend.

We are extremely pleased with these results. As we begin our seventh year as a public company and our 20th year in business, we are confident that Och-Ziff is better positioned competitively than it is ever been.

Throughout 2013 we demonstrated the discipline and repeatability of our investment process. We generated very strong performance in all our product areas creating significant value for our fund investors. The depth and breadth of our expertise across strategies and geographies were again evident as was the flexibility we maintain in adjusting our portfolio allocations as market conditions change.

This flexibility is key to our investment process because it enables us to be highly opportunistic in how and when we invest capital globally in each of our products. These attributes are integral not only to the decision by fund investor to place capital with us, but also to their request that we expand our product offerings into areas such as dedicated credit and long/short equity.

The strong growth in our asset-base last year was reflective of both our investment performance and increasing organic net flows. Our business is evolving as we continue to become a solutions provider that can offer a diverse range of products to institutional investors. We believe that this has enabled us to attract greater share of the capital allocated globally to alternative asset managers.

We are growing in areas where there is excess capacity and where current and prospective fund investors have expressed interest. This in turn has enabled us to broaden and deepen our relationships with them.

Our performance in asset growth in 2013 are a tribute to the caliber of our employees across the firm. We are confident that we have and continue to develop and promote the most talented team globally. The collective skill and commitment from our 24 partners, 55 managing directors, and our employees was integral to driving the records we achieved last year.

Equally important the excellence of our employees has enabled us to broaden and deepen management and investing responsibilities at all level of the firm as our business has expanded. As a management team, we are proud of their accomplishments and the resulted momentum in our business.

Now let me review our assets under management. On January 1 of this year our assets under management totaled $40.6 billion increasing 27% or approximately $8.7 billion from $31.9 billion on January 1, 2013. This reflected approximately $4.5 billion of performance related asset appreciation and $4.2 billion of capital net inflows including $1.6 billion of CLO assets. As you saw in our 8-K released earlier this week our assets under management on February 1 increased to $41.3 billion.

Throughout last year we experienced strong demand from pension funds and private banks which represented a significant portion of our net inflows. In addition to these areas, we are also seeing a pickup in interest from investors internationally. Investor interest remains high across all our products and we anticipate that this momentum will continue in 2014.

Now let me turn to our funds investment performance. For the full year through the December 31, our master fund was up 13.9% net. Our Europe master fund was up 12.4% net and our Asia master fund was up 13.5% net. These returns were generated with less than 37% of the volatility of the S&P 500 index on a weighted average basis.

We were active in all of our strategies at varying points throughout the year, but the most significant contributors to our performance being our long/short equity special situations and credit related strategies. In January, our performance demonstrated our ability to consistently protect investor capital against the backdrop of sharp declines in the equity markets globally.

As always we actively managed our exposures as market conditions evolved. The master fund was down just 27 basis points net, the Europe master fund was down 7 basis points net, and the Asia master fund was down 3.1% net.

Looking ahead to 2014, we are positive on the investing environment. We ended 2013 fully invested in the master fund and although we remain cautious as macroeconomic and political uncertainties persist, we believe the current environment will play to the strengths of our multi-product investment approach. Markets characterized by volatility and uncertainty provide us not only with strong opportunities to outperform, but also with new investment opportunities globally.

We currently see compelling ideas in event driven a global long/short equity. We also believe that we are well-positioned in our credit strategies to take advantage of the investment opportunities we see. We believe that the demand for diversified alternative asset managers who demonstrate excellence will continue to increase. Although global equity markets had a strong year in 2013, institutional investors remain extremely focused on risk mitigation, and downside capital production of their equity portfolios, and yield enhancement in the fixed income portfolios.

Industry data suggest that the trend line for capital allocations toward alternative managers increased meaningfully in 2013. We firmly believe that our performance, the strength of our business, and the expansion of our product offerings position us to accelerate our growth. We believe that institutional investors are increasingly seeking alternative managers who have global reach and scale and can offer them a flexible solutions-based approach to investing across multiple asset classes.

