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Och-Ziff Capital Management Group (NYSE:OZM)

Q2 2014 Earnings Conference Call

August 5, 2014 08:30 ET

Executives

Tina Madon – IR

Dan Och – Chairman & CEO

Joel Frank – CFO & COO

Analysts

Bill Katz – Citi

Dan Fannon – Jefferies

Ken Worthington – JPMorgan

Cynthia Mayer – Bank of America Merrill Lynch

Marc Irizarry – Goldman Sachs

Craig Siegenthaler – Credit Suisse

Bulent Ozcan – Bank of Canada

Robert Lee – KBW

Operator

Welcome to the Och-Ziff Capital Management Group’s 2014 second quarter earnings conference call. My name is Darren and I will be your operator for today. (Operator Instructions). I would now like to turn the call over to Tina Madon, Head of Investor Relations at Och-Ziff. Please proceed.

Tina Madon

Thanks, Darren. Good morning, everyone, and thanks for joining us 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 current 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 2013 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 the 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, I’m going to turn the call over to Dan.

Dan Och

Thanks Tina. Good morning everyone. This morning I will update you on a year-to-date performance and the growth in our assets under management. The momentum across our business is strong and we continue to see new opportunities to invest and grow our franchise globally. Year-to-date through July 31, our performance reflected our ability to actively manage our capital allocations across strategies and geographies as well as our highly opportunistic approach to investing. This was particularly evidenced during July as geopolitical and macro-economic uncertainty increased causing market conditions to become more difficult globally.

The consistency of our performance and our ability to protect investor capital, our hallmarks of our approach to investing and managing risk and are the core of the value that we deliver to the investors in our funds.

We believe that we’re well positioned to create significant incremental value as we continue to execute on our strategy diversifying our product offerings. Our year-to-date net inflows and growth in assets under management through August 1st is open for growth across our products and investor interest in our platforms remains high.

Globally we believe that pension funds and other institutions will continue increase their allocations to alternative asset managers and that we will be a substantial beneficiary of this secular trend as we further expand and diversify our business.

Now let me turn to our assets under management, as we announced yesterday morning our assets under management as of August 1st totaled 45.7 billion increasing approximately 5.5 billion or 14% from 40.2 billion on December 31st of last year. This increase was due to approximately 4.5 billion of net inflows including 1.5 billion of CLO assets and 894 million of performance related appreciation.

Our assets under management have grown rapidly with organic net inflows year-to-date through August 1st, exceeding our full year 2013 total by 46%. Private bank platforms and pension funds remain the primary drivers of these flows but we also saw an increase from corporate, institutional and other sources. The OZ Master Fund has experienced strong growth with organic net inflows of approximately 1.5 billion year-to-date. Coming from the diverse range of investors globally and saw a substantial acceleration in net inflows in the second quarter compared to the first quarter. We completed two additional closings totaling 225 million in our third real estate fund during June bringing that fund to a current total of 1.2 billion. The growth of our real estate business is contributing to the diversification of our assets under management and we see a number of interesting opportunities to grow this business further both in the U.S. and Europe.

Our credit products have also experienced strong growth year-to-date increasing 17% or 760 million since December 31, we completed two additional CLOs during the second quarter and have now raised approximately 4.1 billion since we initiated this business two years ago. This has been an important source of diversification for us. We continue to evaluate additional opportunities to expand our credit offerings globally both in opportunistic credit and on the loan only side.

Now let me turn to our funds investment performance, year-to-date through July 31, our Master Fund had a net return of 2% while our Asia and Europe Master Funds had net returns of minus 4.4% and minus 1.7% respectively.

Our credit strategies were the primary driver of the year-to-date performance in the Master Fund which remain fully invested during the second quarter. The positive performance of the credit strategies in our Asia and Europe Master Funds was offset by negative performance of the long short equity strategies.

The investment landscape benefited from recovery in the equity markets globally during the second quarter combined with a strong increase in M&A activity. We believe this has created a substantial opportunity set in venture investing.

We are also mainly active in our credit strategies although we’re incrementally more cautious in U.S. structured credit.

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

Joel Frank

Thanks Dan. This morning I will review our 2014 second quarter results and provide some color on how we’re thinking about expenses for the third quarter. For the 2014 second quarter we reported GAAP net income of 11 million or $0.06 per basic and $0.05 per diluted Class A share, as always our press release includes a discussion of our GAAP results.

