UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Endedquarterly period ended September 30, 20172023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________  to ________
Commission File NumberNumber: 001-33805
OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC.
(Exact Namename of Registrant as Specifiedspecified in its Charter)
charter)
Delaware
26-0354783
Delaware26-0354783
(State or other jurisdiction of Incorporation)incorporation or organization)(I.R.S. Employer Identification Number)No.)
9 West 57th Street, New York, New York 10019
(Address of Principal Executive Offices)principal executive offices)
Registrant’s telephone number: (212) 790-0000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A SharesSCUNew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ☑    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  þ☑    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Act.
Large accelerated filer☐þAccelerated filer¨☑
Non-accelerated filer☐
¨ (Do not check if a smaller reporting company)
Smaller reporting company¨☐
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨

☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No þ☑
As of October 30, 2017,November 6, 2023, there were 185,436,16329,352,181 Class A Shares, 4,650,661 Restricted Class A Shares and 339,339,47833,017,247 Class B Shares outstanding.



OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
TABLE OF CONTENTS



SCULPTOR CAPITAL MANAGEMENT, INC.
TABLE OF CONTENTS
Page
Page
PART I — FINANCIAL INFORMATION
Item 1.
46
46
7
58
69
711
913
Item 2.
3347
Item 3.
6987
Item 4.
7189
PART II — OTHER INFORMATION
Item 1.
7291
Item 1A.
7292
Item 2.
7293
Item 3.
7293
Item 4.
7293
Item 5.
7294
Item 6.
7394
7495




i



Defined Terms
2007 OfferingsRefers collectively to our IPO and the concurrent private offering of approximately 38.13.81 million Class A Shares to DIC Sahir Limited, a wholly owned indirect subsidiary of Dubai Holdings LLCLLC.
Accrued but unrecognized incentive incomeAccrued but unrecognized incentive income (“ABURI”) is the amount of incentive income accrued at the fund level on longer-term AUM that has not yet been recognized in our revenues. These amounts may ultimately not be recognized as revenue by us in the event of future losses in the respective funds.
active executive managing directorsExecutive managing directors who remain active in our businessbusiness.
Annual ReportOur annual report on Form 10-K for the year ended December 31, 2016,2022, dated March 1, 20173, 2023, and filed with the SECSEC.
Advisers ActInvestment Advisers Act of 1940, as amended.
Assets Under Management
Assets Under Management (“AUM”) refers to the assets for which we provide investment management, advisory or certain other investment-related services. Specifically:
a.AUM for our multi-strategy and opportunistic credit funds is generally based on the net asset value of those funds plus any unfunded commitments, if applicable. AUM is reduced for unfunded commitments that will be funded through transfers from other funds.
b.AUM for Institutional Credit Strategies is generally based on the amount of equity outstanding for CLOs and CBOs (during the warehouse period) and the par value of the collateral assets and cash held (after the warehouse period). For aircraft securitization vehicles, AUM is based on the adjusted portfolio appraisal values for the aircraft collateral within the securitization. AUM is reduced for any investments in these CLOs and securitization vehicles held by our other funds. AUM also includes the net asset value of other investment vehicles within this strategy.
c.AUM for our real estate funds is generally based on the amount of capital committed by our fund investors during the investment period and the amount of actual capital invested for periods following the investment period. AUM is reduced for unfunded commitments that will be funded through transfers from other funds. AUM for our new real estate investment vehicle is based on net asset value.
d.AUM for our special purpose acquisition company (“SPAC”) sponsored by us included the proceeds raised in the initial public offering held in a trust account for use in a business combination. The SPAC liquidated in the second quarter of 2023.

AUM includes amounts that are not subject to management fees, incentive allocation or other amounts earned on AUM, including without limitation, investments by the Company, its executive managing directors, employees and certain other related parties. Our calculation of AUM may differ from the calculations of other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. Our calculations of AUM are not based on any definition set forth in the governing documents of the investment funds and are not calculated pursuant to any regulatory definitions.
Class A SharesOur Class A Shares, representing Class A limited liability company interestscommon stock of Och-ZiffSculptor Capital Management, Group LLC,Inc., which are publicly traded and listed on the NYSENYSE.
Class B SharesClass B Shares of Och-ZiffSculptor Capital Management, Group LLC,Inc., which are not publicly traded, are currently held solely by our executive managing directors and have no economic rights but entitle the holders thereof to one vote per share together with the holders of our Class A SharesShares.
CLOsCollateralized loan obligationsobligations.
1

the Company, Sculptor Capital, the firm, we, us, ourRefers, unless the context requires otherwise, to the Registrant and its consolidated subsidiaries, including the Sculptor Operating Group.
Consolidated EntitiesRefers to funds, special purpose entities, investment vehicles and other similar structures for which the Company is required to consolidate in accordance with GAAP.
Distribution HolidayThe Sculptor Operating Partnerships initiated a distribution holiday (the “Distribution Holiday”) on the Group A Units, Group E Units and Group P Units and on certain RSUs and RSAs that will terminate on the earlier of (x) 45 days after the last day of the first calendar quarter as of which the achievement of $600.0 million of Distribution Holiday Economic Income is realized and (y) April 1, 2026. Holders of Group A Units, Group E Units and Group P Units and certain RSUs and RSAs, do not receive distributions during the Distribution Holiday.
Distribution Holiday Economic IncomeDistribution Holiday Economic Income is the cumulative amount of Economic Income earned since October 1, 2018, less any dividends paid to Class A Shareholders or on the now-retired Preferred Units. Distribution Holiday Economic Income is a non-GAAP measure that is defined in the agreements of limited partnership of the Sculptor Operating Partnerships and is being presented to provide an update on the progress made toward the $600.0 million target required to exit the Distribution Holiday.
Economic IncomeEconomic Income is a non-GAAP measure of pre-tax operating performance that excludes the following from our results on a GAAP basis: noncontrolling interests, redeemable noncontrolling interests, equity based compensation expense, net of cash settled RSUs, depreciation and amortization expenses, components of our other income (loss), non-cash interest expense accretion on debt, and amounts related to consolidated entities. In addition, expenses related to incentive income profit-sharing arrangements are generally recognized at the same time the related incentive income revenue is recognized. The fair value of RSUs that are settled in cash to employees or executive managing directors, where the number of RSUs to be settled in cash is not certain at the time of grant, is included as an expense at the time of settlement. Where the number of RSUs to be settled in cash is certain on the grant date, the expense is recognized during the performance period to which the award relates. Similarly, deferred cash compensation is expensed in full during the performance period to which the award relates for Economic Income, rather than over the service period for GAAP. Further, impairment of right-of-use lease assets is excluded from Economic Income at the time the impairment is recognized for GAAP and the impact is then amortized over the lease term for Economic Income. Additionally, rent expense is offset by subrental income as management evaluates rent expenses on a net basis.
Exchange ActSecurities Exchange Act of 1934, as amendedamended.
��
executive managing directorsThe current limited partnersexecutive managing directors of the Oz Operating Group entities other than our intermediate holding companies, including our founder, Daniel S. Och,Company, and, except where the context requires otherwise, includealso includes certain limited partnersexecutive managing directors who are no longer active in the business of the Companyour business.
Fee Paying Assets Under ManagementFee Paying Assets Under Management (“FP AUM”) refers to the AUM on which we earn management fees and/or incentive income.
fundsThe multi-strategy funds, dedicated credit funds, including opportunistic credit real estatefunds and equity funds, Institutional Credit Strategies products, real estate funds, and other alternative investment vehicles for which we provide asset management services, as well as the SPAC we sponsored, which was liquidated in the second quarter of 2023.
GAAPU.S. generally accepted accounting principlesprinciples.
Group A UnitsRefers collectively to one Class A operating group unit in each of the OzSculptor Operating Partnerships. Group A Units are equitylimited partner interests held by our executive managing directorsdirectors.
2

Group A-1 UnitsRefers collectively to one Class A-1 operating group unit in each of the Sculptor Operating Partnerships. Group A-1 Units are limited partner interests held by our executive managing directors.
Group B UnitsRefers collectively to one Class B operating group unit in each of the OzSculptor Operating Partnerships. Group B Units are equitylimited partner interests held by our intermediate holding companiesSculptor Corp.
Group DE UnitsRefers collectively to one Class DE operating group unit in each of the OzSculptor Operating Partnerships. Group DE Units are non-equity, limited partner profits interests held by our executive managing directorsdirectors.
Group P UnitsRefers collectively to one ClassGroup P operating group unit in each of the OzSculptor Operating Partnerships. Group P Units are equitylimited partner interests held by our executive managing directorsdirectors.
Institutional Credit StrategiesOur asset management platform that invests in performing credits, including leveraged loans, high-yield bonds, private credit/bespoke financing and investment grade credit via CLOs, aircraft securitization vehicles, collateralized bond obligations, the structured alternative investment solution, and other customized solutions
intermediate holding companiesRefers collectively to Oz Corp and Oz Holding, both of which are wholly owned subsidiaries of Och-Ziff Capital Management Group LLC


1


solutions.
IPOOur initial public offering of 36.03.6 million Class A Shares that occurred in November 20072007.
Longer-term AUMAUM from investors that are subject to initial commitment periods of three years or longer. Investors with longer-term AUM may have less than three years remaining in their commitment period. This excludes AUM that had initial commitment periods of three years or longer and subsequently moved to shorter commitment periods at the end of their initial commitment period.
NYSENew York Stock ExchangeExchange.
the Company, the firm, we, us, ourRefers, unless the context requires otherwise, to Och-Ziff Capital Management Group LLC, a Delaware limited liability company, and its consolidated subsidiaries, including the Oz Operating Group
Oz CorpOch-Ziff Holding Corporation, a Delaware corporation
Oz HoldingOch-Ziff Holding LLC, a Delaware limited liability company
Oz Operating GroupRefers collectively to the Oz Operating Partnerships and their consolidated subsidiaries
Oz Operating PartnershipsRefers collectively to OZ Management LP, OZ Advisors LP and OZ Advisors II LP
Partner Equity UnitsRefers collectively to the Group A Units, Group E Units and Group P Units.
Preferred UnitsOne Class A cumulative preferred unit in each of the OzSculptor Operating Group entitiesPartnerships collectively representsrepresented one “Preferred Unit.” Certain of our executive managing directors collectively ownowned 100% of the Preferred Units. We redeemed in full the Preferred Units in the fourth quarter of 2020.
PSUsClass A performance-based RSUs.
RecapitalizationRefers to the recapitalization of our business that occurred in February 2019. As part of the Recapitalization, a portion of the interests held by our former executive management were reallocated to existing members of senior management. In addition, we restructured the previously outstanding senior debt and Preferred Units.
RegistrantOch-ZiffSculptor Capital Management, Group LLC,Inc., a Delaware limited liability companycorporation.
RSAsRestricted Class A Shares.
RSUsClass A restricted share units.
Sculptor CorpSculptor Capital Holding Corporation, a Delaware corporation.
Sculptor Operating GroupRefers collectively to the Sculptor Operating Partnerships and their consolidated subsidiaries.
Sculptor Operating Group UnitsRefers collectively to Sculptor Operating Group A, B, E, and P Units.
3

Sculptor Operating PartnershipsRefers collectively to Sculptor Capital LP, Sculptor Capital Advisors LP and Sculptor Capital Advisors II LP.
SECU.S. Securities and Exchange CommissionCommission.
Securities ActSecurities Act of 1933, as amendedamended.
SPACRefers to special purpose acquisition company.
Special InvestmentsInvestments that we, as investment manager, believe lack a readily ascertainable market value, are illiquid or should be held until the resolution of a special event or circumstance
ZiffsRefers collectively to Ziff Investors Partnership, L.P. II and certain of its affiliates and control personscircumstance.