Our strategic objective continues to be to expand our business by offering multi-product solutions to current and prospective fund investors globally. Against this backdrop our priorities for the coming year will be; to continue to create value for fund investors by generating positive absolute returns with low volatility; to take advantage of our investment expertise and institutional strengths; to grow assets under management in our multi-strategy credit, real estate and long/short equity platforms; and to add additional product offerings in order to meet the needs of our fund investors; and to scale our business and infrastructure as our assets under management grow and our product offerings expand. We are confident that our ability to achieve these objectives will result in strong asset and earnings growth over time.

With that let me now turn the call over to Joel who will take you through our financial results.

Thanks Dan this morning I'll review our 2013 full-year and fourth-quarter results. I'll also briefly review the way we are thinking about expenses for the first quarter of this year.

For the 2013 fourth-quarter, we reported GAAP net income of $196 million or a $1.19 per basic and $1.12 per diluted class A share. For the full year, our GAAP net income was $252 million or a $1.61 for basic and $1.57 per diluted class A share. As always a discussion of our GAAP results is contained in our earnings press release which is available on our website.

Let me now review the details of our economic income results starting with revenues. Our total revenues for 2013 were $1.6 billion. These are the highest revenues we've earned since Och-Ziff was founded almost 20 years ago and nearly 50% higher than our revenues in 2012.

Total revenues for the 2013 fourth-quarter were $1 billion incentive income for the year and the quarter were the highest that we have ever earned. Full-year 2013 management fees totaled $546 million management an 11% increase year over year as average assets grew 19% for the same period. Management fees in the fourth quarter were $146 million 6% higher on a sequential basis.

From July 1 to October 1, our assets under management grew by approximately $1.7 billion or 5% to $37.8 billion. From October 1 our assets under management grew another $2.8 billion or 7% to $40.6 billion on January 1 of this year. Our average management fee for the fourth quarter of 1.52% up from 1.5% in the third quarter. As a reminder, we anticipate our average management fee will vary based on the mix of products that drive the growth in our assets under management and therefore will fluctuate over time.

Full-year 2013 incentive income totaled $1.1 billion 80% higher than the incentive income we earned in 2012 due to the strong investment performance across all of our funds. The strength of this result demonstrates the powerful effect that both strong returns in asset growth has on our ability to earn incentive income.

Now let's turn to operating expenses. Full-year 2013 comp and benefits was $406 million a 38% increase over the prior year due principally to higher cash bonus expense, salaries and benefits were $90 million, 14% higher year over year. In the 2013 fourth-quarter, salaries and benefits were $24 million a 4% increase on a sequential basis. The increase in both periods was due to a higher activities globally last year.

For the 2013 full year and fourth quarter salaries and benefits were 16% of management fees. For the first quarter of 2014, we expect this ratio will remain in the range of 16% to 18%.

Full-year 2013 cash bonus expense was $316 million a 47% increase from 2012 due to the significantly higher incentive income we earned. This amount included the performance awards paid to certain executive managing directors under the terms of the partner incentive plan. As a reminder, 2013 was a first year in which these awards were granted.

Cash bonuses were 19% of total annual revenues last year compared to 20% in 2012. We follow the same methodology for discretionary bonuses in 2013 that we've always used. We determine bonuses based on the full-year economic results of the firm including incentive income crystallized at year-end with the objective of maintaining a stable franchise and culture through a competitive compensation structure.

Our strong investment performance last year and the substantial progress we made in becoming a multi-product alternative asset manager reflects the skill and dedication of our employees. Our firm is comprised of extremely talented people who through their commitment and expertise are integral to helping our business perform and expand which in turn will drive our future earnings growth.

Now let me turn to non-compensation expenses. Full-year 2013 non-comp expenses were $126 million 21% higher than the prior year. For the fourth quarter, non-comp expenses were $32 million a 10% increase sequentially.

The year over year increase was due primarily to higher professional service fees as well as increased IT and other infrastructure cost related to the growth in the business. This sequential increase was primarily related to higher infrastructure expenses.

For the 2013 full-year and fourth-quarter non-comp expenses were 23% and 22% of management fees respectively. For the fourth quarter of 2014, we expect the first quarter of 2014 we expect that this ratio will remain in the range of 21% to 23%.

