Och-Ziff Capital Management Group's CEO Discusses Q3 2012 Results - Earnings Call Transcript

Nov. 2.12 | About: Och-Ziff Capital (OZM)

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

Q3 2012 Earnings Call

November 2, 2012 8:30 am ET

Executives

Tina Madon - Head, IR

Dan Och - Chairman & CEO

Joel Frank - CFO & COO

Analysts

Roger Freeman - Barclays

Marc Irizarry - Goldman Sachs

Ken Worthington - JPMorgan

Dan Fannon - Jefferies

Bill Katz - Citigroup

Cynthia Mayer - Bank of America

Bulent Ozcan - RBC Capital Markets

Operator

Good morning, everyone, and welcome to the Och-Ziff Capital Management Group's 2012 Third Quarter Earnings Conference Call. My name is Cavalin, 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

Good morning, everyone, and welcome to Och-Ziff Capital Management Group's 2012 third quarter earnings conference call. Thanks for joining us today. This morning I'll review our year-to-date investment performance through October 31. With me today are Dan Och, our Chairman and CEO; and Joel Frank, our Chief Financial Officer and Senior Chief Operating 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 performance may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.

For a discussion of the risks that could affect our results, please see the risk factors described in our 2011 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 that 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 Class A 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 any 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 www.ozcap.com.

With that, let me now turn things over to Dan.

Dan Och

Thanks, Tina. Good morning, everyone, and thank you for joining us 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 also share our perspectives on the environment for capital flows and the opportunities we see for growth in our business. Lastly, I'll talk about the investment opportunities we're focused on as we look forward towards the final months of 2012.

During the third quarter and through October, we continue to build on the strong performance we generated in the first half of this year. As always, we focused intensely on delivering consistent high quality absolute returns to our fund investors. Against the backdrop of mixed macroeconomic conditions globally we actively managed our exposures and remained opportunistic in deploying in each of our portfolios. Our ability to remain nimble has been central to the risk adjusted excess returns we've been able to generate this year.

A long history of generating profits for our fund investors and the ongoing strength of our investment performance demonstrate the value of the deep expertise we have in each of our investment strategies. Our returns also reflect our ability to source a broad range of investment opportunities. Our diversified platforms enable us to identify and capitalize on global investment trends across regions and asset classes.

We believe these attributes have been significant points of competitive differentiation for us. As institutional investors increase their capital allocations to alternative asset managers in both equity and credit, they remain focused on those managers that have consistently delivered good returns over time.

During the third quarter, capital inflows to the hedge fund industry increased modestly. We believe that ongoing concerns about the weak macroeconomic environment globally continue to weigh on near term investor confidence. However, we remain confident that allocations to the industry will become significant as institutional investors increasingly seek to enhance the yield and reduce the volatility of both their equity and fixed income portfolios. We believe that these drivers of secular growth will continue to increase in importance as market conditions remain unsettled and interest rates stay extremely low.

Now turning to our Assets Under Management. As we announced this morning, our assets under management until November 1 totaled $31.8 billion increasing $3 billion or 10% from $28.8 billion on December 31 of last year, due to $2.8 billion of performance led appreciation and approximately $200 million of net inflows. These amounts included $300 million of performance related appreciation for the month of October and about $500 million of net inflows on November 1, which included approximately $510 million from the second CLO that we closed yesterday.

Consistent with what we've experienced in the first half of this year, interest in both our multi-strategy and dedicated credit funds remained strong during the third quarter. We also continue to focus on creating platforms that can be tailored to meet these strategic investment objectives of institutional investors. These types of platforms are also important source of future growth for our business.

Now, let me give you a quick update on our funds investment performance. Year-to-date through October 31st, our master fund was up 9.4% net, our Europe master fund was up 7.8% net, our Asia master fund was up 3.5% net, and our global special investments master fund was up 7.8% net. These returns were generated with 23% of the volatility of the S&P 500 index on a weighted average basis for these funds. Our year-to-date performance was primarily driven by structured credit, long/short equity and corporate credit.

Over the course of the third quarter, we were very active in allocating capital across our strategies. At the beginning of the third quarter, the cash balance of the master fund was approximately 7%. We deployed this cash in a discipline manner largely by increasing allocations to our US and European long/short equity strategies and ended the quarter fully invested. As we look toward the final month of 2012, we are optimistic about the global investment landscape although remain cautious about the economic outlook.