4

2



Available Information
We file annual, quarterly and current reports, proxy statements and other information required by the Exchange Act with the SEC. We make available free of charge on our website (www.ozm.comwww.sculptor.com) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to those filings as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. We also use our website to distribute company information, including Assets Under Management by investment strategy, and such information may be deemed material. Accordingly, investors should monitor our website, in addition to our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this report.
Also posted on our website in the “Public Investors – “Shareholder Services—Corporate Governance” section are charters for our Audit Committee; Compensation Committee; Nominating, Corporate Governance and Conflicts Committee and Corporate Responsibility and Compliance Committee, as well as our Corporate Governance Guidelines and Code of Business Conduct and Ethics governing our directors, officers and employees. Information on, or accessible through, our website is not a part of, and is not incorporated into, this report or any other SEC filing. Copies of our SEC filings or corporate governance materials are available without charge upon written request to Och-ZiffSculptor Capital Management, Group LLC,Inc., 9 West 57th Street, New York, New York 10019, Attention: Office of the Secretary.
Any materials we file with the SEC are also publicly available through the SEC’s website (www.sec.gov) or may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.(www.sec.gov).
No statements herein, available on our website or in any of the materials we file with the SEC constitute, or should be viewed as constituting, an offer of any fund.
Forward-Looking Statements
Some of the statements under “Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which we refer to as the “MD&A,” “Part I — Item 3. Quantitative and Qualitative Disclosures About Market Risk,” “Part II — Item 1A. Risk Factors” and elsewhere in this quarterlyThis report may containcontains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that reflect our current views with respect to, among other things, future events, our operations and our financial performance. We generally identify forward-looking statements by terminology such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “will,” “should,” “could,” “seek,” “approximately,” “predict,” “intend,” “plan,” “estimate,” “anticipate,” “opportunity,” “comfortable,” “assume,” “remain,” “maintain,” “sustain,” “achieve,” “see,” “think,” “position” or the negative version of those words or other comparable words.
Any forward-looking statements contained herein are based upon historical information and on our current plans, estimates and expectations. The inclusion of this or other forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.
We caution that forward-looking statements are subject to numerous assumptions, estimates, risks and uncertainties, including but not limited to the following: global economic, business, market and geopolitical conditions; U.S.conditions, poor investment performance of, or lack of capital flows into, the funds we manage; our investors’ right to redeem their investments from our funds on a regular basis; the highly variable nature of our revenues, results of operations and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy;cash flows; difficult market conditions that could adversely affect our funds; counterparty default risks; the United Kingdom’s withdrawal from the European Union; the outcome of third-party litigation involving us; or from matters involving the consequencesfounder and former CEO of the Foreign Corrupt Practices Act settlements with the SEC and the U.S. Department of Justice (the “DOJ”);our predecessor Och-Ziff; conditions impacting the alternative asset management industry; our ability to retain existing fund investor capital; our ability to successfully compete for fund investors, assets, professional talent and investment opportunities; our ability to retain our active executive managing directors, managing directors and other investment professionals; our successful formulation and execution of our business and growth strategies; the publicly announced special committee process and any outcome thereof; our ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to our business; U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy; and assumptions relating to our operations, investment performance, financial results, financial condition, business prospects, growth strategy and liquidity.
If one or more of these or other risks or uncertainties materialize, or if our assumptions or estimates prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors are not and should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to those described in our Annual Report.
There may be additional risks, uncertainties and factors that we do not currently view as material or that are not known. The forward-looking statements contained in this report are made only as of the date of this report. We do not undertake to update any forward-looking statement because of new information, future developments or otherwise.

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SCULPTOR CAPITAL MANAGEMENT, INC.

CONSOLIDATED BALANCE SHEETS — UNAUDITED

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
OCH-ZIFF
 September 30, 2023December 31, 2022
 (dollars in thousands)
Assets  
Cash and cash equivalents$159,446 $258,863 
Restricted cash8,297 7,895 
Investments (includes assets measured at fair value of $296,951 and $231,929 including assets sold under agreements to repurchase of $173,156 and $157,107 as of September 30, 2023 and December 31, 2022, respectively)383,984 299,059 
Income and fees receivable26,569 56,360 
Due from related parties26,706 32,846 
Deferred income tax assets252,911 257,939 
Operating lease assets68,726 75,861 
Other assets, net75,424 106,442 
Assets of consolidated entities: 
Cash and cash equivalents413 3 
Restricted cash and cash equivalents9,800 9,805 
Investments of consolidated entities322,516 544,554 
Other assets of consolidated entities11,266 2,579 
Total Assets$1,346,058 $1,652,206 
Liabilities and Shareholders’ Equity 
Liabilities  
Compensation payable$74,012 $127,209 
Unearned income and fees40,510 53,869 
Tax receivable agreement liability173,124 190,245 
Operating lease liabilities83,168 92,045 
Debt obligations115,486 124,176 
Warrant liabilities, at fair value34,140 24,163 
Securities sold under agreements to repurchase177,503 166,632 
Other liabilities43,178 43,049 
Liabilities of consolidated entities: 
Notes payable, at fair value220,702 196,106 
Warrant liabilities, at fair value— 596 
Other liabilities of consolidated entities5,070 9,669 
Total Liabilities966,893 1,027,759 
Commitments and Contingencies (Note 16)
Redeemable Noncontrolling Interests of Consolidated Entities (Note 3)— 237,864 
Shareholders’ Equity  
Class A Shares, par value $0.01 per share, 100,000,000 shares authorized; 28,033,472 and 26,729,608 shares issued and 25,011,092 and 23,707,228 shares outstanding as of September 30, 2023 and December 31, 2022, respectively250 238 
Class B Shares, par value $0.01 per share, 75,000,000 shares authorized; 33,017,247 and 33,569,188 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively330 336 
Treasury stock, at cost; 3,022,380 as of September 30, 2023 and December 31, 2022(32,495)(32,495)
Additional paid-in capital294,665 255,293 
Accumulated deficit(309,569)(276,149)
Accumulated other comprehensive loss(546)(119)
Shareholders’ deficit attributable to Class A Shareholders(47,365)(52,896)
Shareholders’ equity attributable to noncontrolling interests426,530 439,479 
Total Shareholders’ Equity379,165 386,583 
Total Liabilities and Shareholders’ Equity$1,346,058 $1,652,206 
    See notes to consolidated financial statements.
6

SCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC.
CONSOLIDATED BALANCE SHEETSSTATEMENTS OF OPERATIONS — UNAUDITED
 September 30, 2017 December 31, 2016
    
 (dollars in thousands)
Assets 
  
Cash and cash equivalents$317,917
 $329,813
Investments (includes assets measured at fair value of $289,525 and $21,341 as of September 30, 2017 and December 31, 2016, respectively)304,648
 37,980
Income and fees receivable77,847
 176,638
Due from related parties22,802
 20,494
Deferred income tax assets683,152
 695,441
Other assets, net83,517
 169,984
Assets of consolidated funds: 
  
Investments of consolidated funds, at fair value41,074
 37,661
Other assets of consolidated funds12,416
 17,544
Total Assets$1,543,373
 $1,485,555
    
Liabilities and Shareholders’ (Deficit) Equity   
Liabilities 
  
Compensation payable$53,143
 $206,106
Due to related parties521,948
 522,101
Debt obligations541,016
 577,128
Other liabilities (includes liabilities measured at fair value of $0 and $8,204 as of September 30, 2017 and December 31, 2016, respectively)180,443
 174,994
Liabilities of consolidated funds: 
  
Other liabilities of consolidated funds8,965
 15,197
Total Liabilities1,305,515
 1,495,526
    
Commitments and Contingencies (Note 15)

 

    
Redeemable Noncontrolling Interests (Note 3)445,142
 284,121
    
Shareholders’ (Deficit) Equity 
  
Class A Shares, no par value, 1,000,000,000 shares authorized, 185,312,439 and 184,843,255 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively—
 —
Class B Shares, no par value, 750,000,000 shares authorized, 339,339,478 and 297,317,019 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively—
 —
Paid-in capital3,087,247
 3,097,431
Accumulated deficit(3,558,633) (3,563,452)
Shareholders’ deficit attributable to Class A Shareholders(471,386) (466,021)
Shareholders’ equity attributable to noncontrolling interests264,102
 171,929
Total Shareholders’ (Deficit) Equity(207,284) (294,092)
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders’ (Deficit) Equity$1,543,373
 $1,485,555
 Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
 (dollars in thousands)
Revenues    
Management fees$60,194 $66,236 $186,344 $211,443 
Incentive income17,801 7,566 62,383 73,788 
Other revenues7,683 3,576 20,931 8,526 
(Loss) income of consolidated entities(23)1,453 4,535 1,603 
Total Revenues85,655 78,831 274,193 295,360 

Expenses    
Compensation and benefits62,081 67,130 188,187 224,658 
Interest expense6,712 3,876 18,462 10,588 
General, administrative and other42,088 28,290 105,811 82,031 
Expenses of consolidated entities229 1,031 2,080 2,943 
Total Expenses111,110 100,327 314,540 320,220 

Other (Loss) Income    
Changes in fair value of warrant liabilities(9,717)(2,386)(9,977)40,690 
Changes in tax receivable agreement liability225 (14)(302)206 
Net gains (losses) on investments7,051 (2,989)17,187 (39,171)
Net (losses) gains of consolidated entities(9,440)(3,498)303 (5,792)
Other(1,406)— (1,406)— 
Total Other (Loss) Income(13,287)(8,887)5,805 (4,067)

Loss Before Income Taxes(38,742)(30,383)(34,542)(28,927)
Income taxes(280)227 11,277 (720)
Consolidated Net Loss(38,462)(30,610)(45,819)(28,207)
Less: Net loss attributable to noncontrolling interests7,349 9,410 23,376 15,837 
Less: Net income attributable to redeemable noncontrolling interests— (1,492)(3,350)(5,257)
Net Loss Attributable to Sculptor Capital Management, Inc.(31,113)(22,692)(25,793)(17,627)
Change in redemption value of redeemable noncontrolling interests— 174 6,826 3,939 
Net Loss Attributable to Class A Shareholders$(31,113)$(22,518)$(18,967)$(13,688)
Loss per Class A Share   
Loss per Class A Share - basic$(1.23)$(0.91)$(0.75)$(0.53)
Loss per Class A Share - diluted$(1.23)$(0.91)$(1.00)$(1.79)
Weighted-average Class A Shares outstanding - basic25,204,848 24,772,098 25,186,162 25,620,996 
Weighted-average Class A Shares outstanding - diluted25,204,848 24,772,098 40,212,156 26,818,176 

See notes to consolidated financial statements.