Our effective tax rate for the 2013 full year and fourth-quarter were 18% and 17% respectively. For the 2014 full-year and for the first quarter, we estimate that our effective tax rate will be in the range of 22% to 25%; however as always, these estimates are subject to many variables and won't be finalized until the fourth quarter of this year and therefore could vary materially.

Distributable earnings for the 2013 full year were $904 million or $1.87 per adjusted class A share. For the fourth quarter, they were $559 million or a $1.15 per adjusted class A share.

As you saw in our press release this morning, our 2013 fourth-quarter dividend was a $1.12 per class A share. Bringing our 2013 full-year dividend to a $1.79 per class A share. This is the highest annual dividend we have paid since we went public.

To conclude, we are extremely pleased with the performance and growth of our business last year and the resulting strength of our 2013 financial results. The earnings power of our models clearly evident which is driven by strong revenue growth in substantial operating leverage.

As we look forward to 2014, I'd like to reemphasize three points. First, the repeatability of our investment performance and in turn our ability to earn incentive income. Even though or absolute returns may vary year-to-year, the consistency of those returns is central to the value we have provided to our fund investors throughout our 20 year history. 2013 was an exceptional example of that.

In each year that we generate investment performance, we earn incentive income and we don't need to monetize large or liquid investments that crystallized the majority of that. We earn 20% incentive income annually in cash on the majority of the assets under management this is a powerful yet under appreciated driver of our earnings growth.

Second, the linkage between the consistency of our returns and our ability to grow assets under management we made significant progress in 2013 towards a goal of evolving our business to become a global solutions provider through our expanded product offerings. In addition, the increase in the invest able assets of our fund investors resulting from our strong investment performance was substantial and virtually all the appreciation remain with the firm.

All sources contributed significant asset growth we achieved last year. Our track record in the quality of our investment process for each of our platforms are the single most important criteria to current and prospective fund investors in allocating capital and create substantial growth momentum not only in 2014, but also in future years. As our business expands and our assets under management grow, and we continue to generate returns, our incentive income grows. The compounding effect of asset growth of incentive income we earn is substantial.

Third the profitability of our business. Our fixed expenses have a low relative to our revenues historically even as we have invested to support the growth of the firm. The largest part of expense base is bonuses which are discretionary invariable based on the economics of the business. Because of these factors, our business has been highly profitable.

Earnings are cash-based and has always been our policy we expect to continue to payout substantially all of our annual distributable earnings to our shareholders. Our 2013 full-year dividend was approximately 96% of our distributable earnings. With that, we will now take your questions.

(Operator Instructions)

Your first question comes from Bill Katz from Citi please proceed.

Thank you very much for taking my questions. I guess the thing that I hear on this post quarter update is just an acceleration of the business momentum. So maybe you could frame it out a little bit in terms of where you're seeing the stepped up demand and could you break that down maybe between US and non-US investors and maybe new versus existing clients?

Sure we are really; we are seeing demand in a lot of different areas. I think consistently for the last year or so we've talked about pension funds and private banks. And if you look at the allocations you're given each quarter you can get a sense of, where those flows have been going and it's been to all the different product areas. Our growth has a very simple model to it. We grow by providing excellence to fund investors. That's why a new LP will give us capital and that's why a current investors stays with us. And that has always driven what we do.

We believe that in addition to our multi-strategy products which have a very, very long history investors also see that our credit platforms, our real estate platforms, and our long/short equity platforms have the same characteristics. So I think the acceleration is about a continuation of what's been occurring. I think it's about more momentum in some of the other product areas, and we also see an acceleration globally probably related to the overall environment, but we have certainly seen an acceleration of interest from other investors particularly international.

Just one follow for me, given all that you did mention the new products is curious what you might be thinking about and the timing of any launch associated with that?

We have nothing to discuss or disclose at this time and those are evolutionary. Our new products in the past have been based on where do we see investment opportunity, where do we think we have an edge, where do we think we can excel, if we -- if all of that comes together, we then approach clients and gauge their interest. And that is the way we are going to continue to grow.

Okay thanks for taking my questions.

Thank you the next question comes from Dan Fannon from Jefferies please proceed.

