Och-Ziff Capital Management Group LLC Management Discusses Q4 2013 Results - Earnings Call Transcript

Feb. 6.14 | About: Och-Ziff Capital (OZM)

Och-Ziff Capital Management Group LLC (NYSE:OZM)

Q4 2013 Earnings Call

February 06, 2014 8:30 am ET

Executives

Tina Madon - Managing Director and Head of Investor Relations

Daniel Saul Och - Founder, Chairman, Chief Executive Officer, Executive Managing Director, and Chairman of Partner Management Committee

Joel Martin Frank - Chief Financial Officer, Senior Chief Operating Officer, Principal Accounting Officer, Executive Managing Director and Director

Analysts

William R. Katz - Citigroup Inc, Research Division

Daniel Thomas Fannon - Jefferies LLC, Research Division

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Cynthia Mayer - BofA Merrill Lynch, Research Division

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

M. Patrick Davitt - Autonomous Research LLP

Operator

Good morning, everyone, and welcome to the Och-Ziff Capital Management Group 2013 Fourth Quarter and Full Year Earnings Conference Call. My name is Gemma, 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.

Tina Madon

Thanks, Gemma. 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-Ziff's 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 statements 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 U.S. 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.

Daniel Saul Och

Thanks, Tina. Good morning, everyone, and thank you for joining us. This morning, I'll review our investment performance through 2013 and January of this year. I will also 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'll take your questions.

2013 was an outstanding year for us and demonstrated the strength of our fund globally. Last year was also reflective of the significant progress we've made towards our strategic goal of becoming a global multiproduct 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 has 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 maintained in adjusting our portfolio allocations as market conditions changed. 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 investors to place capital with us, but also to the request that we expand our product offerings in the 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 diverse range of products to institutional investors. We believe that this is an area for us to attract the greatest 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 and 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 result and 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 in 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. Investment interest remained 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 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 are active in all of our strategies at varying points throughout the year, with 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 consistency protect invested capital against the backdrop of sharp declines in the equity markets globally. As always, we actively manage 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 in 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 further the strengths of our multiproduct 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 and global long/short equity. We also believe that we are well positioned on 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 remained extremely focused on risk mitigation, and downside capital protection of their equity portfolios, and yield enhancement in their fixed income portfolios. Industry data suggests that the trend line for capital allocations to alternative managers increased meaningfully in 2013. We firmly believe that our performance, the strength of our business and the extension 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 multiproduct solutions to current and prospective fund investors globally.

Against this background, our priorities for the coming year would 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.

Joel Martin Frank

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 $1.19 per basic and $1.12 per diluted Class A share. For the full year, our GAAP net income was $252 million, or $1.61 per basic and $1.57 per diluted Class A share. As always, the 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 was the highest that we have ever earned. Full year 2013 management fees totaled $546 million, 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 was 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 are driving some 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 our funds. The strength of this result demonstrates the powerful effect of both strong returns and asset growth has in 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 funds 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 activity 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 to remain 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 and was part of the incentive plan. As a reminder, 2013 was the first year in which these awards were granted. Cash bonuses were 19% of total annual revenues last year compared to 20% in 2012. We followed the same methodology for discretionary bonuses in 2013 that we've always used. We determined 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 multiproduct alternative asset manager reflects the scale 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 costs related to the growth in the business. The 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 that 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 $1.15 per adjusted Class A share. As you saw in our press release this morning, our 2013 fourth quarter dividend was $1.12 per Class A share, bringing our 2013 full year dividend to $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 model is clearly evident, which is driven by strong revenue growth and substantial operating leverage.

As we look forward to 2014, I'd like to reemphasize 3 points. First, the repeatability of our investment performance and, in turn, our ability to earn incentive income. Even though our absolute returns may vary year-to-year, the consistency of those returns is central to the value we have provided through our fund investment 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 crystallize 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 underappreciated 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 investable 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 to significant asset growth we achieved last year. Our track record on the quality of our investment process for each of our platform is the single most important criteria to current and prospective fund investors are now allocating capital to us and creates substantial growth and 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 compounded effect of asset growth and incentive income we earn is substantial.

Third, the profitability of our business. Our fixed expenses have been low relative to our revenues historically, even as we have invested to support the growth of the firm. The largest part of the expense base is bonuses, which are discretionary and variable 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 pay out 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.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Bill Katz from Citi.

William R. Katz - Citigroup Inc, Research Division

I guess the theme, right here, on this post-quarter update is just sort of the 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 it down maybe between U.S. and non-U.S. investors and maybe new versus existing clients?

Daniel Saul Och

Sure. I mean, we're really -- we're seeing demand arrive in different areas. I think consistently for the last year or so, we talked about pension funds and private banks. And if you look at the allocations we'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 new LP will give us capital, and that's why our current investor stays with us. And that's always driven what we can 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 the 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.