Most markets globally fell sharply during the third quarter in respond to central bank statements and actions in the U.S., Europe and Japan, however, uncertainties remains around the specific details of each plan. Resolution of the fiscal cliff in the upcoming elections in the U.S, as well as ongoing difficulties in Europe are also contributing to that uncertainty. We remain sensitive to these factors as we evaluate investment opportunities.

We continue to find interesting ideas in credit and equities in the U.S and Europe. We began to see a trend towards fundamentals in Europe for the first time in a couple of years. And in turn we increased our European long/short equity exposure. We also continue to allocate to long/short equity in the U.S. We remain firmly committed to Asia and will continue to look for in capitalized on investment opportunities as they present themselves.

In addition, our global credit business has experienced further growth and we remain focused on opportunities in corporate and structure credit in U.S. and Europe.

On the corporate credit side as I mentioned earlier, we closed our second CLO. This business will further augment our investment expertise in credit and position us to the continued development of our credit platforms.

With that, let me now turn the call over to Joel.

Joel Frank

Thanks Dan. Today I will review our 2012 third quarter results and discuss how we are thinking about expenses for the fourth quarter. For the 2012 third quarter, we reported a GAAP net loss of a $128 million or $0.89 cent per basic and diluted Class A share. For your reference, a discussion of our GAAP result is contained in our press release.

Now, let's turn to the details behind our 2012 third quarter economic income beginning with revenues. Management fees totaled a $122 million of which approximately a $119 million was attributable to the fund segment and $3 million to other operation. Management fees remained essentially unchanged from the 2012 second quarter as Assets Under Management declined very slightly from April 1st to July 1st. From July 1st to October 1st, our Assets Under Management increased approximately 6% or $1.7 billion.

Our average management fee for the third quarter was approximately 1.62%, down slightly from the 1.67% in the second quarter. This average included the effect of non-fee paying assets, our dedicated credit platforms, our first CLO, and our other alternative investment vehicles.

Incentive income was approximately $8 million during the third quarter, and was all attributable to the Fund segment. This amount was principally due to redemption.

Now let me turn to the 2012 third quarter expenses. Comp and benefits totaled $23 million during the third quarter, with $22 million attributable to the Funds segment and $1 million to Other Operations. As a total, salaries and benefits were $20 million, which was primarily related to the Funds segment. This amount remained essentially unchanged from the 2012 second quarter. Third quarter comp and benefits also included $3 million of bonus expense, which was essentially all attributable to the guaranteed bonuses in the Funds segment.

Salaries and benefits were 17% of management fees in the third quarter. We expect this ratio to be approximately 16% to 18% of management fees for the fourth quarter of this year.

Now turning to non-compensation expenses. Non-comp expenses totaled $26 million in the third quarter, which was essentially all attributable to the Funds segment. Non-comp expenses increased slightly from the 2012 second quarter. Non-comp expenses totaled 21% of management fees in the third quarter. We expect this ratio to be 20% to 22% for the fourth quarter of this year.

Our 2012 third quarter effective tax rate was 24%. We estimate that our full year effective tax rate will be in the range of 23% to 26%. As always, this range is subject to variables that won't be finalized until the fourth quarter of this year. These include the amount of incentive income we earn, the resulting flow of revenue and expenses through our legal entity structure, and the effect that changes in our stock price may have on the deduction for vesting RSUs. As a result of these factors, our full year effective tax rate could vary materially from our estimate.

Our 2012 third quarter distributable earnings were $62 million or $0.14 per Adjusted Class A Share. As you saw in our press release this morning, our dividend for the 2012 third quarter is $0.12 per Class A Share. We use cash as we typically do to fund items related to the operation of our business. The most significant of these was withholding taxes that we will pay upon the vesting of RSUs.

Before closing, I want to emphasize, as I do in each of our calls, the importance of the relationship between our investment performance and our earnings and dividend growth. Investment performance result in growth in Assets Under Management and creation of incentive income. Like our management fees, which increased as our assets grow, our incentive income is earned annually on the majority of our Assets Under Management and is paid in cash and flows through to our distributable earnings each year. This is a significant driver of the operating leverage in our model and also our future earnings potential.

With that, we will now take any questions you have.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And your first question comes from the line of Roger Freeman at Barclays.

