Q3 2019 Earnings Call

During today's call, we'll 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 for the most directly comparable GAAP measures are available in our earnings release, which is posted on our website.

No statements made during this involves should be construed as an offer to purchase shares of the company or an interest in any of our funds or any other entities.

Our earnings press release from this morning also included an earnings presentation youll be referring to this report during the call if you'd like to follow along you can find them presentation on them public investors page of sculptor dotcom at the Threeq you press release link.

Earlier. This morning, we reported third quarter 2019, GAAP net loss at 200 of $25 million or a $1.20 per basic and diluted class a share as always you can find a full review of our GAAP results in our earnings release.

On an economic income basis, we reported third quarter 2019, distributable earnings of $2.3 billion or four cents per fully diluted share in the third quarter. We recorded a legal provision of $19.1 million, which will be which we will provide further detail on during the financial data.

Adjusted distributable earnings, which excludes the legal provision net tiara and other payables.

Were $17.7 million or 32 cents per fully diluted share for the third quarter 2019. If you have any questions about the information provided in our press release or on our call. This morning. Please feel free to follow up with me with that let me turn the call over to Rob.

Thanks, Lisa and good morning, everyone.

Starting with investment performance, which is a challenging quarter four funds.

Markets continue to react enrollments in the U.S, China Trade war and shifting settlement over global growth as well as sizable movements in interest rates, an abrupt sector rotations in equities.

Sculptor Rose two point was down 2.8% net for the third quarter, what is up 8.5% net year to date through September thirtyth compared favorably with the HFR realized fund weighted composite index year to date returned 6.8%.

In addition, the master from was up 1.9% net in October bringing year to date net performance to tenant half percent grew up so were 31.

Performance in the third quarter was primarily the result of a handful of negative company specific developments for some of our larger fundamental equity positions.

Corporate credit was also in that's attractive attributable in part to our modest exposure to energy related companies and idiosyncratic weakness the small number of positions.

Looking deeper into the Master fund performance I'd like to point out that there were number of positive developments, which helped to counterbalance losses, which we believe our illustrative of the benefits of our opportunistic approach.

And the breadth of our investment capabilities.

Several of our largest and most complex physicians in merger arbitrage corporate credit and convertible and derivative arbitrage was achieved significant milestones consistent with our investment thesis.

It is also worth noting that we hold net and gross equity exposure comparatively low during the quarter as higher implied volatility increased the cost of maintaining convexity in our hedge strategy.

This involves a number of disciplined reductions equity positions that have outperformed year to date and effort that we believe has been prudent given the potency of key headline risks related to the escalation of the trade war changes in monetary policy expectations mixed economic data and Brexit.

The scope their credit opportunities fund, our global were up through opportunistic credit fund was down 2.2% Thats in the third quarter 2019, and as of 1.1% net to the first nine months of the year.

While challenges for handful of positions have driven the near term underperformance. The fund continues to demonstrate strong and differentiated long term returns with a 10.8% net annualized returns since inception.

Our real estate funds continue to deploy capital and generate strong returns with a 20% annualized net return in our third opportunistic fund through September Thirtyth.

Turning to flows.

As you can see on page seven as of November 1st our assets under management were 33 billion.

Our net inflows in the third quarter were 15 million due to the closing of a new COO and inflows into our opportunistic credit strategy, partially offset by redemptions in the scope to Master fund.

In addition from October one two November 1st we had net inflows of 930 million driven by the first close of scope to real estate funds for.

Turning to page eight real estate had total assets under management of 1.8 billion as of September Thirtyth, which included reductions of 1.1 billion in the third quarter due to the expiration of the investment period for real estate fund three.

From October Onest November 1st Real estate had approximately 1.2 billion in subscriptions due to the first close of real estate funds for and related co investment vehicles.

There has been high demand given our strong performance and tenured team and we look forward to additional closings over the next year.

In addition, we continue to see opportunities to expand real estates product offerings.

Opportunistic credit has 6 billion of assets as of September Thirtyth, which included 97 million of net inflows in the quarter from October Onest inflows two quarters from October 1st in November Onest. There were an additional 76 million of outflows from former executive managing directors as part of.

The strategic actions announced in December 2018.

We continue to see room for future opportunistic credit product Adjacencies.

Institutional credit strategies, a total assets of 14.9 billion as of September Thirtyth and net inflows of 259 million in the third quarter, primarily driven by the closing a use COO, we expect additional refinancing activity in the fourth quarter.

In addition last month reprice, our first collateralized bond offering.

Which utilized our capabilities across bond and loan investing.

Once closed the CEO will add around 270 million to us.

We intend to Opportunistically issue Ceos in the future.

Our multi strategy products had assets of 9.1 billion as of September Thirtyth.

Net outflows in the third quarter were 351 million and approximately 83 million from former executive managing directors.

From October Onest November Onest, there were approximately 23 million of outflows from former executive managing directors.

Getting deeper into multi strat.

We had expectations that there would be inflows in 2019, and it has taken longer than our original expectation.

I want to directly address the point, we have alluded too many times simply put the FCP a settlement cast a long shadow on the firm.