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OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED


Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Consolidated net loss$(38,462)$(30,610)$(45,819)$(28,207)
Other Comprehensive Loss, Net of Tax
Other comprehensive loss - currency translation adjustment(1,266)(1,430)(427)(3,406)
Comprehensive Loss(39,728)(32,040)(46,246)(31,613)
Less: Comprehensive loss attributable to noncontrolling interests7,349 9,410 23,376 15,837 
Less: Comprehensive income attributable to redeemable noncontrolling interests— (1,492)(3,350)(5,257)
Comprehensive Loss Attributable to Sculptor Capital Management, Inc.$(32,379)$(24,122)$(26,220)$(21,033)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 (dollars in thousands)
Revenues       
Management fees$77,171
 $128,513
 $243,508
 $428,822
Incentive income51,249
 18,754
 168,990
 57,477
Other revenues1,524
 380
 4,081
 1,544
Income of consolidated funds2,055
 458
 3,518
 1,262
Total Revenues131,999
 148,105
 420,097
 489,105

       
Expenses       
Compensation and benefits74,490
 57,758
 214,112
 169,762
Interest expense5,611
 6,129
 17,043
 17,452
General, administrative and other33,136
 56,125
 114,229
 596,321
Expenses of consolidated funds8,824
 17
 9,368
 316
Total Expenses122,061
 120,029
 354,752
 783,851

       
Other Income       
Changes in tax receivable agreement liability—
 11,819
 —
 11,990
Net gains on investments in funds and joint ventures264
 803
 1,050
 1,302
Net gains of consolidated funds7,658
 821
 8,278
 2,182
Total Other Income7,922
 13,443
 9,328
 15,474

       
Income (Loss) Before Income Taxes17,860
 41,519
 74,673
 (279,272)
Income taxes1,942
 9,986
 17,242
 39,436
Consolidated and Comprehensive Net Income (Loss)15,918
 31,533
 57,431
 (318,708)
Less: (Income) loss attributable to noncontrolling interests(9,760) (16,570) (41,680) 186,867
Less: Income attributable to redeemable noncontrolling interests(432) (678) (1,238) (1,801)
Net Income (Loss) Attributable to Och-Ziff Capital Management Group LLC5,726
 14,285
 14,513
 (133,642)
Less: Change in redemption value of Preferred Units—
 —
 (2,853) —
Net Income (Loss) Attributable to Class A Shareholders$5,726
 $14,285
 $11,660
 $(133,642)
        
Earnings (Loss) per Class A Share       
Income (Loss) per Class A Share - basic$0.03
 $0.08
 $0.06
 $(0.73)
Income (Loss) per Class A Share - diluted$0.03
 $0.05
 $0.06
 $(0.75)
Weighted-average Class A Shares outstanding - basic186,235,651
 182,521,225
 186,201,389
 182,508,296
Weighted-average Class A Shares outstanding - diluted186,235,651
 479,838,244
 186,201,389
 479,825,416
        
Dividends Paid per Class A Share$0.02
 $—
 $0.05
 $—


See notes to consolidated financial statements.

8

5



OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) — UNAUDITED
Sculptor Capital Management, Inc. Shareholders
 Class A SharesClass B SharesTreasury Stock SharesClass A Shares Par ValueClass B Shares Par ValueAdditional Paid in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury Stock, at costShareholders’ Deficit Attributable to Class A Shareholders Shareholders’ Equity Attributable to Noncontrolling InterestsTotal Shareholders’ Equity
(dollars in thousands, except share data)
Balance at July 1, 202324,971,561 33,017,247 3,022,380 $250 $330 $283,057 $(278,365)$720 $(32,495)$(26,503)$428,575 $402,072 
Equity-based compensation, net of taxes39,531 — — — — 11,517 — — — 11,517 1,451 12,968 
Dividend equivalents on Class A restricted share units— — — — — 91 (91)— — — — — 
Consolidated net loss, excluding amounts attributable to redeemable noncontrolling interests— — — — — — (31,113)— — (31,113)(7,349)(38,462)
Currency translation adjustment— — — — — — — (1,266)— (1,266)— (1,266)
Capital contributions— — — — — — — — — — 4,649 4,649 
Capital distributions— — — — — — — — — — (796)(796)
Balance at September 30, 202325,011,092 33,017,247 3,022,380 $250 $330 $294,665 $(309,569)$(546)$(32,495)$(47,365)$426,530 $379,165 
Balance at July 1, 202224,885,028 33,633,474 1,641,589 $249 $336 $219,705 $(251,059)$(1,925)$(19,492)$(52,186)$448,085 $395,899 
Equity-based compensation, net of taxes85,755 (64,286)— — — 17,742 — — — 17,742 2,146 19,888 
Repurchase of Class A Shares(936,016)— 936,016 (9)— — — — (8,740)(8,749)— (8,749)
Dividend equivalents on Class A restricted share units— — — — — 319 (319)— — — — — 
Change in redemption value of SPAC Class A Shares— — — — — 174 — — — 174 — 174 
Cash dividends declared on Class A Shares ($0.13 per share)— — — — — — (3,222)— — (3,222)— (3,222)
Consolidated net loss, excluding amounts attributable to redeemable noncontrolling interests— — — — — — (22,692)— — (22,692)(9,410)(32,102)
Currency translation adjustment— — — — — — — (1,430)— (1,430)— (1,430)
Capital contributions— — — — — — — — — — 5,490 5,490 
Capital distributions— — — — — — — — — — (1,751)(1,751)
Balance at September 30, 202224,034,767 33,569,188 2,577,605 $240 $336 $237,940 $(277,292)$(3,355)$(28,232)$(70,363)$444,560 $374,197 
9

SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) — (continued)

 Och-Ziff Capital Management Group LLC    
 Number of
Class A
Shares		 Number of
Class B
Shares		 Paid-in
Capital		 Accumulated
Deficit		 Shareholders' Deficit
Attributable to Class A
Shareholders		 Shareholders' Equity
Attributable to
Noncontrolling Interests		 Total
Shareholders’
Equity (Deficit)
              
     (dollars in thousands)
As of December 31, 2016184,843,255
 297,317,019
 $3,097,431
 $(3,563,452) $(466,021) $171,929
 $(294,092)
Capital contributions—
 —
 —
 —
 —
 783
 783
Capital distributions—
 —
 —
 —
 —
 (16,317) (16,317)
Cash dividends declared on Class A Shares—
 —
 —
 (9,256) (9,256) —
 (9,256)
Equity-based compensation, net of taxes469,184
 172,459
 25,716
 —
 25,716
 37,135
 62,851
Dividend equivalents on Class A restricted share units—
 —
 438
 (438) —
 —
 —
Relinquishment of Group A Units (Note 3)—
 (30,000,000) —
 —
 —
 —
 —
Class B Shares granted to holders of Group P Units (Note 3)—
 71,850,000
 —
 —
 —
 —
 —
Impact of changes in Oz Operating Group ownership (Note 3)—
 —
 (12,266) —
 (12,266) 12,266
 —
Dilution of proceeds from tax receivable agreement waiver (Note 3)—
 —
 (21,219) —
 (21,219) 21,219
 —
Change in redemption value of Preferred Units—
 —
 (2,853) —
 (2,853) (4,593) (7,446)
Comprehensive net income, excluding amounts attributable to redeemable noncontrolling interests—
 —
 —
 14,513
 14,513
 41,680
 56,193
As of September 30, 2017185,312,439
 339,339,478
 $3,087,247
 $(3,558,633) $(471,386) $264,102
 $(207,284)
Sculptor Capital Management, Inc. Shareholders
 Class A SharesClass B SharesTreasury Stock SharesClass A Shares Par ValueClass B Shares Par ValueAdditional Paid in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury Stock, at costShareholders’ Deficit Attributable to Class A Shareholders Shareholders’ Equity Attributable to Noncontrolling InterestsTotal Shareholders’ Equity
(dollars in thousands, except share data)
Balance at January 1, 202323,707,228 33,569,188 3,022,380 $238 $336 $255,293 $(276,149)$(119)$(32,495)$(52,896)$439,479 $386,583 
Equity-based compensation, net of taxes1,303,864 (551,941)— 12 (6)31,411 — — — 31,417 4,259 35,676 
Dividend equivalents on Class A restricted share units— — — — — 1,135 (1,135)— — — — — 
Change in redemption value of SPAC Class A Shares— — — — — 6,826 — — — 6,826 — 6,826 
Cash dividends declared on Class A Shares ($0.26 per share)— — — — — — (6,492)— — (6,492)— (6,492)
Consolidated net loss, excluding amounts attributable to redeemable noncontrolling interests— — — — — — (25,793)— — (25,793)(23,376)(49,169)
Currency translation adjustment— — — — — — — (427)— (427)— (427)
Capital contributions— — — — — — — — — — 9,177 9,177 
Capital distributions— — — — — — — — — — (3,009)(3,009)
Balance at September 30, 202325,011,092 33,017,247 3,022,380 $250 $330 $294,665 $(309,569)$(546)$(32,495)$(47,365)$426,530 $379,165 
Balance at January 1, 202225,668,987 33,613,023 — $257 $336 $184,691 $(253,521)$51 $— $(68,186)$446,469 $378,283 
Equity-based compensation, net of taxes943,385 (43,835)— 9 — 49,167 — — — 49,176 6,029 55,205 
Repurchase of Class A Shares(2,577,605)— 2,577,605 (26)— — — — (28,232)(28,258)— (28,258)
Dividend equivalents on Class A restricted share units— — — — — 143 (143)— — — — — 
Change in redemption value of SPAC Class A Shares— — — — — 3,939 — — — 3,939 — 3,939 
Cash dividends declared on Class A Shares ($0.24 per share)— — — — — — (6,001)— — (6,001)— (6,001)
Consolidated net loss, excluding amounts attributable to redeemable noncontrolling interests— — — — — — (17,627)— — (17,627)(15,837)(33,464)
Currency translation adjustment— — — — — — — (3,406)— (3,406)— (3,406)
Capital contributions— — — — — — — — — — 14,469 14,469 
Capital distributions— — — — — — — — — — (6,570)(6,570)
Balance at September 30, 202224,034,767 33,569,188 2,577,605 $240 $336 $237,940 $(277,292)$(3,355)$(28,232)$(70,363)$444,560 $374,197 

See notes to consolidated financial statements.