Now turning to the details behind our 2014 second quarter economic income beginning with revenues. Management fees totaled about 160 million, 3% higher than the 2014 first quarter reflective of the asset growth and diversification we have achieved as our business has expanded. From January 1st to April 1st, our assets under management grew by approximately 2.1 billion or 5% to 42.7 billion. From April 1st to July 1st our assets under management grew another 2.8 billion or nearly 7% to approximately 45.5 billion.

Our average management fee for the second quarter was approximately 1.48% compared to 1.51% in the first quarter. The sequential decline was due to the effect of the growth in our credit assets during the quarter. This excludes the effect of the 1.2 billion of capital range for our third real estate fund, the majority of which did not begin to earn management fees until July 1st. As a reminder we anticipate that 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.

Incentive income was approximately 14 million during the second quarter, this amount was primarily due to incentive income crystalized in certain longer term credit assets.

Now let me turn to our operating expenses, comp and benefits totaled 30 million during the 2014 second quarter. Of this amount salaries and benefits were 25 million essentially unchanged from the first quarter. Second quarter comp and benefits also included approximately 5 million of bonus expense.

Salaries and benefits were 16% of management fees in the second quarter. We expect this ratio to continue to be approximately 16% to 18% of management fees for the third quarter. Non-comp expenses totaled approximately 31 million in this 2014 second quarter and 8% increase from the first quarter. The first quarter included a recovery of expenses we incurred to launch our third real estate fund which was the main driver of the sequential increase. Now comp expenses totaled 19% of management fees in the second quarter. We expect this ratio to remain in the range of 19% to 21% for the third quarter.

Our 2014 second quarter effective tax rate was 20%, we estimate that this rate will remain in the range of 20% to 25% for the third quarter. As always I want to remind you that these estimates are subject to many variables that won't be finalized through the fourth quarter and therefore could change meaningfully.

Our 2014 second quarter distributable earnings were 90 million or $0.18 for adjusted Class A share. As you saw in our press release this morning, our dividends for the 2014 second quarter is $0.17 per Class A share. In closing I like to reemphasize the linkage between the growth and assets under management that we have ached year-to-date from both organic net flows and performance related appreciation. As Dan mentioned our assets have increased nearly 14% since the beginning of the year and approximately 24% from August 1 of last year.

As we expand our product platforms our ability to grow assets increases as thus the diversification stability of our revenues. As our assets increase, our management fees grow and that growth compounds overtime. This is a key driver of the expansion and stability of our revenues and in turn of our distributable earnings and dividend. We also earned incentive income annually on net expanded base of assets. Although there are some variability to our returns year-to-year, our investment performance has historically being consistent.

We believe that these factors when combined with an expense phase that is scalable as their assets grow, we will drive powerful earnings growth overtime.

With that we will be happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions). First question is from the line of Bill Katz from Citi. Please go ahead. Your line is open.

Bill Katz – Citi

Just wondering on the real estate fund, when you turn on in the third quarter how do you think about the incremental revenue opportunity on that fund and then Dan you mentioned that you continue to see opportunities globally both on the hedge funds and others. Can you maybe talk a little bit about, it's a separate question, you just talked about third quarter flows were a little soft so far, so where are you in terms of incremental opportunity as it relates to that?

Joel Frank

So Bill honestly, that’s why in the speech I said it was 1.48% because that actually excluded the effective real estate assets which weren’t earning fees [ph] but if you -- that 1.48% that should get you where you want to be in terms of model.

Dan Och

And Bill in terms of the flows, we feel really good about the numbers and everything below the numbers. Our strategic plan has been to become a multi-product alternative asset manager by excelling in each area individually and then making the combined package even more attractive to investors through not only the flexibility that provides but everything else that existed as if in terms of operations, transparency disclosure et cetera. We think that plan is working very well.

It's all about solutions for clients, it's all about giving clients comfort and opportunity and we believe as long as we continue to do that we will continue to do well.

Bill Katz – Citi

And just one last one for me, thanks for taking my questions. Just play devil’s advocate for a second. Your year-to-date performance up a couple of percentage points, is that beginning any kind of focal point for investors as they something -- allocations into hedge funds more broadly and how is your performance stacking up relative to competition?