William R. Katz - Citigroup Inc, Research Division

Okay. Just one follow-up for me. Given all that, you did mention new products. I'm sort of curious what you might be thinking about and the timing of any kind of launches associated with that?

Daniel Saul Och

We have nothing to discuss or disclose at this time, and those are evolutionary. Our new products in the past were 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're going to continue to grow.

Operator

The next question comes from Dan Fannon from Jefferies.

Daniel Thomas Fannon - Jefferies LLC, Research Division

If we could talk about the marketability of some of the -- of credit and the long/short equity and real estate, I guess, the track record on a standalone basis kind of where those sit. And then, if I may -- I see some of the AUMs, but I may have missed the performance for some of those smaller strategies and kind of how those have tracked in more recent periods.

Daniel Saul Och

Yes. We don't disclose on some -- on multi-strat assets and some of the -- 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.

Daniel Thomas Fannon - Jefferies LLC, Research Division

But are there 3-year track records for the -- separated for the real estate, credit and long/short equity to kind of go out in market? Or is that something that...

Daniel Saul Och

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

Daniel Thomas Fannon - Jefferies LLC, Research Division

Okay. And then, just a follow-up, maybe, on the first question, just with regards to kind of your existing customer base and thinking about -- I know you had mentioned in the past that the credit originally was built out of sourcing clients from the Master Fund. And can you just talk about kind of where you are in the process of targeting existing customers with 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?

Daniel Saul Och

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 a part of the process of creating a deeper relationship where we can add more value and time with that client. And we're also seeing new clients come to the firm in the different product areas. And that goes back to what we said earlier. We're 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 our new product, add to a new product and stay with us if they believe that we're 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.

Daniel Thomas Fannon - Jefferies LLC, Research Division

And then, I guess, just one follow-up, just with regards to the performance fees in the quarter, was there any 3-year lock-up expiration in that number? And do we anticipate anything in the first half of the year that's sizable for the 3-year tranches?

Daniel Saul Och

No. But 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 other multi-strat assets. And as we know, in the first quarter, there's nothing material coming there.

Operator

Your next question comes from Ken Worthington from JPMorgan.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

I wanted to flush out your comments on kind of the strategy for 2014, in particular, kind of growing AUM. Can you -- what is the strategy on the distribution side to grow? I know you said kind of the international client base has been strong. Are you doing kind of new things to further penetrate them? I think earlier on 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.

Daniel Saul Och

Sure. Our main focus in terms of how we're 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, at 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 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 differently than we're doing on that front, other than the continued evolution. You also may be referring to the retail area, which may be our next step. We don't have anything particular that we're focused on from the distribution side. Having said that, I think we've talked about this with the private banks. We want the first and will create the distribution, although it's another product that they would want as the distributions evolves. And then, that's how we're positioning ourselves on the retail side as well.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Okay. And you mentioned your kind of performance excellence. Can you talk about the performance of the non-Master Fund products in 2013? It'd 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 to the CLOs, so we can kind of try to benchmark you against some other strategies.

Daniel Saul Och

No. So we don't disclose those returns. However, I will reemphasize the fact that performance across all asset classes is excellent.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

And can you maybe say were the returns on those different areas above or below the Master Fund? So -- but nothing specific, okay?

Daniel Saul Och

Well, listen, we don't disclose at this point. At some point in the future, remember, we talked about this. If we deem it significant and as we talk to our disclosures, determine that it should be disclosed, we will. But at this point, well, we just don't disclose that information.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Okay, then, last one. In terms of the new contracts with your partners, where should we expect unit count to go in 1Q '14?

Daniel Saul Och

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% to 4%.

Operator

The next question comes from Cynthia Mayer from Bank of America Merrill Lynch.

Cynthia Mayer - BofA Merrill Lynch, Research Division

I guess just a follow-up on the questions on flows. Are you seeing a primary demand in 1-year performance fee structures, 3-year or some other structures? And our credit products are primarily 1 year?

Daniel Saul Och

I'd say that we're not seeing significant demand for the 3-year structure. I think Joel can give you the numbers, and you'll see the overall trend. I think what's really important to us is that virtually all the assets that were in 3-year tranches when they have expired has 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 from different product areas. But at the margin versus 2 or 3 years ago when the 3-year tranche was relatively popular, it tends to be more in the 1-year area.

Cynthia Mayer - BofA Merrill Lynch, Research Division

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

Daniel Saul Och

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're not doing anything substantial in terms of retail. We've always felt that when we grow, we like to do it incrementally. 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 do with the private banks, although let's 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're not doing anything particularly proactive right now on that side. So thank you for giving that opportunity to clarify.

Cynthia Mayer - BofA Merrill Lynch, Research Division

Okay. Thanks for correcting. And then, I guess just lastly, can you maybe give a little color sort of an update on I think your 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 internal committee. So you have any further thoughts on how you would structure that beyond this year, and any update on sales last year?