10


6


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED




 Nine Months Ended September 30,
 20232022
 (dollars in thousands)
Cash Flows from Operating Activities 
Consolidated net loss$(45,819)$(28,207)
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities:  
Amortization of equity-based compensation44,263 66,664 
Depreciation, amortization and net gains and losses on fixed assets3,085 3,815 
Changes in fair value of warrant liabilities9,977 (40,690)
Other loss1,406 — 
Deferred income taxes5,463 (4,103)
Non-cash lease expense14,030 14,311 
Net (gains) losses on investments, net of dividends(14,517)42,831 
Operating cash flows due to changes in:  
Income and fees receivable29,873 167,168 
Due from related parties6,159 (93)
Other assets, net(912)(11,635)
Compensation payable(59,312)(178,630)
Unearned income and fees(13,360)3,388 
Tax receivable agreement liability(17,121)(16,979)
Operating lease liabilities(15,770)(16,486)
Other liabilities148 (819)
Consolidated entities related items:  
Net losses of consolidated entities689 5,792 
Purchases of investments(44,537)(493,970)
Proceeds from sale of investments59,198 180,669 
Other assets of consolidated entities(11,917)(10,320)
Other liabilities of consolidated entities(5,195)(7,213)
Net Cash Used in Operating Activities(54,169)(324,507)
Cash Flows from Investing Activities  
Purchases of fixed assets(66)(2,317)
Purchases of United States government obligations(88,222)(98,082)
Maturities and sales of United States government obligations35,000 224,386 
Investments in funds(33,502)(136,734)
Return of investments in funds44,533 152,517 
Consolidated entities related items:
Proceeds from sale of investment in government obligations of consolidated SPAC242,272 — 
Purchases of United States government obligations by SPAC— (235,040)
Net Cash Provided by (Used in) Investing Activities200,015 (95,270)
11
 Nine Months Ended September 30,
 2017 2016
    
 (dollars in thousands)
Cash Flows from Operating Activities   
Consolidated net income (loss)$57,431
 $(318,708)
Adjustments to reconcile consolidated net income to net cash provided by operating activities:   
Amortization of equity-based compensation63,696
 56,311
Depreciation, amortization and net gains and losses on fixed assets7,693
 14,947
Deferred income taxes12,395
 31,038
Net gains on investments in funds and joint ventures(1,050) (1,302)
Operating cash flows due to changes in:   
Income and fees receivable98,791
 77,760
Due from related parties(2,308) (9,888)
Other assets, net27,175
 9,762
Due to related parties(153) (12,133)
Compensation payable(152,838) (153,875)
Other liabilities5,286
 398,686
Consolidated funds related items:   
Net gains of consolidated funds(8,278) (2,182)
Purchases of investments(383,184) (185,940)
Proceeds from sale of investments146,907
 175,131
Other assets of consolidated funds(306,453) 9,078
Other liabilities of consolidated funds78,044
 558
Net Cash (Used in) Provided by Operating Activities(356,846) 89,243
    
Cash Flows from Investing Activities   
Purchases of fixed assets(3,857) (7,559)
Proceeds from sale of fixed assets (Note 7)57,599
 —
Purchases of United States government obligations(112,400) (29,915)
Maturities of United States government obligations—
 18,500
Investments in funds(132,102) (12,734)
Return of investments in funds4,310
 1,493
Other, net—
 (17)
Net Cash Used in Investing Activities(186,450) (30,232)
    


7


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED — (continued)


 Nine Months Ended September 30,
 2017 2016
    
 (dollars in thousands)
Cash Flows from Financing Activities   
Issuance and sale of Preferred Units, net of issuance costs150,054
 —
Contributions from noncontrolling and redeemable noncontrolling interests3,066
 2,551
Distributions to noncontrolling and redeemable noncontrolling interests(16,317) (225)
Dividends on Class A Shares(9,256) —
Proceeds from debt obligations127,864
 120,000
Repayment of debt obligations(167,319) (2,738)
Proceeds from debt obligations of consolidated CLO666,712
 —
Repayment of debt obligations of consolidated CLO(222,434) —
Withholding taxes paid on vested RSUs(840) (2,340)
Other, net(130) 141
Net Cash Provided by Financing Activities531,400
 117,389
Net Change in Cash and Cash Equivalents(11,896) 176,400
Cash and Cash Equivalents, Beginning of Period329,813
 254,070
Cash and Cash Equivalents, End of Period$317,917
 $430,470
    
    
Supplemental Disclosure of Cash Flow Information 
  
Cash paid during the period: 
  
Interest$11,199
 $10,374
Income taxes$3,196
 $10,563
Non-cash transactions:   
Assets related to the initial consolidation of CLO$100,156
 $—
Liabilities related to the initial consolidation of CLO$99,878
 $—
Assets related to the deconsolidation of CLO$653,629
 $—
Liabilities related to the deconsolidation of CLO$629,282
 $—
Increase in paid in capital as a result of waiver of payments under tax receivable agreement (Note 15)$—
 $54,112

 Nine Months Ended September 30,
 20232022
 (dollars in thousands)
Cash Flows from Financing Activities  
Contributions from noncontrolling interests9,177 14,469 
Distributions to noncontrolling interests(3,009)(6,570)
Dividends on Class A Shares(6,492)(6,001)
Proceeds from debt obligations, net of issuance costs1,154 5,881 
Repayment of debt obligations, including prepayment costs(11,145)(9,424)
Proceeds from securities sold under agreements to repurchase, net of issuance costs13,299 20,395 
Purchases of treasury stock— (28,232)
Other, net(3,123)(6,254)
Consolidated entities related items:
Redemption of SPAC Class A Shares(242,172)— 
Proceeds from debt obligations of consolidated entities, net of issuance costs— 215,733 
Net Cash (Used in) Provided by Financing Activities(242,311)199,997 
Effect of exchange rate changes on cash and cash equivalents and restricted cash(2,145)(5,478)
Net change in cash and cash equivalents and restricted cash(98,610)(225,258)
Cash and cash equivalents and restricted cash, beginning of period276,566 412,671 
Cash and Cash Equivalents and Restricted Cash, End of Period$177,956 $187,413 
Supplemental Disclosure of Cash Flow Information  
Cash paid during the period:  
Interest$16,062 $8,746 
Income taxes$8,625 $7,199 
Non-cash transactions:  
Assets related to initial consolidation of funds$— $16,699 
Liabilities related to initial consolidation of funds$— $2,364 
Assets related to deconsolidation of funds$— $44,042 
Liabilities related to deconsolidation of funds$— $29,632 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents$159,446 $170,304 
Restricted cash8,297 7,144 
Cash and cash equivalents of consolidated entities413 83 
Restricted cash and cash equivalents of consolidated entities9,800 9,882 
Total Cash and Cash Equivalents and Restricted Cash$177,956 $187,413 
See notes to consolidated financial statements.

12

8


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023



1. OVERVIEWORGANIZATION
Och-ZiffSculptor Capital Management, Group LLCInc. (the “Registrant”), a Delaware limited liability company,corporation, together with its consolidated subsidiaries (collectively, the “Company” or “Sculptor Capital”), is a leading global alternative asset management firmmanager and a specialist in opportunistic investing with offices in New York, London, Hong Kong Mumbai, Beijing, Shanghai and Houston.Shanghai. The Company provides asset management services to itsand investment funds (the “funds”), which pursue a broad range of global investment opportunities.products across Credit, Real Estate, and Multi-Strategy. The Company currentlyserves its global client base through commingled funds, separate accounts and specialized products (collectively, the “funds”). The Company’s model is driven by a global team that is predominantly home-grown, long tenured and incentivized to put client outcomes first. The Company’s capabilities span all major geographies and asset classes, including corporate credit, structured credit, real estate debt and equity, fundamental equities, merger arbitrage, and convertible and derivative arbitrage.
The Company manages multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds, multi-strategy funds, and other alternative investment vehicles. Through Institutional Credit Strategies, the Company’s asset management platform that invests in performing credits, the Company manages collateralized loan obligations (“CLOs”), aircraft securitization vehicles, collateralized bond obligations (“CBOs”), structured alternative investment solutions, commingled products and other customized solutions for its clients.
The Company’s primary sources of revenues are management fees, which are generally based on the amount of the Company’s assets under management (“Assets Under Management” or “AUM”), as defined below, and incentive income, which is based on the investment performance of theits funds. Accordingly, for any given period, the Company’s revenues will be driven by the combination of assets under managementAssets Under Management and the investment performance of the funds. AUM refers to the assets of the funds to which the Company provides investment management and advisory services. The Company’s AUM are a function of the capital that is allocated to it by the investors in its funds and the investment performance of its funds.
The Company currently has two operating segments: the Oz Funds segmentconducts its business and the Company’s real estate business. The Oz Funds segment is currently the Company’s only reportable operating segment under U.S. generally accepted accounting principles (“GAAP”) and provides asset management services to the Company’s multi-strategy funds, dedicated credit funds and other alternative investment vehicles. The Company’s real estate business, which provides asset management services to its real estate funds, is included within Other Operations, as it does not meet the threshold of a reportable operating segment under GAAP.
The Company generates substantially all of its revenues primarily in the United States.States (the “U.S.”) through one operating and reportable segment. The liabilitysingle reportable segment reflects how the Company’s chief operating decision makers allocate resources, make operating decisions and assess financial performance on a consolidated basis under the Company’s ‘one-firm approach’, which includes operating collaboratively across business lines, with predominantly a single expense pool. The Company conducts its operations through Sculptor Capital LP, Sculptor Capital Advisors LP and Sculptor Capital Advisors II LP (collectively, the “Sculptor Operating Partnerships” and collectively with their consolidated subsidiaries, the “Sculptor Operating Group”). The Registrant holds its interests in the Sculptor Operating Group indirectly through Sculptor Capital Holding Corporation (“Sculptor Corp”), a wholly owned subsidiary of the Registrant.
References to the Company’s “executive managing directors” include the current executive managing directors of the Company, and, except where the context requires otherwise, also include certain former executive managing directors who are no longer active in the Company’s business.
On July 23, 2023, the Company entered into an Agreement and Plan of Merger, as amended on October 12, 2023 by Amendment No. 1 to Agreement and Plan of Merger, as further amended on October 26, 2023 by Amendment No. 2 to Agreement and Plan of Merger, with Rithm Capital Corp. and certain of its affiliates. Refer to Note 17 for details of the proposed transaction with Rithm Capital Corp.
Company Structure
The Registrant is a holding company that, through Sculptor Corp, holds equity ownership interests in the Sculptor Operating Group. The Registrant had issued and outstanding the following share classes:
•Class A Shareholders is limitedShares—Class A Shares are publicly traded and entitle the holders thereof to one vote per share on matters submitted to a vote of shareholders. The holders of Class A Shares are entitled to any distributions declared
13