Dan Och

Our investors take a long term approach and clearly in the spring we had a couple of months where the performance wasn’t what we wanted it to be. You heard from detail on the call today, it's Asia and Europe where we have underperformed, it's on the equity long short side in Asia and Europe where we have underperformed. We feel that’s on, we’re very strong team is that we have got very long histories there, over 10 years in both cases. We’re very committed to the international operations and I think that as you see from the numbers, the investors are very comfortable with them.

Our long term capabilities and how we deal with short term issues that don’t quite measure up to our expectations.

Operator

The next question is from the line of Dan Fannon. Your line is open. Please go ahead.

Dan Fannon – Jefferies

My question is around credit, if you could talk about performance year-to-date in the core credit strategies and then in terms of allocations from a growth perspective are you taking -- are clients allocating to you from their credit bucket in terms of overall assets or is it from their alternatives bucket in terms of kind of the potential opportunity of the net asset class.

Dan Och

Well in terms of the return numbers, as you know we don’t preferably disclose those numbers, something that we’re in discussions about. In terms of where clients are allocating from, it can come from different areas. I think that on the credit side, number one, were a candidate for investment from what clients call their opportunistic bucket but obviously a very important part of our long term growth strategy is to access both the fixed income buckets and the equity allocations of these institutions. These are very large and permanent allocations and that’s part of the reason to provide more than one product in each area. It's one of the reasons that on the credit side in addition to opportunistic and longer term funds, we are also focused on the loan only side.

We feel that as we create more products with the excellence that we require, institutions become more comfortable giving us larger allocations and we believe that process of capital being allocated from the fixed income allocation and from the equity long/short allocation is in it's very early stages and is a very long term secular trend that we should benefit from.

Dan Fannon – Jefferies

One more on just the CLO opportunity, is the market so attractive and is the reason we will assume you guys will be active in that in the kind of short to intermediate term and is this still a way that you guys are viewing as an opportunity to expand your customer base from your legacy traditional strong hold?

Dan Och

We’re going continue to be very opportunistic in the CLO space. There are a lot of variables that have to line-up, the asset side, the liability side, what’s going on in different trading markets and we have put in place a structure that gives us the flexibility to do each of those pieces individually as we see the best opportunity and then put it together.

We feel very good about the fact as we said it was only two years ago we started the CLO business, were up to about $4 billion in assets that’s moving us up in the ranks but most importantly we believe we’re moving up in the ranks in terms of performance and capability. That’s -- we’re very proud of the fact that at Och-Ziff what drives our asset growth is the performance driven nature of our funds and the team involved there have clearly demonstrated that.

Operator

The next question is from the line of Ken Worthington from JPMorgan. Your line is open. Please go ahead.

Ken Worthington – JPMorgan

First with the new real estate funds getting turned on, are there any catch up fees in the new real estate fund or do they just start in whole July 1st?

Dan Och

It's starting whole in July 1st for all committed capital.

Ken Worthington – JPMorgan

And then on Ziff Brothers, I believe they made some changes to their family office and their investments during the quarter. How does that flow through to impact Och-Ziff and then how much do they own of Och-Ziff at this point and are they invested in any other products?

Dan Och

I mean we can’t really comment on what they are doing but we don’t think anything that they are doing is having an impact on our firms, our funds or the management of the firm.

Operator

Next question is from the line of Cynthia Mayer. Your line is open. Please go ahead.

Cynthia Mayer – Bank of America Merrill Lynch

Just in terms of the new assets you’re raising how many have hurdle rates versus performance fees which are based on absolute performance and just thinking about what is -- overall what is your mix there right now?

Dan Och

Some of our funds do have hurdle rates but actually fewer than most and it depends on the product and what is relevant particular asset class like real estate funds usually will have hurdle rates, some credit funds may have hurdle rates but in general the majority of our capital is not subject to a hurdle.

Cynthia Mayer – Bank of America Merrill Lynch

Okay. And you know in terms of the stronger flows to the Master Funds, is that primarily from the private bank channel or pension or other sources?

Dan Och

It's from all different sources, and it just shows you we talk a lot about how it's difficult to predict quarter-to-quarter. I think as long as our products are strong, our relationship is strong will position us to be the firm and product of choice when decisions [ph] want to act. There is no specific reason why that’s the product that was chosen but it was from a broad mix. Including mix of current client adding and new clients.