Good morning. If we could talk about the marketability of some of credit in the long/short equity in real estate, I guess the track records on a standalone basis, where those sit, and then if I missed -- I see some of the AUM's, but maybe I missed the performance for some of those smaller strategies and how those have tract you know in more recent periods.

We don't disclose on multi-strat assets and some -- and the credit assets, the individual performance and so, I think that's probably what you're looking for but we don't disclose those particular performance numbers.

But are there three-year track records for separated for the real estate credit and long/short equity to go out and market or is that something that's in the process of building?

Sure definitely, definitely separate track records for all the different products to go out and market.

Okay. And then just a follow up maybe on the first question just with regards to your existing customer base, and thinking about I know you've mentioned in the past that the credit originally was built out of sourcing clients from the Master Fund. Can you just talk about where you are in the process of targeting existing customers with, you know, these new solutions on a standalone basis and then ultimately -- or is it more coming from new customers like you said before in private banks and internationally?

It's both. We are seeing current clients in one product invest in other products and obviously that's something that's very important, that vote of confidence is very important. And that's part of the process of creating a deeper relationship where we can add more value and [time] with that client and we are also seeing new clients come to the firm in the different product areas. That goes back to what we said earlier we are only going to grow -- a new client is only going to come with us in any of our products if they think that's their best alternative anywhere in the world. A current client is only going to move to a new product, add to new product, and stay with us if they believe that we are the best alternative for them anywhere in the world. That's been the case for 20 years and that's what drives our business model.

Then I guess just one follow-up just with regards to the performance fees in the quarter was there any three-year lockup expiration in that number and do we anticipate anything in the first half of the year that's sizable for the three-year tranches?

No, basically it was generally very strong performance for all the asset classes, including some that we don't disclose, some of the credit assets and all the multi-strat assets. And there will be not -- in the first quarter there's nothing material coming in.

Thank you.

Thank you.

Thank you the next question comes from Ken Worthington from JPMorgan please proceed.

Hi good morning. I wanted to flush out your comments on the strategy for 2014 in particular growing AUM, maybe what is the strategy on the distribution side to grow. I know you said the international client base has been strong. Are you doing new things to further penetrate them I think earlier in the call you talked about compensation and salaries going up because you've been hiring are you hiring more people in the distribution side? So any color there would be helpful.

Sure look our main focus in terms of how we are going to distribute these products is the product itself. The performance, the risk management, the team, the infrastructure, et cetera. We did talk in the past about -- as we grew different products, especially products where the institutional level the decision is made by people who have not traditionally been our touch point and contact point, we did talk about expanding and reorganizing the sales force just to accommodate how the institutions work that process has been in place for some period of time. We think it's working well, but I want to be clear you can't sell a product that isn't excellent, but it does make sense to adjust the sales force to accommodate the institution.

So we don't have any plans to do anything different than were doing on that front other than the continued evolution. You also may be referring to the retail area which may be a next step, we don't have anything particular that we are focused on from the distribution side having said that, I think we've talked about this with the private banks we weren't the first and we didn't create the distribution. Our goal was to have the product that they would want as the distribution evolved. And that's how we are positioning ourselves on the retail side as well.

Okay thank you. And you mentioned performance excellent, can you talk about the performance of the non-Master Fund products in 2013? It would be great if you could give us maybe even the approximate returns for the other multi-strat funds, the returns for the credit funds, and the returns for the CLOs so we can try to benchmark you against some other strategies.

Now no we don't disclose those returns, however, I will reemphasize the size the fact that performance across all asset classes was excellent.

Can you maybe say -- were the returns in those different areas above or below the Master Fund so that's not too specific.

No, listen we don't disclose at this point, at some point in the future -- remember we've talked about this, if we deem significant and as we talk to our disclosures determined that should be disclosed, we will but at this point we just don't disclose that information.

Okay, then last one in terms of the new contracts with your partners, where should we expect unit count to go in 1Q 2014?

The increase should be around 3% to 4% some of that obviously relates to compensatory awards and some relates to promotions, but the increase should be around 3% or 4%.

Okay thank you very much.

Thank you.

