Och-Ziff Capital CEO Discusses Q3 2010 Results – Earnings Call Transcript
Och-Ziff Capital Management Group LLC (
)
Q3 2010 Earnings Call Transcript
November 2, 2010 8:30 am ET
Executives
Tina Madon – Head, IR
Dan Och – Chairman and CEO
Joel Frank – CFO
Analysts
Roger Freeman – Barclays Capital
Bill Katz – Citigroup
Cynthia Mayer – Bank of America/Merrill Lynch
Robert Lee – KBW
Marc Irizarry – Goldman Sachs
Presentation
Operator
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Good morning, everyone and welcome to Och-Ziff Capital Management Group's 2010 third quarter earnings conference call. My name is Feb and I'll 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 call over to Tina Madon, Head of Investor Relations at Och-Ziff.
Tina Madon
Great. Thanks, Fab. Good morning, everyone and welcome. With me today are Dan Och, our Chairman and CEO and Joel Frank, our Chief Financial Officer. I'd like to remind you that today's call 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 2009 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 U.S. 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 For 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
. With that, let me turn the call over to Dan.
Dan Och
Thanks, Tina. Good morning, everyone. We appreciate you joining our call today. This morning I'll review our year-to-date investment performance through October 31 and assets under management as of November 1. I'll spend a little time reviewing our investment process and share our current view on capital flows. I'll also update you on the investment environment as we see it.
We continued to generate positive risk-adjusted returns for our fund investors with low volatility and low coalition to the equity markets regardless of market conditions, both during the third quarter and year-to-date. Our performance was a function of our adherence to a consistent disciplined approach to investing and managing risk. Our ability to invest across multiple strategies and geographies enabled us to be nimble in adjusting our portfolio allocations as market conditions changed. This was particularly evident in the month of October.
We have a long-history of generating profits for our fund investors because its diversified model enabled us to capitalize on opportunities across global market without excessive exposure in any one area. We deployed additional capital and increased our exposures without adjusting our risk parameters or changing our approach to evaluating new investment ideas.
Our consistency and discipline combined with our deep and long-standing investment expertise in each of our strategies are important elements of our competitive differentiation. Our fund investors play a significant value on both the preservation of capital during periods of market decline and the generation of competitive performance in rising markets.
They've realized that in order to produce non-volatile, non-correlated returns. We must – must be hedged and managed exposures at all times, not just in down markets. However, they also understand that we seek to generate competitive returns for them, regardless of market conditions or other factors. They therefore take a long-term view in placing capital with us and typically evaluate our annual investment performance rather than focusing on any specific month or quarter.
Within this context, our fund investors evaluate us based on our ability to consistently identify investment opportunities and strategies that perform within our risk tolerances, effectively manage the risk and liquidity of our portfolios and maintain a high degree of ongoing transparency in communications with them about our investment process and portfolio compositions.
Let me now turn to our business results, starting with assets under management. As we announced this morning, our assets under management as of November 1 totaled $27.2 billion, increasing $4.1 billion or 18% from $23.1 billion on December 31 of last year due to $2.4 billion of capital net inflows and $1.7 billion of performance-related appreciation.
These amounts include $300 million of net inflows on November 1 and $600 million of performance-related appreciation in the month of October. We believe it is most meaningful to evaluate year-to-date net inflows in order to measure the trend in our asset growth. As I had said previously, month-to-month capital flows can vary, sometimes significantly and therefore not the best measure of this growth.
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