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
on the Class A Shares by the Registrant’s board of directors (the “Board of Directors” or the “Board”) (other than RSAs, where entitlement to distributions may be subject to limitations and conditions).
•Class B Shares—Class B Shares are held by executive managing directors, as further discussed below. These shares are not publicly traded but rather entitle the executive managing directors to one vote per share on matters submitted to a vote of shareholders. These shares do not participate in the earnings of the Registrant, as the executive managing directors participate in the related economics of the Sculptor Operating Group through their direct ownership in the Sculptor Operating Group, subject to the extent of their capital contributions.Distribution Holiday discussed below.
The Company conducts its operations through OZ Management LP, OZ Advisors LPthe Sculptor Operating Group. The following is a list of the outstanding units of the Sculptor Operating Partnerships as of September 30, 2023:
•Group A Units—Group A Units are limited partner interests issued to certain executive managing directors. In connection with the Recapitalization, as defined below, the Sculptor Operating Partnerships initiated a distribution holiday (the “Distribution Holiday”). Holders of Group A Units do not receive distributions on such units during the Distribution Holiday. Each executive managing director may exchange his or her vested and OZ Advisors II LP (collectively,booked-up (as defined below) Group A Units for an equal number of Class A Shares (or the “Ozcash equivalent thereof) over a period of two years in three equal installments commencing upon the final day of the Distribution Holiday and on each of the first and second anniversary thereof (or, for units that become vested and booked-up Group A Units after the final day of the Distribution Holiday, from the later of the date on which they would have been exchangeable in accordance with the foregoing and the date on which they become vested and booked-up Group A Units) (and thereafter such units will remain exchangeable), in each case, subject to certain restrictions. A “book-up” is achieved when sufficient appreciation has occurred to meet a prescribed capital account book-up target under the terms of the Sculptor Operating Partnerships,”Partnership limited partnership agreements.
Group A Unit grants are accounted for as equity-based compensation. See Note 3 and collectivelyNote 13 in the Company's Annual Report for additional information. The Company completed a recapitalization in February 2019 (“Recapitalization”). In connection with their consolidated subsidiaries, the “Oz Operating Group”). ReferencesRecapitalization, each Group A Unit outstanding on the Recapitalization date was recapitalized into 0.65 Group A Units and 0.35 Group A-1 Units.
•Group A-1 Units—Group A-1 Units are limited partner interests into which 0.35 of each Group A Unit was recapitalized in connection with the reallocation that was effectuated by the Recapitalization. The Group A-1 Units will be canceled at such time and to the Company’s “executive managing directors” referextent that the Group E Units granted in connection with the Recapitalization vest and achieve a book-up. Group A-1 Units are not eligible to receive distributions at any time and do not participate in the net income (loss) of the Sculptor Operating Group. However, the holders of Group A-1 Units shall participate in any sale, change of control or other liquidity event that takes place prior to cancellation of the Group A-1 Units. In the Recapitalization, the holders of the 2016 Preferred Units, as defined below, forfeited an additional 749,813 Group A Units, which were recapitalized into Group A-1 Units.
•Group B Units—Sculptor Corp holds a general partner interest and Group B Units in each Sculptor Operating Partnership. Sculptor Corp owns all of the Group B Units, which represent equity interest in the Sculptor Operating Partnerships. Except during the Distribution Holiday as described above, the Group B Units are economically identical to the current limited partners of the Oz Operating Partnerships other than the Company’s intermediate holding companies, and include the Company’s founder, Daniel S. Och, and, except where the context requires otherwise, include certain limited partners who are no longer active in the business of the Company. References to the Company’s “active executive managing directors” refer toGroup A Units held by executive managing directors who remain activebut are not exchangeable for Class A Shares and are not subject to vesting, book-up, forfeiture or minimum retained ownership requirements.
•Group E Units—Group E Units are limited partner interests issued to certain executive managing directors that are only entitled to future profits and gains upon satisfaction of a certain performance condition. Each Group E Unit converts into a Group A Unit and becomes exchangeable for one Class A Share (or the cash equivalent thereof) to the extent there has been a sufficient amount of appreciation for a Group E Unit to achieve a book-up target and, subject to other conditions contained in the limited partnership agreements of the Sculptor Operating Partnerships, the Distribution Holiday has ended (or an earlier exchange date is established by the Exchange
14

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Committee, which consists of the Chief Executive Officer and the Chief Financial Officer of Sculptor Capital Management, Inc.). The Group E Units are entitled to share in residual assets upon liquidation, dissolution or winding up and become eligible to participate in any tag along right, in a change of control transaction or other liquidity event only to the extent of their relative positive capital accounts (if any). Holders of Group E Units do not receive distributions during the Distribution Holiday. Group E Unit grants are accounted for as equity-based compensation. See Note 3 and Note 13 in the Company’s business. ReferencesAnnual Report for additional details.
•Group P Units—Group P Units are limited partner interests issued to certain executive managing directors that are only entitled to future profits and gains upon satisfaction of certain service and market conditions. Each Group P Unit becomes exchangeable for one Class A Share (or the cash equivalent thereof), in each case upon satisfaction of certain service and market conditions at such time and, with respect to exchanges, to the “Ziffs” refer collectivelyextent there has been sufficient appreciation for a Group P Unit to Ziff Investors Partnership, L.P. IIachieve a book-up target and, subject to other conditions contained in the limited partnership agreements of the Sculptor Operating Partnerships, the Distribution Holiday has ended (or an earlier exchange date is established by the Exchange Committee). The Group P Units are entitled to share in residual assets upon liquidation, dissolution or winding up and become eligible to participate in any tag along right, in a change of control transaction or other liquidity event only to the extent that certain market conditions are met and to the extent of their relative positive capital accounts (if any). The terms of the Group P Units may be varied for certain executive managing directors. Group P Unit grants are accounted for as equity-based compensation. See Note 3 and Note 13 in the Company’s Annual Report for additional information.
Executive managing directors hold a number of Class B Shares equal to the number of Group A Units, vested Group E Units, Group A-1 Units (to the extent the corresponding Class B Shares have not been canceled in connection with the vesting of certain Group E Units issued in connection with the Recapitalization, as further discussed in Note 3 in the Company’s Annual Report), and Group P Units held. Upon the exchange of a Group A Unit or Group P Unit for a Class A Share, the corresponding Class B Share is canceled and a Group B Unit is issued to Sculptor Corp. Class B Shares that relate to Group A-1 Units will be voted pro rata in accordance with the vote of the Class A Shares.
15

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The following table presents the number of shares and units of the Company and the Sculptor Operating Partnerships, respectively, that were outstanding as of September 30, 2023:
As of September 30, 2023
Sculptor Capital Management, Inc.
Class A Shares25,011,092
Class B Shares33,017,247
Restricted Class A Shares (“RSAs”)4,650,661
Restricted Share Units (“RSUs”)2,593,305 
Performance-based RSUs (“PSUs”)912,500 
Warrants to purchase Class A Shares (Note 7)4,338,015 
Sculptor Operating Partnerships
Group A Units15,025,994
Group A-1 Units9,244,477
Group B Units25,011,092
Group E Units13,020,157
Group P Units4,734,286
The Company grants RSAs, RSUs and PSUs to its employees and executive managing directors as a form of compensation. These grants are accounted for as equity-based compensation. See Note 13 in the Company's Annual Report for additional information. In addition, the Company has 3,022,380 shares of treasury stock as of September 30, 2023.
Share Repurchase Program
In February 2022, the Company’s Board of Directors authorized the Company to repurchase up to $100.0 million of its affiliatesoutstanding common stock. The Company records its treasury stock repurchases at cost on a trade date basis. As of September 30, 2023, the Company repurchased 3,022,380 Class A Shares at a cost of $32.5 million for an average price of $10.75 per share through open market purchase transactions. No shares were purchased in the three months ended September 30, 2023. As of September 30, 2023, $67.5 million remained available for repurchase of the Company’s common stock under the share repurchase program. All of the repurchased shares are classified as treasury stock in the Company’s consolidated balance sheets.
The repurchase program has no expiration date. On July 23, 2023, we entered into an Agreement and control persons. ReferencesPlan of Merger, as amended on October 12, 2023 by Amendment No. 1 to Agreement and Plan of Merger, as further amended on October 26, 2023 by Amendment No. 2 to Agreement and Plan of Merger (including the schedules and exhibits thereto, the “Merger Agreement”) with entities affiliated with Rithm Capital Corp. The Company has not and will not repurchase any shares while the Merger Agreement remains in effect. See Note 17 to the Company’s “intermediate holding companies” refer, collectively, to Och-Ziff Holding Corporation (“Oz Corp”) and Och-Ziff Holding LLC, both of which are wholly owned subsidiaries ofunaudited consolidated financial statements for more information regarding the Registrant.Merger Agreement.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited, interim, consolidated financial statements are prepared in accordance with GAAPU.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”), and exclude some of the disclosures required in audited financial statements and therefore should be read in conjunction with the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2016 (the “Annual Report”). In the opinion of management,Annual Report. Management believes all adjustments considered necessary for a fair presentation of the Company’s unaudited, interim, consolidated financial
16

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
statements have been included and are of a normal and recurring nature. nature and that estimates made in preparing unaudited, interim, consolidated financial statements are reasonable and prudent. The consolidated financial statements include the accounts of the Company, its wholly owned or majority owned subsidiaries, the consolidated entities which are considered to be variable interest entities and for which the Company is considered the primary beneficiary, and certain other entities which are not considered variable interest entities but the Company is determined to have control. All significant intercompany transactions and balances have been eliminated in consolidation.
The results of operations presented for the interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year, primarily because ofyear. For example, incentive income for the majority of incentive income and actual amounts of discretionary cash bonuses being recordedthe Company’s multi-strategy AUM is recognized in the fourth quarter each year. All significant intercompany transactions and balances have been eliminated in consolidation.


9

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

Interim Accrual of Annual Discretionary Cash Bonus
In the first quarter of 2017, the Company decided to provide a minimum annual discretionary cash bonus. As a result of this decision, the Company accrues the minimum annual discretionary cash bonusyear, based on a straight-line basis during the year. The total amount of discretionary cash bonuses ultimately recognized for the full year which is determined in the fourth quarter of each year, could differ materially from the minimum amount accrued, as the total discretionary cash bonus is dependent upon a variety of factors, including fund performance for the year. investment performance.
Reclassifications
The Company has reclassified the changes in tax receivable agreement liability from general, administrative and other expenses to other income (loss) in the consolidated statements of comprehensive income (loss). The Company also reclassified its investments in funds, joint ventures and United States government obligations from other assets, net to investmentsSee Note 2 in the Company’s consolidated balance sheets. These reclassifications had no impact onAnnual Report for the Company’s financial position or resultscomplete listing of operations, and prior period amounts have been reclassified to conform to the current year presentation.our significant accounting policies.
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting. The requirements of ASU 2016-09 were effective for the Company beginning in the first quarter of 2017. As permitted under the new guidance, the Company has made an accounting policy election to account for forfeitures on share-based compensation arrangements as they occur. Prior to the adoption of ASU 2016-09, the Company was required to estimate forfeitures. The decision to no longer estimate forfeitures was not material to the financial statements. Additionally, the Company will recognize all income tax effects of awards within consolidated and comprehensive net income when the awards vest or are settled. Prior to the adoption of ASU 2016-09, excess tax benefits were recorded to paid-in capital, while tax deficiencies were recorded in consolidated and comprehensive net income to the extent in excess of previously recorded excess tax benefits. The amendments related to the recognition of excess tax benefits and tax deficiencies in the statement of comprehensive income were applied prospectively.
In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties that Are under Common Control. The guidance was effective for the Company beginning in the first quarter of 2017. ASU 2016-17 amended the consolidation guidance with respect to a single decision maker’s evaluation of interests held through related parties that are under common control when it is determining whether it is the primary beneficiary of a variable interest entity (“VIE”). Under the amended guidance, a reporting entity considers its indirect economic interests in a VIE held through related parties that are under common control on a proportionate basis, consistent with the way it would evaluate its indirect economic interests held through related parties that are not under common control. The adoption of ASU 2016-17 did not have a material impact on the Company’s consolidated financial statements.
None of the otherNo changes to GAAP that went into effect in the nine months ended September 30, 2017 has2023 had a material effect on the Company’s consolidated financial statements.
Future Adoption of Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes the revenue recognition requirements in ASC 605-Revenue Recognition and most industry-specific revenue recognition guidance throughout the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company is in the process of implementing the new revenue guidance and is continuing to evaluate the effect the ASU will have on its consolidated financial statements, including, whether the Company: (a) will be required to recognize incentive income earlier than as prescribed under current guidance, (b) should present certain revenue streams on a gross or net basis depending on whether it is identified as principal or agent in a transaction where the standard’s core principle is