Roger Freeman - Barclays

So just the, could you say what the size of the CLO was that you just raised?

Joel Frank

Yeah about $509 million.

Roger Freeman - Barclays

$509 million. Okay. So, all right, so we back that out of the flows today to get it's underline the November flows?

Joel Frank

Yeah.

Roger Freeman - Barclays

Okay. Just I guess, Dan you kind of about the investing climate, it's interesting in looking at some of the reallocation increase a little bit less corporate credit? I mean I presume that you look at equities and asset class as more attractive opportunity near-term than at least corporate credit?

Dan Och

Well, let me give you some detail on that because we do -- I didn't mean to say I'm less corporate credit. But in the first half of the year the major drivers of our profitability, the major focus of our investment was corporate and structure credit in the U.S. long, short equity in the U.S., and then sometime earlier in the year we became more interested in credit in Europe as we saw some signs of underlying stability. More recently, we've also become more constructive on European long, short equity, which is another investment area where we see the opportunity and that's a combination of what we're seeing from the bottoms up and I mentioned the trend towards fundamentals. That means that conversations with companies tend to be more about their fundamentals than macro factors. It means that the -- our analysts' capabilities, the excess return they can generate is not automatically overwhelmed by multiples, by whatever is going on the macroeconomic side.

So the major now versus earlier in the year is just we're seeing a broader investment. So in Asia, our common Asia to make clear, well right now the investment opportunity in Asia are not as the same levels as certain regions. We remain more than firmly committed. We didn't have for over 10 years now. We are still big believers that Asia is going to grow and investment opportunities will come back. New markets and opportunities will develop and staying there, it's staying on the forefront is going to be important.

Roger Freeman - Barclays

Okay, thanks, it's helpful. And just on your credit business more broadly. Obviously kind of big area focus you talked about a lot more. How do you kind of looking out to next year, is there areas within that that you want to grow further, either cost existing, sort of down based or otherwise, what would those be, if any?

Dan Och

Well the four basic areas are corporate, credit and structure credit in the U.S., and in Europe. We're not as focused on credit opportunities in Asia, for now that could change. On the investment side, I mean I'll say we're going to focus on where we see the opportunities. One of the nice things on the structure credit side is our size and our relationship and our capabilities are giving up a significant competitive edge. It is not a market you can just walk in and buy things trading on the screen. So, for example having our real estate capability gives us a big edge to the extent that structured credit product involves commercial real estate number one, we can do the work and we can do the analysis where others may not be able to. Number two, the people with a product no we can do the work. So, we feel that more and more of the structure credit product that we are buying in both the U.S. and Europe is differentiated and product that not everyone can access.

Operator

The next question we have comes from the line of Marc Irizarry from Goldman Sachs.

Marc Irizarry - Goldman Sachs

Dan, can you just talk a little bit about your conversations with your LPs relative to the opportunities on a go-forward basis in credit versus just how far we have come? Is there something that you are, in the discussions or an allocations or just -- that we just believe that you guys are just positioned to further exploit opportunity there or just -- it seems like that conversation would just be getting a bit tougher given the performance of credit. Could you just take us through how you are building that credit business relative to where allocations currently are?

Dan Och

Absolutely, I think that actually plays to one of our strengths. I mentioned in response to last question the competitive differentiations. We are able to sit down with clients and show them. Let us show you what we are seeing, what we continue to see because what you are referring to Marc is with the run up in some of these credit markets people are concerned about what is left in terms of opportunity. And for those who don't have access to the more unique way of their own product, I think your point is valid. We are able to sit down and show them what we are able to buy, what we have access to, why we have access to and its the combination of the very deep significant global relationships of Och-Ziff, the breath of our resources that enable us to do some things that others can't do. The size we have because in these transactions entities would rather deal with a smaller number of parties than a larger number of parties. The confidentially we maintain, which is very, very important. So, we feel very good about what we feel extremely good about our performance this year, but we feel maybe even better about our competitive differentiation going-forward.

Joel Frank

And I will add to that, we do not just offer these people let's say credit we offer them several opportunities. So, obviously, if your point is the credit markets were not as attractive, we can offer them other things because we have several capabilities.

Marc Irizarry - Goldman Sachs

Okay. And then -- and how is that the channels of distribution and the pricing of the credit strategies, and how should we think about the fees and I guess the fee rate as a percentage of AUM logistics? So, we think that these are sort of bigger mandates at lower fees or, and what about channels of distribution for you guys?