Cynthia Mayer – Bank of America Merrill Lynch

And in terms of the Asia and the Europe funds which are smaller, though it looks like the Asia Fund is growing again. Is size at all an issue for that? Do you -- does in terms of how they are invested? Or in terms of how you market them? Do you make any different plans according to demand there in terms of how you market them? Are they available as widely as say the Master Funds so that their growth really just depends on investor demand or do you market them somehow differently?

Dan Och

First of all there is nothing that we’re doing differently based on the size, you know it's one of the advantages to having a larger firm. We have got about 60 people in London, we have been there for over 15 years. We have got about 40 people in Asia, we have been there for over 10 years. We don’t have to dramatically reduce that or dramatically expand that as the funds in either of the -- the funds invested in either of those funds go up and down. We have got the franchises, we have got the firm we can keep the stability and I think that’s important to the investors and nothing we’re doing is based on the size. The marketing is generally the same, it's the same thought process. It doesn’t mean that each investor or each channel is interested in the same things but the thought process is generally the same.

Cynthia Mayer – Bank of America Merrill Lynch

Okay and then just lastly I think in the past you have said at times that you felt like you should grow your marketing a little bit. Where are you in terms of that? Do you feel like you’re adequately staffed and obviously you’re definitely bringing in the assets, do you want to add more?

Dan Och

We feel very good about the team that’s in place and a lot of what we did what was not so much changed the team as much as change how they were interacting with the different clients in response to the growth of the different products that we have. Our team first of all, we don’t refer it as a marketing team, it's a client investor relations team. Our team it's about building relationships with clients, understand who they are or what they are looking to accomplish. Taking the time for them to understand who we’re and what we’re doing. We’re not out pushing anyone fund at one particular time.

We don’t expect any significant changes to the size or nature of the team but we feel very good about the job that we have been doing. The asset growth so far this year aside from being what we think are very good numbers as you can see it's in different products, it was the multi-strategy fund, it was the real estate fund, it was the credit products, it's from different sources, it's diversified by geographic region and so you know the underlying debt is very strong to that growth.

Cynthia Mayer – Bank of America Merrill Lynch

Right, so no changes? I guess it sounds like -- as you put it your client relations.

Dan Och

No substantial changes to the size of the team, correct.

Operator

Thank you. Next question is from the line of Marc Irizarry, Goldman Sachs. Your line is open. Please go ahead.

Marc Irizarry – Goldman Sachs

Dan can you talk about the how we should think about how much opportunity there is there for fund raising with the near term and then you mentioned U.S. versus Europe maybe you can give some perspective on where you would be putting that, putting most of that capital to work over that period of time and then I guess for Joel you know how should we think about the performance fees related to real estate in terms of the velocity of the investments that you’re going to make and how should sort of thing about the performance fees associated with it?

Joel Frank

We have announced that we have raised approximately $1.2 billion for OZ real estate fund three and so our primary focus on the real estate site is going to be performing for those investors and that fund and using all of the resources of the real estate team as well as the firm globally to perform for the investors in that fund. We have also talked about some of the areas where because banks are doing something differently than they used to do there is what we believe to be a secular change in the opportunity and one of those areas is the credit side of real estate and that has created opportunities in the past we believe it will create opportunities going forward primarily in the U.S. and Europe and to the extent that we see opportunities that fit what clients are looking to do we will approach them aggressively. But at this point our plans is less execute on OZ Real Estate Three for those investors who just entrusted their capital to us.

Dan Och

And then in terms of incentive phases, it's pretty much a private equity structure where you have 3 to 5 year investment period and then you harvest that this in your investments overtime and as I mentioned earlier there is hurdle rate and so on and so. As we start to wind down the investment period let’s say real estate fund two and we’re starting real estate fund, there will be some harvesting of this. It's a more difficult process to predict but that’s in a way that basically works like most other private equity debt structures.

Marc Irizarry – Goldman Sachs

And then just in terms of credit and some opportunities to extend your reach and credit. You mentioned opportunistic in the loan only side that there is some opportunities there. Dan could you elaborate on that somewhat particularly give where we’re in terms of credit spreads and then I guess Joel the fee structures on the loan only side I mean how should we think about what that might mean to credit to manager your fees on the credit side? Thanks.