10

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

one of control and not risks and rewards, as is the case with the current guidance, and (c) whether certain costs associated with business development and deal origination, which are currently recognized as an expense as incurred, should be initially deferred and subsequently recognized as an expense over a specified period. The ASU also introduces new qualitative and quantitative disclosure requirements and requires disaggregation of revenue information beyond that which is currently required, that will significantly impact the information presented in the notes to the Company’s consolidated financial statements. The Company expects to adopt ASU 2014-09 using a modified retrospective application approach in the first quarter of 2018.
In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 significantly changes accounting for lease arrangements, in particular from the perspective of the lessee. The Company is not currently a lessor in any significant lease arrangements, but is a lessee in several lease arrangements that would be impacted by the ASU. The Company has determined that most of its operating leases will be reported as lease obligations, along with offsetting right to use assets on its consolidated balance sheet at their present value, and will continue to recognize associated expenses within consolidated net income (loss) in a manner similar to the existing accounting for leases (i.e., on a straight-line basis over the lease term). Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The requirements of ASU 2016-02 are effective for the Company beginning in the first quarter of 2019. See Note 17 of the Company’s Annual Report for details related to the Company’s existing operating lease obligations.
None of the otherNo changes to GAAP that are not yet effective are expected to have a material effect on the Company’s consolidated financial statements.
3. NONCONTROLLING INTERESTS AND OZ OPERATING GROUP OWNERSHIP
Noncontrolling interests represent ownership interests in the Company’s subsidiaries held by parties other than the Company, and primarily relate to the Group A Units held by the Company’s executive managing directors and fund investors’ interests indirectors.
Prior to the consolidated funds. NetRecapitalization, the attribution of net income (loss) attributable toof each Sculptor Operating Partnership was based on the relative ownership percentages of the Group A Units is driven(noncontrolling interests) and the Group B Units (indirectly held by the earnings (losses)Registrant). In applying the substantive profit-sharing arrangements in the Sculptor Operating Partnerships’ limited partnership agreements to the Company’s consolidated financial statements, for periods subsequent to the Recapitalization and for the duration of the OzDistribution Holiday, the Company will allocate net income of each Sculptor Operating Group.Partnership in any fiscal year solely to the Group B Units and any net loss on a pro rata basis based on the relative ownership percentages of the Group A Units and Group B Units. To the extent a Sculptor Operating Partnership incurs a net loss in an interim period, any net income recognized in a subsequent interim period in the same fiscal year is allocated on a pro rata basis to the extent of previously allocated net loss. Conversely, to the extent a Sculptor Operating Partnership recognizes net income in an interim period, any net loss incurred in a subsequent interim period in the same fiscal year is allocated solely to the Group B Units to the extent of previously allocated net income.
Noncontrolling interests are presented as a separate component of shareholders’ equity on the Company’s consolidated balance sheets. The primary components of noncontrolling interests are separately presented in the Company’s consolidated statements of changes in shareholders’ equity (deficit) to distinguish the shareholders’ equity (deficit) attributable to Class A shareholders and noncontrolling interest holders. Net income attributable to fund investors’ interests in consolidated funds is driven by the earnings of those funds.
The following table presents the components of(loss) includes the net income (loss) attributable to the holders of noncontrolling interests:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 (dollars in thousands)
Group A Units$9,500
 $16,313
 $41,145
 $(187,338)
Consolidated funds—
 —
 —
 262
Other260
 257
 535
 209
 $9,760
 $16,570
 $41,680
 $(186,867)
The following table presents the components of the shareholders’ equity attributable to noncontrolling interests:
 September 30, 2017 December 31, 2016
    
 (dollars in thousands)
Group A Units$260,011
 $166,521
Other4,091
 5,408
 $264,102
 $171,929


11

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

The Preferred Units and fund investors’ interests in certain consolidated funds are redeemable outside ofinterest on the Company’s control. These interests are classified within redeemable noncontrolling interests in the consolidated balance sheets. The following table presents the activity in redeemable noncontrolling interests:statements of operations.
 Nine Months Ended September 30, 2017
 Consolidated Funds Preferred Units Total
      
 (dollars in thousands)
Beginning balance$21,621
 $262,500
 $284,121
Change in redemption value of Preferred Units—
 7,446
 7,446
Preferred Units issuance, net of issuance costs—
 150,054
 150,054
Capital contributions2,283
 —
 2,283
Comprehensive income1,238
 —
 1,238
Ending Balance$25,142
 $420,000
 $445,142
Oz SculptorOperating Group Ownership
The Company’s equity interest in the OzSculptor Operating Group increased to 40.9%47.1% as of September 30, 2017,2023, from 38.3%46.2% as of December 31, 2016, (excluding Group P Units, as they are not yet participating in the economics of the Oz Operating Group).September 30, 2022. Changes in the Company’s interest in the OzSculptor Operating Group have historically been, and in the future may be, driven by the following: (i) the exchange of Group A Units and Group P Units for an equal number of Class A Shares, at which
17

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
time the related Class B Shares are also canceled; (ii) vesting of RSAs; (iii) the issuance of Class A Shares under the Company’s Amended and Restated 2007 Equity Incentive Plan, 2013 Incentive Plan and 20132022 Incentive Plan related to the settlement of RSUs; (iii)RSUs or PSUs; and (iv) the forfeiture of Group A Units and participating Group P Units by a departing executive managing director; and (iv)director.
The table below sets forth the repurchasecalculation of Class A Shares and Group A Units. The Company’s interest innoncontrolling interests related to the Oz Operating Group is expected to continue to increase over time as additional Class A Shares are issued upon the exchange of Group A Units and Group P Units, as well asfor each Sculptor Operating Partnership (rounding differences may occur). The blended participation percentages presented below take into account ownership changes throughout the settlement of vested RSUs. These increases will be offset upon any conversion by an executive managing director of Group D Units, which are not considered equity for GAAP purposes, into Group A Units, at which time an equal number of Class B Shares is also issued toperiods presented.
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Sculptor Capital LP
Net (loss) income$(20,207)$(9,389)$22,832 $6,826 
Blended participation percentage0 %0 %0 %0 %
Net Income Attributable to Group A Units$— $— $— $— 
Sculptor Capital Advisors LP
Net loss$(11,556)$(14,398)$(32,107)$(15,595)
Blended participation percentage37 %39 %38 %38 %
Net Loss Attributable to Group A Units$(4,330)$(5,548)$(12,050)$(5,999)
Sculptor Capital Advisors II LP
Net loss$(11,584)$(9,800)$(39,238)$(29,273)
Blended participation percentage37 %40 %38 %38 %
Net Loss Attributable to Group A Units$(4,337)$(3,930)$(14,726)$(11,261)
Total Sculptor Operating Group
Net loss$(43,347)$(33,587)$(48,513)$(38,042)
Blended participation percentage20 %28 %55 %45 %
Net Loss Attributable to Group A Units$(8,667)$(9,478)$(26,776)$(17,260)
The following table presents the executive managing director. Additionally, the Company’s interest in the Oz Operating Group will decline when Group P Units begin to participate as described below.
Group P Units, 2017 Incentive Program and Limited Partnership Agreements Amendments
On February 13, 2017, the Company’s board of directors approved the Och-Ziff Capital Management Group LLC 2017 Incentive Program (the “2017 Incentive Program”). Under the termscomponents of the 2017 Incentive Program, the Company granted Group P Units (an “Incentive Award”)net income loss attributable to certain executive managing directors. One Class P common unit in each Oz Operating Partnership, collectively, is referred to as a “Group P Unit.”noncontrolling interests:
The Company granted 71.9 million Group P Units in March 2017, at the average fair value of $1.25 per unit. The fair value was determined using the Monte-Carlo simulation valuation model, with the following assumptions: volatility of 35.7%, dividend rate of 10.0%, and risk-free discount rate of 2.2%. The requisite service period for these Incentive Awards was estimated to be 3.9 years at the time of the grant. As of September 30, 2017, there were 71.9 million Group P Units outstanding and total unrecognized stock-based compensation expense related to unvested awards was $75.3 million.
A grant of Group P Units will conditionally vest upon the applicable executive managing directors satisfying a service condition (the “Service Condition”) and certain market performance-based targets, expressed as percentages (the “Performance Condition”) being satisfied, as follows: 20% of Units vest upon a Performance Condition of 25% being achieved (i.e., total shareholder return from the contractually determined reference price of $3.21); an additional 40% (for a total of 60%) of Units vest upon a Performance Condition of 50% being achieved; an additional 20% (for a total of 80%) of Units vest upon a Performance Condition of 75% being achieved; and an additional 20% (for a total of 100%) of the Units vest upon a

Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(dollars in thousands)
Group A Units$(8,667)$(9,478)$(26,776)$(17,260)
Other1,318 68 3,400 1,423 
 $(7,349)$(9,410)$(23,376)$(15,837)