Dan Och

Well, as a general matter in the marketplace credit products are lower fee than hedge fund products. Now, the CLOs are generally even lower than most alternative credit products. And in our case, that's correct. And the key is we do these as additive. And if we launch a CLO at a lower than our average management fee, well obviously everyone could do is take that lower average management fee. But it's just additive. It doesn't cannibalize anything that we're doing. We can demonstrate to a credit investor or a hedge fund investor or multi strategy hedge fund investor why it increases the resources and capability inflow, while being in the flow with banks, the investment banks makes it even more likely that we see structure credit product from them.

So I previously said that we're adding assets in credit at fees that are lower than our average hedge fund fee. If they're additive to the overall asset base and if they're additive to all the LP's and if they're additive to the employees then that's a really good thing to do.

Joel Frank

All right and I'll add that to Dan's point. It doesn't cannibalize anything. So as the multi strategy funds grow, that's at higher fees. That's also an effect on the total ratio.

Marc Irizarry - Goldman Sachs

Okay. And then Dan or Joel, can you just give us some perspective on the three-year lock money. How much is coming in with, is it all coming in on with multiple, multiyear locks and just what the percentage AUM is with the multiyear locks?

Dan Och

Yeah I mean the three-year tranche is around out of the longer-term assets. It's around 9% of the longer-term assets. We have some maturing at the end of the year, I'm not going to go into great detail, but at that point we'll see what happens after that. But you'll have some at the end of the year. I don't expect it to be material, although I can't project returns.

Joel Frank

And look its another level of performance is so important. Obviously one of the most important things is that when a three-year tranche comes to its term, we want the investor to feel that they had an extremely good experience with Och-Ziff. And we want them to continue their best with us, whether they re-role into the three-year tranche or go into one of our other tranches. We don't, we're fine with whatever is their preference. Want to make sure that they, after being with us, they have an even better experience than when they came in and we feel that's about performance and a lot of things, but obviously strong performance has been important.

Operator

Thank you. Next question we have comes from the line of Ken Worthington. Please go ahead.

Ken Worthington - JPMorgan

Actually the follow-up on a Marc's question there. On the three-year money you've seen some mature over the last two quarters. How is that money acting in terms of renewals in terminations versus the other tranches? Is it acting more sticky or is it less sticky. Because I think there is more to come later this year and even more to come next year?

Dan Och

Well we don't want to comment on any specific numbers because we want to stay with our policy. But as a general matter, look I think you've seen how we've done. I think, not suffering some of the issues in the hedge fund industry in 2011, strong performance today, having it come from a lot of differentiated areas.

Some small examples, if you look in October positive performance with the S&P down a couple of percent, obviously made us here with the other test. I think it's fair to say that the clients in general, but the clients in the three year tranche, who are near-term have been very "satisfied, happy" you will take the term about those, their experience with us, and our expectation is that we will go well.

Ken Worthington - JPMorgan

Okay. On the may be the direct pension side, you've won a number of high profile state mandates over the last quarter or so. Can you talk about funding, has that money started to fund yet, if you can just give us some high level comments about what has already come in the door and may be what has yet to come in the doors so we can think about the model?

Dan Och

We don't comment on specific clients and those details. But as a general matter, first of all, pension fund is an area of focus for a long time. So the numbers here in the press release and Joel can give you the numbers but you've seen a, we think it's a very significant increase in pension fund assets over the last several years. Sometimes they announce and put on the website and you read about it and sometimes they don't. We obviously are very pleased with the confidence shown by the ones that you're referring to we did announce it publicly. We're not going we do want to remind you, date announced publicly we still aren't going to comment on individual client. But we remain in very active dialogue with other pension fund and current pension fund clients about expanding their relationships with Och-Ziff.

Ken Worthington - JPMorgan

Okay, worth a try? And may be lastly in terms of distribution, the private bank channel seems to be a good opportunity to grow and yet money seems to be coming out of this channel for the last couple of quarters, why is that? I would think that you would be very attractive to those end users or investors?