Dan Och

Credit spreads are tight globally, a number of the dislocations that have existed in the world have moved closer to balance and interest globally are quite low. Clearly that makes the opportunistic side more challenging that it had been. On the other hand as I think you see from the CLO business it also shows you that the investors are looking for opportunity and with the 10 year interest rate in the U.S., the 2.5% and interest rates around the globe roughly at that level and in some cases even lower. We think that there are places all across the spectrum from loan only and CLO to opportunistic which generates hopefully even more significant returns and I think that we have shown investors that we can excel on the opportunistic side. We have shown investors that we can excel on the CLO side and I think that they are going to see that our capabilities are going to be beneficial to them and they will take advantage of it.

Joel Frank

In terms of the fees Marc, the 1.48, that average management fee factors in, lower fees and certain credit assets and in terms of all our opportunistic credit that’s always going to have a 20% incentive. Some of the loan only have different type structures but as we move forward and as we start to talk more and more about our credit products and maybe disclose a little more, we will give you a little bit more guidance but for now that’s the way I look at the average management fee reflects where you need to be on management fees and incentive is pretty much especially on the opportunistic side at that 20% level.

Dan Och

Marc, we’re very focused in all our areas with our strategic plan on making sure that everything is additive to the firm, and to the LPs. So if we raise loan only asset, for CLO assets were a good example. They were lower fee than other assets and it's that mix changes that can impact the average management fee but it's additive and it diversifies. So from the advantage point of the firm it's beneficial, it builds resources it diversifies, it's additive. From the advantage point of LP, it's the same thing. It gives them the opportunity to choose different products which ever products they are in we have more resources, we have more capability, we have more breadth. So that whole concept of it being additive, accretive and beneficial to the firm, shareholders and its constituents as well as to the LP. That alignment of interest we think has been one of our firm’s strength for 20 years and something that we focus on a lot, right. And then Dan mentioned earlier being a solution provider to a client who is looking for different asset class, looking for different ways to invest. This gives us the opportunity to do that.

Operator

Thank you. Next question is from the line of Craig Siegenthaler from Credit Suisse. Your line is open. Please go ahead.

Craig Siegenthaler – Credit Suisse

Dan, I just want to circle back to the comments you made around U.S. structure credit that you view the environment today is a little less attractive. First is how is that, A, impact you guys from an investment perspective and also maybe what key points kind of caused you to become less positive here?

Dan Och

Well the main factor, I talked about some of the imbalances in the credit world that has moved towards more normalized. U.S. structure credit would be one of those so the sole issue there is that its, it is harder to find product. I think if you look over the past 12 months at the differentiation between the product that our team and our firm has found and be able to execute on versus the product available in the market it's been a very, very wide differentiation. Obviously we want to continue that very wide differentiation but just overall the flow of distressed and dislocated structure credit product in the U.S. has been slowing and it looks like it's going to continue to slow.

Craig Siegenthaler – Credit Suisse

And then just a follow-up here and this was sort of asked in a different way but how should we think about future organic growth in the three Master Funds, just given right now that a lot of the growth has been coming from some of these newer funds, the side funds [ph]. How should we think about growth in those three larger funds the two regionals and the OZ Master Fund going forward?

Dan Och

Well we don’t really know, the way you should think about it is think what we’re trying to match? We’re trying to match excellence in performance and risk management. We’re trying to match resources that are differentiated from the market, we’re trying to match the business model and it's client solutions driven. So a big factor in the organic growth, in the regional funds is going to be to what extent our clients interested in that as a solution. Our experience has been that when the world is uncertain and clients do not have a strong view on the individual geographic area they tend to put the capital in the multi-strategy, in the Master Fund. When clients have a strong view in one of the geographic regions they go with the geographic fund. It's a little hard for us to predict when they will get there. We just want to make sure that we’re doing what they need us to do and when they need us to do it.

Operator

Thank you. Next question is from the line of Bulent Ozcan from Bank of Canada. Your line is open. Please go ahead.

Bulent Ozcan – Bank of Canada

Just following up on a question and a comment that was made on basically uncertainty in the market and how uncertain strategies than others -- more than others. If you think about the current market environment and the increase in volatility, does this overall help your business? What kind of discussions are you’ve having with your clients?