18
12


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023

Performance Condition of 125% being achieved. AchievementThe following table presents the components of the applicable Performance Conditions earlier than estimated can materially affectshareholders’ equity attributable to noncontrolling interests:
 September 30, 2023December 31, 2022
(dollars in thousands)
Group A Units$390,424 $412,941 
Other36,106 26,538 
 $426,530 $439,479 
Redeemable noncontrolling interests
In the amountsecond quarter of equity-based compensation expense recognized2023, our previously consolidated SPAC was liquidated in accordance with its charter and its Class A shares were redeemed. Therefore, there was no activity for the redeemable noncontrolling interests for the three months ended September 30, 2023. Prior to the liquidation, the investors’ interests in the SPAC were classified as redeemable noncontrolling interests in the consolidated balance sheets as they were redeemable for cash by the Companypublic shareholders in any given period.
Executive managing directors will be entitled to receive distributions on their Group P Units only after satisfactionthe event the SPAC did not consummate an initial business combination within the time period required by its charter. The following table presents the activity in redeemable noncontrolling interests, excluding the reversal of deferred underwriting fees as a result of the Service Condition and the Performance Condition, from which time the executive managing director will be entitled to receive the same distributions per Unit on each Group P Unit as holders of Group A Units and Group D Units.
If a holder of an Incentive Award has not satisfied both the Service Condition and the applicable Performance Condition has not been met with respect to the units comprising such Incentive Award by the sixth anniversary of the respective grant date, such units will be forfeited and canceled immediately.
Upon satisfaction of the Service Condition and the Performance Condition, Group P Units may be exchanged at the executive managing director’s discretion for Class A Shares (or the cash value thereof, as determined by the Board) provided that sufficient Appreciation (as defined in the Limited Partnership Agreements) has occurred for each Group P Unit to have become economically equivalent to a Group A Unit. Upon the exchange of a Group P Unit for a Class A Share (or the cash equivalent), the exchanging executive managing director will have a right to potential future payments owed to him or her under the tax receivable agreement.
Effective March 1, 2017, the Board of Directors approved amendments to the Limited Partnership Agreements of the Oz Operating Partnerships that, in addition to the events discussed above, adjust the measurement thresholds used in determining whether sufficient Appreciation has taken place for Group D Units issued prior to March 1, 2017, to have become economically equivalent to Group A Units. This amendment makes it more likely that outstanding Group D Units will convert to Group A Units.
On May 9, 2017, upon approval by the Company’s shareholders of the amendment to the 2013 Incentive Plan, each holder of Group P Units received a number of Class B Shares equal to the number of Group P Units held. One Class B Share will be canceled for each Class A Share issued upon the exchange of a Group P Unit.
Relinquishment of Group A Units
Oz Corp and Oz Holding, as the general partners of the Oz Operating Partnerships, entered into a Relinquishment Agreement with Daniel S. Och and certain family trusts over which Mr. Och has investment control (the “Och Trusts”) effective as of March 1, 2017 (the “Relinquishment Agreement”). Pursuant to the Relinquishment Agreement, Mr. Och and the Och Trusts agreed to cancel, in the aggregate, 30.0 million of their vested Group A Units. The Relinquishment Agreement provides that if any of the Group D Units granted to James S. Levin on March 1, 2017 are forfeited, such forfeited units (up to an aggregate amount of 30.0 million) shall be reallocated to Mr. Och and the Och Trusts pursuant to the terms of the Limited Partnership Agreements. The Company accountedSPAC liquidation, for the transaction as a repurchase of Group A Units for no consideration. A corresponding number of Class B Shares were also canceled.nine months ended September 30, 2023:
Dilution of Proceeds from Tax Receivable Agreement Waiver
Nine Months Ended September 30,
2023
SPAC
(dollars in thousands)
Beginning balance$237,864 
Change in redemption value of Class A Shares of consolidated SPAC958 
Capital distributions(242,172)
Comprehensive income3,350 
Ending Balance$—
In September 2016, the Company amended the tax receivable agreement to provide that no amounts will be due or payable under the tax receivable agreement by Oz Corp, one of the Company’s wholly owned intermediate holding companies, with respect to the 2015 and 2016 taxable years. During the first quarter of 2017, Oz Corp contributed to the Oz Operating Group the cash previously set aside for such payments, which resulted in a reallocation of such contribution between the Company’s paid-in capital and the paid-in capital of the Group A Units (including within noncontrolling interests).


13

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

4. INVESTMENTS AND FAIR VALUE DISCLOSURES
The following table presents the components of the Company’s investments as reported in the consolidated balance sheets:
September 30, 2023December 31, 2022
(dollars in thousands)
U.S. government obligations, at fair value$79,408 $24,782 
CLOs, at fair value217,543 207,147 
Equity method investments87,033 67,130 
Total Investments$383,984 $299,059 
Investments of Consolidated Entities$322,516 $544,554 
The Company invests in U.S. government obligations to manage excess liquidity. CLOs, at fair value, consist of investments in notes of unconsolidated CLOs. These investments are carried at fair value under the irrevocable fair value option
19

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
 September 30, 2017 December 31, 2016
 (dollars in thousands)
United States government obligations, at fair value(1)
$112,722
 $—
CLOs, at fair value176,803
 21,341
Other funds and joint ventures, equity method15,123
 16,639
Total Investments$304,648
 $37,980
election at initial recognition. Changes in fair value are recorded within net gains (losses) on investments in the consolidated statements of operations. Interest income on these investments is accrued using the effective interest method and separately presented from the overall change in fair value and is recognized in other revenues in the consolidated statement of operations.
_______________The Company’s equity method investments include investments in funds, which are not consolidated, but in which the Company exerts significant influence, but not control. The Company has not elected the fair value option and accounts for such investments under the equity method. Under the equity method of accounting, the Company recognizes its share of the underlying earnings (losses) from equity method investments within net gains (losses) on investments in the consolidated statements of operations. The carrying amounts of equity method investments are recorded in investments in the consolidated balance sheets. Refer to Note 15 for details of the related party nature of such investments.
(1) HeldIn the second quarter of 2023, our consolidated SPAC was liquidated in accordance with its charter and the investments held in a SPAC’s trust account were liquidated. Investments of consolidated entities included both investments of the Company’s consolidated SPAC, prior to its liquidation, as well as investments held by the Oz Operating GroupCompany’s consolidated structured alternative investment solution. The investments of the consolidated structured alternative investment solution that the Company manages are generally measured at fair value using the NAV per share practical expedient. The Company may determine based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Company will estimate the fair value in good faith and in a manner that it reasonably chooses in accordance with GAAP. The Company does not categorize investments where fair value is measured using the NAV practical expedient within the fair value hierarchy.
The following table summarizes the fair value of the investments of the structured alternative investment solution that are measured using the NAV practical expedient by strategy type and ability to redeem such investments as of September 30, 2023:
Fund Type(1)
Fair Value (as of September 30, 2023)
Redemption Frequency(2)
Redemption Notice Period(2)
(dollars in thousands)
Multi-strategy58,583 Quarterly - Annually30 days - 90 days
Credit250,321 
Monthly - Annually(3)
30 days - 90 days
Real estate13,612 
None(4)
N/A
Total$322,516
_______________
(1)The structured alternative investment solution invests in both open-ended and close-ended funds. The investments in each fund may represent investments in a particular tranche of such fund subject to different withdrawal rights.
(2)$163.3 million of investments are subject to an initial lock-up period of three years during which $99.8time no withdrawals or redemptions are allowed. Once the lock-up period ends, the investments are able to be redeemed with the frequency noted above.
(3)30% of these investments are in closed-end funds which cannot be redeemed, as distributions will be received as the underlying assets are liquidated, which is expected to be approximately six years from inception.
(4)100% of these investments are in closed-end funds which cannot be redeemed, as distributions will be received as the underlying assets are liquidated, which is expected to be approximately seven to nine years from inception.

As of September 30, 2023, the structured alternative investment solution had unfunded commitments of $72.0 million mature on December 21, 2017 and $12.9 million mature on March 1, 2018.related to the investments presented in the table above.
See Note 2 in the Company’s Annual Report for additional information regarding the investments of consolidated entities.
20

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Fair Value Disclosures
Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date (i.e., an exit price). The Company and the funds it manages hold a variety of investments, certain of which are not publicly traded or that are otherwise illiquid. Significant judgement and estimation go into the assumptions that drive the fair value of these investments. The fair value of these investments may be estimated using a combination of observed transaction prices, prices from third parties (including independent pricing services and relevant broker quotes), models or other valuation methodologies based on pricing inputs that are neither directly nor indirectly market observable. Due to the inherent uncertainty of valuations of investments that are determined to be illiquid or do not have readily ascertainable fair values, the estimates of fair value may differ from the values ultimately realized, and those differences can be material.
GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilitiesfinancial instruments at fair value. Market price observability is impacted by a number of factors, including the type of assets and liabilities and the specific characteristics of the assetsfinancial instrument, including existence and liabilities. Assets and liabilitiestransparency of transactions between market participants. Financial instruments with readily available actively quoted prices or for which fair value can be measured from actively-quoted prices generally will have a higher degree of market price observability and lesser degree of judgment used in measuring fair value.
Assets and liabilitiesFinancial instruments measured at fair value are classified and disclosed into one of the following categories:categories based on the observability of inputs used in the determination of fair values:
•Level I– Fair value is determined using quotedQuoted prices that are available in active markets for identical assets or liabilities.financial instruments as of the reporting date. The types of assets and liabilitiesfinancial instruments that would generally be included in this category are certain listed equities, U.S. government obligations and certain listed derivatives.
The Company does not adjust the quoted price for these investments.
•Level II – Fair value is determined using quotationsQuotations received from dealers making a market for these assets or liabilitiesfinancial instruments (“broker quotes��quotes”), valuations obtained from independent third-party pricing services, the use of models or other valuation methodologies based on pricing inputs that are either directly or indirectly market observable as of the measurementreporting date. The types of assets and liabilitiesfinancial instruments that would generally be included in this category are certain corporate bonds and loans, certain credit default swap contracts, certain bank debt securities, certain commercial real estate debt, less liquid equity securities, forward contracts and certain over the-counter (“OTC”) derivatives.
Level III – Fairderivatives where the fair value is determined using pricingbased on observable inputs. These financial instruments exhibit higher levels of liquid market observability as compared to Level III financial instruments.
•Level III – Pricing inputs that are unobservable infor the marketfinancial instruments and includes situations where there is little, if any, market activity for the asset or liability.financial instrument. The inputs into the determination of fair value of assets and liabilitiesfinancial instruments in this category may require significant management judgment or estimation in determining fair value of the assets or liabilities.estimation. The fair value of these assets and liabilitiesfinancial instruments may be estimated using a combination of observed transaction prices, independent pricing services, relevant broker quotes, models or other valuation methodologies based on pricing inputs that are neither directly or indirectly market observable.observable (e.g., cash flows, implied yields, EBITDA multiples). The types of assets and liabilitiesfinancial instruments that would generally be included in this category include real estate investments, equity and debt securities issued by private entities, limited partnerships,CLOs, certain corporate bonds,warrant liabilities, certain credit default swap contracts, certain bank debt securities, certain commercial real estate debt, certain OTC derivatives, residential and commercial mortgage-backed securities, asset-backed securities, collateralized debt obligations and investments in affiliated credit funds.