Joel Frank

You know, you've to remember we remain in an environment and you'll see the numbers shortly where net inflows you all know are a combination of gross inflows and gross outflows. And we're in an environment I had been for several years where outflows, gross outflows have been elevated versus historical. And we believe that has -- that's all about the environment uncertainty and the environment cash needs, investors have, funding these investors have, et cetera. And it's likely that in the current environment that uncertainty, I think if you checked around with the platforms, the issue is with the platforms not with us. There have been some high profile experience with platforms that have caused some issues. But we think that our performance and our steadiness through that continues to position and differentiate us. And degradation to us has not been material to Dan's point.

Dan Och

I think it's really been a slowing of inflows rather than any significant change.

Operator

Thanks for that question. The next question we have comes from the line of Dan Fannon at Jefferies.

Dan Fannon - Jefferies

I guess just another question on credit. Have you guys had success in kind of expanding beyond your existing customer base outside of hedge funds to kind of target your credit strategy and also just give us an update as to kind of what the number is that you would define or just the credit bucket to the AUM?

Joel Frank

So the credit platforms outside of the credit allocation to the multi-strat funds is a little bit over $2 billion.

Dan Och

In terms of your first question that's the process that's in motion. I mean you can understand how it works. The first people that we would go to are our current clients who have literally seen the product directly through their allocations to the other funds and know the people and know the firm. And the next step is to broaden to other clients. So the majority at this point are current clients.

Dan Fannon - Jefferies

Okay. That's helpful. And then I guess looking at the breakdown of investors as well as from type and geography it looks like the fund-to-funds as well as Europe went up for the first time in some period this quarter, anything different happening within your customer base or either from a segment or from a geography perspective that might be worth highlighting?

Dan Och

I think the numbers for the fund-to-funds were down about a percent and Europe was down about a percent. North America was up a little bit. These are not material changes though.

Operator

The next question is from the line of Bill Katz from Citigroup.

Bill Katz - Citigroup

I apologize for any background noise had at time. Just going back to your opening comments about the tough environment for hedge fund allocations, what do you think that's logjam? And then secondly what gives you the confidence that many will come back to hedge funds. We're starting to hear from some of the traditional managers a little pick up in equity allocation discussions so curious little bit of different viewed. What you may be hearing as you talk with clients?

Dan Och

Well, our primary goal is to make sure, number one to make sure that we're at the top of people's lists. That's where we're focused on. Number one, if you are at the top of people's list that means you're at the top of your current clients' lists, which is important and, number two, those are things we can control. Obviously, if the environment becomes more stable we think that will cause outflows to normalize.

The other priority for us is to create other ways for clients to invest with Och-Ziff and take advantage of our capabilities. So, we've obviously talked a lot about the credit platforms. There are some other avenues of distribution that we're focusing on. There are the strategic relationships we've spoken about which we think can lead to some larger longer-term commitments.

Our goal is to continue to drive performance, continue to manage risk, continue to show we differentiate. There was an article recently that talked about Och-Ziff's investments in foreclosed homes on an own to rent basis. And what the article basically said is that this has become a really hot area with a lot of money flooding in. There's a firm -- Och-Ziff was in it very early and is actually considering exiting with all the money flooding in. So, clients notice that. They look and say this is another example. Here was an asset class that wasn’t necessarily front and center that Och-Ziff found, diligenced, figured out a quality way to invest in was early and now when money is flooding in has the option of exiting or staying with it. So that that performance risk management, asset allocation, building of new businesses, differentiation is what we can control and position us for better environments.

Bill Katz - Citigroup

And then just quickly on to Joel, just picturize your guidance on the tax rate, it seems a little high relative to the year-to-date performance given so what I would suspect being a pretty good mix with performance skews in the fourth quarter. Is there something else I'm missing as I go through?

Joel Frank

Yeah, you'd have to take into consideration, as I always said, there are several factors, but one of the big factors is how the revenue or how we expect the revenue to flow through our legal entity model. And that’s going to be a big effect on the amount of the tax rate.

Operator

Thank you for that question. The next question we have comes from the line of Cynthia Mayer from Bank of America. Please go ahead.

Cynthia Mayer - Bank of America

Sorry also for the background noise. May be just a follow-up on the tax rate guidance. It looks like just to compare it to 2010 and that was the last year you had sort of similar performance. The blended tax rate was a lot lower that year. Is that a function of the RSUs in the stock price or is it a function of more conservative assumptions for 4Q or something else?

