Tuesday, November 5, 2013
Daniel Saul Och
We're seeing demand and client allocations in a number of different areas. If you look at credit, we presently have about $6 billion of assets under management in the credit area. You'll recall, some topic on these calls, we would talk about what it's going to take to get the first billion. We've also got demand for our multi-strategy product, a lot of interest in the real estate side, a lot of interest on long/short equity side. So what we're really seeing is, across-the-board interest in our products, across-the-board interest in the way Och-Ziff does things, a desire to establish new relationships with Och-Ziff and to increase relationships that have occurred. If you've heard Joel note on the call, the 3-year tranche that generated most of the incentive this quarter rolled into a new similar structure. So that's always very, very important to us.
We don't disclose those numbers, but it's been across the board. It's new investors. It's current investors increasing. It's current investors interested in expanding the relationship with us. This concept, for them, they look at the quality of our investment products.
They look at the quality of the organization, of its controls, of its operations, of its transparency, and we think all that's playing out well. We also feel good about the fact that the expansion is -- we feel is benefiting all of our investors.
For example, on the credit side, we now got $6 billion of assets under management on the credit side. We've dramatically increased our resources and capabilities over the past several years on the credit side. If you're an investor in a multi-strategy fund, you're benefiting from that. You're benefiting from the flows. You're betting from -- benefiting from the capabilities.
You're benefiting from the increased product capability. We -- same thing with the real estate side. There's no doubt that investors in the credit funds and the multi-strategy funds have benefited from the capabilities we have on the real estate side, and we believe investors on the real estate side also benefit from the flows and product coming from other areas of the firm.
And that's always -- it's been a very important part about how we think about growing. Where do we think we have capability? Where can we deliver value to clients and excess return to clients? And where can we do it in a way that benefits all of the investors?
No, it's mostly -- you talk about the management fee rate. Most of it relates to flows into our credit assets, which typically, as you know, have lower management fees than our other funds. But this is a very important part of our organic growth in this -- in our assets under management. So -- but that's basically the reason.
Sure. Look, our goal -- right now, we haven't done anything specific that we're discussing in terms of those new channels and platforms. Our goals, which is similar to what we do with the private banks, is not to create a channel. It's not necessarily to be the first. We want to be the best alternative available for any channel that decides to come into our space. We think we executed that well with the private banks, and that's worked well for everybody. We believe that we are -- that positions that way for any new channels. So as I said, right now, we don't have anything specific to announce. But we do believe that any new group of investors looking to come into the alternative space in the areas that we touch, we believe that Och-Ziff is one of their best alternatives. And if we maintain that, along with our infrastructure and transparency, we'll be well positioned to take advantage when it's appropriate.
Well, our concern in the credit markets has more to do with the fact that in many areas, spreads have contracted, and in many areas, prices have increased. Our goal in the credit area, our goal in expanding credit products has been to find those areas where we feel we can deliver excess return, where we feel that we can provide value that's significant to clients and do it in a way that enhances all other areas of the firm that invest on the credit side. We're very proud of the fact, as we said, that we have $6 billion in AUM. First is where we were when we first got this started. Having said that, when we look at some of the managers who are very strong in the credit area, their AUM in that asset class is substantially higher than ours. And so we think we have a lot of room to do some very good things for clients going forward.
Joel Martin Frank
Well, to your second question, we don’t think that it's really having any impact. In terms of what we're seeing in the fund raising environment, because it's -- I can't really comment on the overall industry. I don’t know what other firms are doing. But we're seeing interest in a number of different areas.
Pension funds and private banks, which have been the most robust for the past couple of years, continue to be robust. We're seeing more interest in Europe than we've seen over the past couple of years. I think that has a lot to do with the fact that Europe looks a little bit more stable.
We're seeing more interest in large clients looking to establish more significant relationships. And as long as we continue to perform and continue to drive value, we think we can continue to grow. And we like the fact that the growth is in more than one area. That's always very important in this firm. We are thoughtful about capacity.
We are thoughtful about driving returns. We're an investment-driven organization. That is what we intend to be in the future. And so when we can expand in an area such as credit or expand in an area such as real estate which has a lot of capacity, the investors in those areas do very well, and investors in other funds at Och-Ziff benefit from it. That's our formula. That's what we're going to keep doing going forward.