Sculptor Capital assets fall 3.2% in quarter, up 3.4% for year

Sculptor Capital Management's assets under management totaled $33.4 billion as of March 31, down 3.2% from three months earlier but up 3.4% from a year earlier, the firm's earnings report released Wednesday showed.

The $1.1 billion decline in assets was primarily due to performance-related losses of $1.6 billion, partially offset by net inflows of $555 million, and $54 million of distributions.

In contrast, Sculptor attracted $2.1 billion in net inflows in the previous quarter together with $664 million of performance gains and $322 million in distributions. In the year-earlier quarter, the firm had net outflows of $923 million, cushioned by $873 million of performance gains and distributions of $155 million.

In the earnings release, Sculptor's executive team attributed a large portion of the firm's AUM decline in the first quarter to $801 million of performance losses in the firm's opportunistic credit funds, which had net outflows of $279 million. Assets under management in the opportunistic credit fund family declined 18.3% to $4.9 billion compared with Dec. 31 and were down 15.5% for the year.

Robert S. Shafir, Sculptor's CEO, told analysts during Wednesday's earnings call that the firm's opportunistic credit funds were hit hard by losses in corporate and structured credit investments resulting from the impact of the COVID-19 pandemic during the first quarter, particularly in the month of March.

The Sculptor Credit Opportunities Master Fund, for example, declined a net 20% in the first quarter, Mr. Shafir said.

However, Mr. Shafir said he's optimistic that Sculptor's opportunistic credit funds will "recover over time" from market-related mispricing of the underlying investments.

He added that "we continue to see great opportunities for us, especially in structured credit," and noted that the firm is in "active dialogues with investors" regarding opportunistic credit investments.

The firm's multistrategy hedge funds also experienced a comparatively large performance loss of $657 million coupled with net outflows of $210 million and $5 million in distributions during the three-month period ended March 31. Hedge fund AUM was $8.5 billion as of March 31, down 8.6% from Dec. 31 and down 17.5% from March 31, 2019.

Performance of the firm's multistrategy flagship Sculptor Master Fund was down a net 6.6% in the first quarter, but Mr. Shafir told analysts that the fund's return in the month of April was up 5.5%.

Although Sculptor's other fund families — institutional credit strategies and real estate funds — experienced modest performance declines of $113 million and $10 million, respectively, both had AUM increases in the first quarter.

Assets in institutional credit strategies totaled $16 billion as of March 31, up 1.9% from three months earlier and up 19.4% from a year earlier. The credit funds attracted net inflows of $397 million in the quarter.

Real estate strategies totaled $4 billion as of March 31, growth of 17.6% from Dec. 31 and up 48.1% from March 31, 2019. Net inflows into the real estate funds was $647 million and distributions totaled $42 million in the quarter.

Further to Mr. Shafir's point that Sculptor is recovering to some extent from market impacts in the first quarter and is attracting new assets, the earnings report showed that estimated AUM rose 1.8% to $34 billion on May 1, driven by $178.5 million of net inflows and $472.3 million of performance gains.

The firm's revenue fell precipitously to $79.2 million in the first quarter, down 70.9% compared with the previous quarter and down 35.7% from the year-earlier quarter.