Thank you the next question comes from Cynthia Mayer from Bank of America Merrill Lynch

Hi, good morning thanks. I guess just to follow up on the questions on flows, are seeing primarily demand in one-year performance fee structures, three-year or some other structures? And are credit products primarily one year?

I'd say that we are not seeing significant demand for the three-year structure. I think Joel can give you the numbers and you'll see the overall trend. I think what's important to us is that virtually all of the assets that were in three-year tranches when they've expired have stayed with the firm that's very important. And we are certainly receiving large mandates. We are receiving a diversified base of mandates we are receiving mandates and different product areas. But at the margin versus two or three years ago, when the three-year tranche was relatively popular, it tends to be more in the one-year area.

Okay great. Correct me if I'm wrong, but it sounded like a little bit like you're more interested in building out your retail and I'm wondering would you be adding to sales and marketing on that this year? Or different kinds of products, how's the demand there?

Sure with all due respect, I will correct you if you're wrong -- or maybe I did not speak as clearly so I appreciate the opportunity to clarify. Right now we are not doing anything substantial in terms of retail. We've always felt that when we grow we like to do it incremental, we like to make sure that everything is in place in terms of the teams, the performance, the infrastructure, the capacity, et cetera.

We do think that from an industry basis retail and other high net worth channels are likely to grow over time and those investors will want access to some of the top managers. As we did with the private banks our goals -- let's just make sure that we are one of the top managers and are perceived to be one of the top managers. And then if something makes sense we can make it happen, but we are not doing anything particularly proactive right now on that side. So thank you for giving me an opportunity to clarify.

Okay thanks for correcting. And then I guess just lastly can you maybe give a little color an update on I think you're pre-IPO partner agreement allowed partners to sell shares and I think they could sell up to 20% through this year, and after that it's discretionary I think through an eternal committee. So you have any further thoughts on how you would structure that beyond this year and any update on sales last year?

Well there have been no sales and no conversions. Obviously we haven't thought about what's going forward, but since people haven't had any interest in selling we will contemplate that and think about what were going to do and let you guys know as we move along.

Okay thanks a lot.

Thank you, the next question comes from Marc Irizarry from Goldman Sachs please proceed.

Great thanks, Dan. Dan can you help us understand in EM how you're thinking about taking advantage of some of the volatility out there. And specifically I'm curious around some of the new product or investment opportunities that you mentioned your LPs over time might be asking about EM -- or EM opportunities in that opportunity set over time in your view for what you do?

Look for us, the EM volatility is part of the overall volatility being caused by some of the macroeconomic issues, whether that's tapering, whether that's potentially slower growth in certain areas. So number one we incorporate all of those things into our risk management process. We are very pleased that in January you saw the Master Fund down 27 basis points the other funds in similar fashion, that's really important. The idea of downside protection over 20 years is one of the things that's really differentiates the firm.

So we believe that this type of volatility, number one, it gives an opportunity to show we can do, but we have to do it, and then these type of dislocations tend to create the investment opportunities in different areas. What we like, one of the things we like our multi-strategy, multi-products approach is that rather than say okay we do EM, or we do this, or we do that, and that's the only thing we can look we have the ability to look at all assets globally have them linked from a risk management point of view and have a stack up on a risk reward versus each other.

Okay and then I'm curious you know when you step out into more single strategies such as global long/short or credit. How do you -- how is Och-Ziff differentiated itself? It seems like those, there's, within those sleeves if you will there's a competition that's maybe a little bit bigger in those categories versus you being big within multi-strat and those strategies. So how do you differentiate yourself and against that competitive set?

Well, look the way to differentiate ourselves is the same way in the multi-strategy and any of those individual asset areas. The clients making a decision -- either recurrent or prospective client, are only going to come with us in any of the areas including multi-strat if they think we are the best alternative. So if you go back to what I said before about what we're looking to accomplish. The idea of our -- the idea of this multi-product solutions provider approach is, to say to a client -- okay here's what we are looking to accomplish, but if you're looking to do it, if you're particularly focused on credit or a fixed income yield enhancement, here's a different way to do that.