Joel Frank

It's a function of a three things that I mentioned before, which is how it flows, how the revenues and expenses flow through our model, the deductions for RSUs and the amount of incentive. So, you have to think about how we are generating incentive, where the incentive income is coming from overall revenues and how that flows through. But keep in mind, this is all estimates and it can vary materially because obviously, those three factors can change our material basis for the quarter and for the year.

Cynthia Mayer - Bank of America

And just to make sure the incentive for the three-year lockup money should not be treated any differently for taxes in one year, right?

Joel Frank

No, not at all.

Cynthia Mayer - Bank of America

And then, may be just a follow-up on the master fund, you mentioned you increased the allocation to your being long/short. Is there anyway you could give us sort of a geographic breakdown of where the investments are?

Joel Frank

Yeah. Right now, in about 66% of the assets are in the U.S., 22% is in Europe and about -- the difference is in Asia, about 12%.

Cynthia Mayer - Bank of America

And the last thing, just to clarify in October ex the CLO then, I just it would have had light inflows. Are you still seeing most of the flows to the master fund as opposed to the sleeves?

Joel Frank

The inflows -- and don't forget when you see the sleeves, if I include credit in the sleeves then the answer is the inflows were relatively diversified between the multi strategy and the credit side.

Operator

Thanks for that question. The next question comes from the line of Bulent Ozcan from RBC Capital Markets. Please go ahead.

Bulent Ozcan - RBC Capital Markets

Just have a question on Asia. Sounds like from your comments that you are almost taken a defensive posture in saying that you are still committed to Asia, whereas I would have thought that Asia is the growth market given the aging of population and the need for alternative asset managers over there. I guess some comments on that -- because I have been reading a few articles on Korea and Japan and how low interest rates should actually benefit if Korea actually thinking about increasing the exposure to alternative asset managers.

Dan Och

Well, we would agree with what you said. I mean, the point of the comments were that long-term we are extremely committed to what we're doing in Asia. We think that the platform that we have is substantially differentiated from most if not all other platforms. But the current opportunity set for us is less than it's been in other environments. And so in the call we specifically talked about credit and equity in the U.S. and credit and equity in Europe. So we didn't, we want to make a common measure. The common would be in the short-term given some of the uncertainties, particularly related to China, and some and the global economic impact on exporters, then sure of an activity in some of those things that create opportunity for us are a little bit slower. But we're not only staying committed, but we're taking advantage of this opportunity to increase and strengthen our resources.

Bulent Ozcan - RBC Capital Markets

Okay and may be similarly Ken you asked in terms of the pension funds. Are there any other plans of adding headcount, how do you serve with the pension funds, do you have dedicated internal service teams, and if so what would I thought in terms of headcount and what should we think about the count number going forward?

Dan Och

The focus on pension funds is not new to us. I understand that there were a couple of articles that heightened it. But you've seen the numbers in the press release and if you go back and look quarter-by-quarter, you'll see the consistent steady growth over the last five to seven years. So this is not, it's not a new business. It's not a new focus. You shouldn't expect to see any dramatic change in headcount as a result of that.

Operator

Thank you. We have another question and it comes from the line of Ken Worthington. Please go ahead.

Ken Worthington - JPMorgan

Just two follow-ups. One on the Asian front and sorry if you mentioned this. Is it below benchmark and if so how far below at this point approximately? And then, the second one is part of the Jobs Acts signed by the President. It eliminated the probation against solicitation and advertising, which lessens restriction in terms of hedge fund marketing. It's, I guess, it's -- the law was signed, but this is a sole proposal by the FEC. If this proposal goes through, does this change the world for you in terms of fund raising, like make it easier for you to fund raise or may be perversely does it level the plain field with may be some weaker hedge funds that don't have the same brand name that you guys do. I don't know if you thought about it as so just proposal, but what it talks about?

Dan Och

In terms of Asia it's not below tight watermark. And in terms of your second question as you pointed out that law it's just a proposal. There is no logic, nothing behind it. We're not contemplating doing anything different. And when the law is passed then we'll figure out if it's something that we need to address. And obviously we can't address other funds because we don't know what they're going to do, and it's not about that other funds advertising, it's about our competitive advantage in terms of what we do.

Operator

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

Tina Madon

Thanks, Cavalin. 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 enquiry should be directed to Jonathan Gasthalter at (212) 687-8080.

Operator

Thank you. Ladies and gentlemen that concludes your conference call for today. You may now disconnect for your weekend.

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