Daniel Saul Och

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

Operator

Your next question comes from Marc Irizarry from Goldman Sachs.

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

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, and sort of EM -- or EM opportunities sort of in that opportunity set over time and your view for what you do?

Daniel Saul Och

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. And so, number one, we incorporate all of those things into our risk management process. We're very pleased that in January, we saw the investor fund down 27 basis points on the funds similar with us. That's really important. The idea of downside protection over 20 years is one of things that clearly differentiates the firm. So we believe that this type of volatility -- number one, it gives us an opportunity to show we can do, but we have to do it. And then, these types of dislocations tend to create investment opportunities in different areas. And what -- we like it -- one of the things we like on multi-strategy multiproduct 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 at. We have the ability to look at all assets globally, how they're linked from a risk management point of view and how they stack up on the risk reward versus each other.

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Okay. And then, I'm curious when you kind of step out into more stable strategies such as global long/short or credit. How do you -- how is Och-Ziff sort of differentiated investors like those within those suites, if you will. There's sort of spirit of competition that maybe a little bit bigger in those categories versus you're being big within multi-strat and those strategies. So how do you differentiate yourself in that against that competitive side?

Daniel Saul Och

Well, the way to differentiate ourselves is the same way in the multi-strategy and in those individual asset areas. The clients making a decision, either a current or prospective client are only going to come with us in any of the areas, including multi-strat, if they think we're the best alternative. So if you go back to what I said before about what we are looking to accomplish, the idea of this multiproduct solutions provider approach is to say to the client, "Okay, here's what we can accomplish." But if you're looking to do it -- if you're particularly focused on credit or in fixed income yield enhancement, here is a different way to do that. If you're particularly focused -- and we think it's a big opportunity for the firm especially with the large income with the large move you've seen in the past several years in the equity markets. If a client will also going to say, "Okay, I've had big appreciation in my equity portfolio. I'm concerned about that beta [ph] or exposure. I want to consider moving some of the equity allocation to a product that's sort of 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. And so it's just we think -- from the way we think about internally from a client interface to individual products and how we grow and penetrate, it's the same methodology.

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Okay. And just another question. Obviously, your investors -- if you look at your type of investors and the money they brought in, it's 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 then, is that -- as you think about growth over time, is it the number of platforms or you sort of already on the shelves and going to grow in the existing -- with the existing footprint? Or maybe you just give us some help in terms of how diverse you are within the private banks.

Joel Martin Frank

We're on several platforms. We don't disclose, but we're 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's surrounding the investor. That's how we decide what to be on. But I think that there are several and as long as that -- those criteria -- we meet those criteria, we'll be interested in adding those assets.

Daniel Saul Och

And as a general matter, our goal is to be one of the top allocations from a platform as opposed to just getting on as many platforms available. And that just gets to the same concept of it. If we do what we think we should be doing, then we should be able to be one of the top allocations.

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Okay then, just a question on -- I might have missed this, but what was headcount at year end?

Joel Martin Frank

Headcount was 546.

Operator

The next question comes from Patrick Davitt from Autonomous.

M. Patrick Davitt - Autonomous Research LLP

You've seen a lot of pickup in CLO growth and, with that, increasing press coverage frothiness in the syndicated loan market. Give us an idea of what you're seeing in that market to the extent relative to maybe the paper you saw before the crisis. And to what extent there are capacity constraints there, without going too far out the risk spectrum?

Daniel Saul Och

So our CLOs were comfortable, have performed extremely well. And as with everything, we view CLOs opportunistically. If there's an opportunity to grow the CLO platform and the CLO business in the way that makes sense for the constituents, then we're 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's kind of all.

M. Patrick Davitt - Autonomous Research LLP

Okay. 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 U.S. to buy good stuff. How -- 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 fund-raising plans there?

Daniel Saul Och

At this time, we don't really talk about the funds in terms of dry powder. But I do 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. So 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 product themselves. But to the extent they're more credit-related, that's been a very good area for us. And I believe some of the international -- some of the European assets you're referring to could potentially be that.

Operator

The next question comes from Bill Katz from Citi.

William R. Katz - Citigroup Inc, Research Division

I just have a couple follow-up questions. You'll probably say no, but just curious, anyway, the size where you stand right now in terms of equity long/short within sort of separate sleeve?

Daniel Saul Och

You're right. The answer is no.

William R. Katz - Citigroup Inc, Research Division

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

Daniel Saul Och

Well, you could see it from the press release. The fund-to-fund percentages have been pretty stagnant and hasn't changed much. But -- so, obviously, we can't predict the future. But we -- especially with our fund-to-funds, we see it fairly stable.

William R. Katz - Citigroup Inc, Research Division

Okay. And just the final one. Just going back to some of the other questions around credit. On performance, when you mentioned you've great performance, is that from both the absolute perspective or -- and/or relative perspective?

Daniel Saul Och

For both.

Operator

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

Tina 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.

Operator

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

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