If you're particularly focused and it we think it's a big opportunity for the firm especially with the large move you have seen it past several years in the equity markets. If a client looks and says -- okay I've had big appreciation in my equity portfolio, I'm concerned about that data or exposure. I want to consider moving some of the equity allocation to a product that still is equity related, but doesn't have the same risk. In addition to the multi-strategy funds that existed now there's also an equity long/short platform.

If they want to take fixed income or credit assets and move some of that allocation, but want to do it to products that are focused solely on the credit and fixed income side, they can now do that with Och-Ziff. So it's just, we think, from the way with it internally and from the client interface the individual products and how we grow and penetrate it's the same methodology.

Just another question, obviously your -- if you look at your type of investors and the money that you have brought in. Its diversified across various number of types of investors, but I'm curious particularly within areas like the private bank how much. How many platforms are you on, and is that as you think about growth over time, is it the number of platforms? Or are you already on the shelf and going to grow in the existing with the existing footprint, or maybe give us some help in terms of how diverse you are within the private banks?

We are on several platforms -- we don't disclose that, but we are on several platforms. And I think the focus is more on the quality of the assets as opposed to just gathering assets or getting on every platform. It's the structure of how they do it, it's the quality of the investor and the institution that surrounding the investor, that's how we decide what to be on. But I think there are several -- and as long as that -- those criteria, we meet those criteria we will be interested in adding those assets.

As a general matter a goal is to be one of the top allocations from a platform. As opposed to just getting on as many platforms as are available and that just gives to the same concept of if we are doing what we think we should be doing, then we should be able to be one of the top allocations.

And then Joel just a question I might've missed this, but what was headcount at year-end?

Headcount was 546.

Great thanks.

Thank you.

The next question comes from Patrick Davitt from Autonomous. Please proceed.

Good morning guys seeing a lot of pickup in CLO growth and with that, increasing press coverage on frothiness in the syndicated loan markets. Can you give us an idea of what you're seeing in that market to the extent -- relative through maybe paper you saw before the crisis and to what extent their capacity constraints there without going too far out the risk spectrum?

Our CLOs we're comfortable, have performed extremely well. And as with everything, we view CLOs opportunistically. If there's an opportunity to grow the CLO platform in the CLO business in a way that makes sense for all the constituents, then we are going to do it. And if not, we won't. At the present time, we feel very good about the opportunity and where we are but that can evolve.

Okay, thanks and then in real estate -- obviously it's a small part of the whole, could you give us -- but there's a lot of demand there from the LPs at least and a lot of people talking about the opportunity particularly outside the US to buy good stuff. How much, can you give us an idea of how much dry powder is there and what the deployment rate could be and ultimately how that factors into your fundraising plans there?

At this time we don't really talk about the funds in terms of dry powder, but I want to remind you in addition to the dedicated real estate platforms, some of the assets that you're talking about will also have the capacity to buy -- in some of our credit products and in some of our multi-strategy products. To the extent it's pure equity in a real estate product with a long-term illiquid perspective that generally is only in the real estate products themselves. But to the extent they are more credit related, that's been a very good area for us. And I believe some of the international, particularly some of the European assets referring to could potentially be that.

All right, great thank you.

Next question from Bill Katz from Citi please proceed.

Thanks I just have a couple follow-up questions, probably going to say no. But I'm just a little curious any way to size where you stand right now in terms of equity long/short within the separate sleeve?

You're right the answer is no.

I got to give it a shot. Second question is, just two more. Can you talk you a little bit about what you're seeing on the redemption side for the fund-to-funds? It's been an area of outsized redemptions. It seems to me it's more of a gross sales acceleration story but curious what is going on there?

You can see from the press release the fund-to-funds percentage has been pretty static, it hasn't changed much. Obviously we can't predict the future, but especially with our fund-to-funds, we see it fairly stable.

And just a final one, going back to some of the other questions on credit. On performance, when you mentioned you have great performance is that from both an absolute perspective and/or relevant perspective?

For both.

Okay, Thank you.

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

Great thanks. Thank you 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 questions should be directed to Jonathan Gasthalter at 212-687-8080.

Thank you for joining today's conference call this concludes the presentation you may now disconnect. Good day.