Dan Och

I’m not sure I can really say whether what’s going on in any one month or two month period, helps or hurts over time to the extent that we continue to provide well thought-out consistent performance with low risk that they understand that is creating solution to that and a good example of someone said is the low interest rate, the fact that interest rates are lower than we think most people expect them to be is that helping your credit business, is it hurting credit business well then some ways it helps and then some ways it hurts and I think the key for us is we didn’t sit there and bet on one direction. We’re not sitting there saying, okay we were wrong about a substantial bet in one direction that’s why we have a problem. We don’t think about it. In that environment we have done very well opportunistically, done very well on the CLO side. Done very well on some of the other things that we’re doing and that’s what we’re going to continue to do.

Bulent Ozcan – Bank of Canada

Okay and you also made some comment that you are expecting an increase of allocations from pension funds. At the same time there is news out there, which you talked about the pension funds and they are reviewing the allocations to hedge funds and thinking about reducing exposure. Can you help us separate fact from fiction? You know what I think is in the real world?

Dan Och

If you look at our numbers, look over a six month period, 12 month period, 24 month period they are all in the queue. You can see an increase in allocations from pension funds as a percentage of assets and an increase in terms of total dollar assets. Our focus is on what we’re doing here at Och-Ziff and what our clients are thinking and we feel very good about those relationships and where they are going but we also want to be clear there are other areas, private banks have also been growing. We think there are number of areas including some potential international sources that we had commented had been acquired or if leasing [ph] is having to do with their environments that we think are looking more positive but we feel that if we continue to focus, drive and deliver what these clients want and be very responsive to their needs and what there are looking for, that we’re going to continue to do up.

Bulent Ozcan – Bank of Canada

Okay and then maybe on the performance, on the long/short -- on the performance. The long side on the performance or was it the short side on the performance? What’s your expectations?

Dan Och

Well I think during the second quarter which was -- during March and April which were the month that we have the difficult, we said it was primarily the long side.

Operator

Thank you. The next question is from the line of Robert Lee from KBW. Your line is open. Please go ahead.

Robert Lee – KBW

Just one question, just going back to kind of the expansion of the business and as you expand into real estate and more credit just trying to get a little bit of a sense for some – maybe some color on the LP base and presumably the initial round of investors or people who are have known you guys from the multi-strat products and your capabilities there but can you talk a little bit about any success you’ve had of bringing new LPs into the mix with some of the newer strategies or do you think that’s more on the comp so to speak and at this stage the LP base is pretty much people who come out of the multi-strat or know you from some other capacity?

Dan Och

The LP base continues to be fluid. Some of these products -- you’re right that if a general matter when we first start a new product it's most likely that clients who have been with us who know that team, who might have been the clients who asked us to do something in that area are likely to be early investors but let’s take real estate for example. This is real estate fund three, we have had two funds that have had excellent performance measured at standalone real estate funds against their respected vintages. So within that fund, within those fund three there are investors who are initially Och-Ziff investors and there are investors whose first relation with Och-Ziff is on the real estate side. We’re seeing the same thing on the credit side, that goes back to the whole concept of alignment of interest and our internal culture and we compensate people and then how we treat people. The focus is what’s in the best interest of the client. If the client indicates an interest in real estate versus multi-strategy everyone’s interest is to say, okay, let’s do what’s best for the client.

There is no internal battling on these things and that’s a big differentiating factor at our firm, we think it's something that it's very good for the client, it aligns interest. We think it has helped us create a very strong internal culture, we think it helps us maintain people and build teams and build businesses and we haven't talked about that in a little bit but I can tell you that the investors really understand that and they really see that and that’s very important to them. They know that there are approximately 540 people, whose sole focus is doing what’s right for them all the time.

Definitely we don’t we get everything right all the time, it doesn’t mean there can’t be a March or April where the performance is the way we like. Having said that 20 years, non-stop focus on the interest across the board.

Joel Frank

And that leads to performance overtime which is why when you get to real estate fund three you’ve people who are invested in getting there that weren’t in the funds before. So to that part -- all that leads to performance over a long period of time.

Dan Och

And that’s what people are looking for.

Operator

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

Tina Madon

Thanks Darren. Thank you everyone for joining us today and for your interest in Och-Ziff. If you have any questions please give me a call at (212) 719-7381. Media inquiries should be directed to Jonathan Gasthalter at (212) 687-8080.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.

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Source: Och-Ziff Capital Management Group's (OZM) CEO Dan Och on Q2 2014 Results - Earnings Call Transcript

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