14

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability’sa financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.financial instrument when the fair value is based on unobservable inputs.
21

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
For financial instruments for which the Company uses independent pricing services for valuation, the Company performs analytical procedures and compares independent pricing service valuations to other vendors’ pricing as applicable. The Company also performs due diligence reviews on independent pricing services on an annual basis and performs other due diligence procedures as may be deemed necessary.
Fair Value Measurements Categorized within the Fair Value Hierarchy
The following table summarizestables summarize the Company’s investments includingfinancial assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy as of September 30, 2017:
 As of September 30, 2017
 Level I
Level II
Level III
Total








 (dollars in thousands)
Assets, at Fair Value       
Included within investments:       
United States government obligations$112,722
 $—
 $—
 $112,722
CLOs(1)
$—
 $—
 $176,803
 $176,803
        
Investments of consolidated funds:       
Bank debt$—
 $17,737
 $23,337
 $41,074
for the periods presented:
 As of September 30, 2023
 Level ILevel IILevel IIINAVTotal
 (dollars in thousands)
Assets, at Fair Value
Included within cash and cash equivalents:
U.S. government obligations$9,913 $— $— $— $9,913 
Included within investments:
U.S. government obligations$79,408 $— $— $— $79,408 
CLOs(1)
$— $— $217,543 $— $217,543 
Included within investments of consolidated entities:
Investments in funds$— $— $— $322,516 $322,516 
Liabilities, at Fair Value
Warrants$— $— $34,140 $— $34,140 
Liabilities of consolidated entities:
Notes payable$— $— $220,702 $— $220,702 
_______________
(1) As of September 30, 2017,2023, investments in CLOs had contractual principal amounts of $176.6$213.0 million outstanding.outstanding, which excludes the Company’s investments in subordinated tranches of the notes, as these do not have contractual principal payments.
The following table summarizes assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy as of December 31, 2016:
22

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
As of December 31, 2016 As of December 31, 2022
Level I Level II Level III Total Level ILevel IILevel IIINAVTotal
       
(dollars in thousands) (dollars in thousands)
Assets, at Fair Value       Assets, at Fair Value
Included within cash and cash equivalents:       Included within cash and cash equivalents:
United States government obligations$139,974
 $—
 $—
 $139,974
U.S. government obligationsU.S. government obligations$19,937 $— $— $— $19,937 
       
Included within investments:       Included within investments:
U.S. government obligationsU.S. government obligations$24,782 $— $— $— $24,782 
CLOs(1)
$—
 $—
 $21,341
 $21,341
CLOs(1)
$— $— $207,147 $— $207,147 
       
Investments of consolidated funds:       
Bank debt$—
 $19,534
 $18,127
 $37,661
Included within investments of consolidated entities:Included within investments of consolidated entities:
U.S. government obligationsU.S. government obligations$237,964 $— $— $— $237,964 
Investments in fundsInvestments in funds— — — 306,590 306,590 
Investments of Consolidated EntitiesInvestments of Consolidated Entities$237,964 $— $— $306,590 $544,554 
       
Liabilities, at Fair Value       Liabilities, at Fair Value
Included within other liabilities:       
Obligation to deliver loans subject to forward sale agreement included within other liabilities$—
 $8,204
 $—
 $8,204
WarrantsWarrants$— $— $24,163 $— $24,163 
Liabilities of consolidated entities:Liabilities of consolidated entities:
WarrantsWarrants$596 $— $— $— $596 
Notes payableNotes payable$— $— $196,106 $— $196,106 
_______________
(1) As of December 31, 2016, investment2022, investments in CLOCLOs had contractual principal amounts of $21.3$212.0 million outstanding.


15

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

outstanding, which excludes the Company’s investments in subordinated tranches of the notes, as these do not have contractual principal payments.
Reconciliation of Fair Value Measurements Categorized within Level III
The Company assumes that any transfers between Level I, Level II or Level III occur at the beginning of the reporting period presented. Gains and losses on investments categorized within Level III, excluding those related to investments of the consolidated fundsentities and foreign currency translation adjustments, are recorded within net gains (losses) on investments in fundsthe consolidated statements of operations. Gains and joint ventureslosses related to foreign currency translation adjustments are recorded in the consolidated statements of comprehensive income (loss), and gains and losses related to investment of the consolidated fundsentities are recorded within net (losses) gains (losses) of consolidated funds. Amounts related toentities. Amortization of premium, accretion of discount and foreign exchange gains and losses on non-U.S. dollar investments are also included within gains and losses in the deconsolidationtables below. Changes in fair value of warrant liabilities are included in other income (loss) in the consolidated statements of operations. In the first quarter of 2022, the warrants of the Company’s funds upon the adoption of ASU 2015-02 on January 1, 2016,consolidated SPAC began to trade publicly, and deconsolidation of the CLO in the third quarter of 2017 are included within investment sales. Amounts relatedas such, were transferred from Level III to the initial consolidation of the CLOLevel I and in the second quarter of 20172023, the warrants expired worthless as the SPAC was liquidated. Changes in fair value of warrant liabilities and notes payable of the consolidated entities are included within investment purchases.in net (losses) gains of consolidated entities in the consolidated statements of operations. The Company elected to measure its investments in CLOs, U.S. government obligations and notes payable of the consolidated fund at fair value through consolidated net (loss) income in order to simplify its accounting for these instruments.



23

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The following tables summarize the changes in the Company’s Level III financial assets and liabilities for the three months ended September 30, 2017:2023 and 2022:
June 30, 2023Transfers InTransfers OutPurchases / IssuancesInvestment Sales / SettlementsGains / (Losses) Included in EarningsGains / (Losses) Included in Other Comprehensive IncomeSeptember 30, 2023
(dollars in thousands)
Assets, at Fair Value
Included within investments
CLOs$208,138 $— $— $15,687 $(3,887)$2,938 $(5,333)$217,543 
Liabilities, at Fair Value
Warrants$24,423 $— $— $— $— $(9,717)$— $34,140 
Liabilities of consolidated entities:
Notes payable$205,290 $— $— $— $— $(15,412)$— $220,702 
June 30, 2022Transfers InTransfers OutPurchases / IssuancesInvestment Sales / SettlementsGains / (Losses) Included in EarningsGains / (Losses) Included in Other Comprehensive IncomeSeptember 30, 2022
(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs$203,631 $— $— $248 $(40)$(4,143)$(10,482)$189,214 
Investments of consolidated entities:
Bank Debt$40,226 $— $(16,296)$— $(23,930)$— $— $— 
Liabilities, at Fair Value
Warrants$22,211 $— $— $(2,386)$— $24,597 
Liabilities of consolidated entities:
Notes payable$201,985 $— $— $— $— $(5,993)$— $207,978 




24
 June 30,
2017		 Transfers
In		 Transfers
Out		 Investment
Purchases		 Investment
Sales / Settlements		 Gains / Losses September 30, 2017
              
 (dollars in thousands)
Assets, at Fair Value        
Included within investments:             
CLOs$43,723
 $—
 $—
 $132,685
 $—
 $395
 $176,803
              
Investments of consolidated funds:        
Bank debt$39,338
 $8,840
 $(21,900) $30,470
 $(33,975) $564
 $23,337

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The following tables summarize the changes in the Company’s Level III assets for the three months ended September 30, 2016: 
 June 30, 2016 Transfers
In		 Transfers
Out		 Investment
Purchases		 Investment
Sales / Settlements		 Gains / Losses September 30, 2016
              
 (dollars in thousands)
Assets, at Fair Value             
Investments of consolidated funds:            
Bank debt$8,868
 $—
 $(925) $19,317
 $(11,325) $315
 $16,250


16

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

The following tables summarize the changes in the Company’s Level IIIfinancial assets and liabilities for the nine months ended September 30, 2017:2023 and 2022:
December 31, 2022Transfers InTransfers OutPurchases / IssuancesInvestment Sales / SettlementsGains / (Losses) Included in EarningsGains / (Losses) Included in Other Comprehensive IncomeSeptember 30, 2023
(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs$207,147 $— $— $16,231 $(12,342)$8,525 $(2,018)$217,543 
Liabilities, at Fair Value
Warrants$24,163 $— $— $— $— $(9,977)$— $34,140 
Liabilities of consolidated entities:
Notes payable$196,106 $— $— $— $— $(24,596)$— $220,702 

December 31, 2016
Transfers
In		 Transfers
Out		 Investment
Purchases		 Investment
Sales / Settlements		 Gains / Losses
September 30, 2017















(dollars in thousands)
Assets, at Fair Value             
Included within investments:             
CLOs$21,341
 $—
 $—
 $152,885
 $—
 $2,577
 $176,803

             
Investments of consolidated funds:        
Bank debt$18,127
 $767
 $(17,311) $87,611
 $(67,082) $1,225
 $23,337

The following table summarizes the changes in the Company’s
December 31, 2021Transfers InTransfers OutPurchases / IssuancesInvestment Sales / SettlementsGains / (Losses) Included in EarningsGains / (Losses) Included in Other Comprehensive IncomeSeptember 30, 2022
(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs$219,510 $— $— $30,087 $(12,413)$(22,931)$(25,039)$189,214 
Investments of consolidated entities:
Bank Debt$— $3,603 (1)$(47,258)(1)$98,217 $(51,335)$(3,227)$— $— 
Liabilities, at Fair Value
Warrants$65,287 $— $— $— $— $40,690 $— $24,597 
Liabilities of consolidated entities:
Warrants$7,590 $— $(3,450)(2)$— $— $4,140 $— $— 
Notes payable$— $— $— $215,733 $— $7,755 $— $207,978 
_______________
(1) Transfers into and out of Level III assets forin bank debt include $2.3 million related to the nine months ended September 30, 2016: consolidation (Transfers In) and $14.0 million related to the subsequent deconsolidation (Transfers Out) of a fund that the Company manages.
 December 31, 2015 Transfers
In		 Transfers
Out		 Investment
Purchases		 Investment
Sales / Settlements		 Gains / Losses September 30, 2016
              
 (dollars in thousands)
Assets, at Fair Value             
Investments of consolidated funds:             
Bank debt$1,998,423
 $—
 $(466) $66,545
 $(2,049,067) $815
 $16,250
Real estate investments719,957
 —
 —
 —
 (719,957) —
 —
Residential mortgage-backed securities323,571
 —
 —
 —
 (323,571) —
 —
Collateralized debt obligations83,759
 —
 —
 —
 (83,759) —
 —
Energy and natural resources limited partnerships70,604
 —
 —
 —
 (70,604) —
 —
Commercial real estate debt18,295
 —
 —
 —
 (18,295) —
 —
Asset-backed securities23,739
 —
 —
 —
 (23,739) —
 —
Commercial mortgage-backed securities13,803
 —
 —
 —
 (13,803) —
 —
Other investments (including derivatives, net)1,938
 —
 —
 —
 (1,938) —
 —
 $3,254,089
 $—
 $(466) $66,545
 $(3,304,733) $815
 $16,250
(2) Transfers out of Level III presented in the tables above resulted from the fair values of certain securities becoming market observable, with fair value determined using independent pricing services. Transfers into Level III presented in the table above resulted from the valuationI related to warrants of certain investmentsconsolidated entities that became publicly traded with decreased market observability, with fair values determined using broker quotes or independent pricing services. There were no transfers between Levels I and IIavailable quoted prices during the periods presented above.

first quarter of 2022.

25
17


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023

The table below summarizes the net change in unrealized gains and losses(losses) on the Company’s Level III assets and liabilities heldfinancial instruments outstanding as of the reporting date. These gainsdate:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs$(2,395)$(14,625)$6,507 $(47,970)
Liabilities, at Fair Value
Warrants$(9,717)$(2,386)$(9,977)$40,690 
Liabilities of consolidated entities:
Notes payable$(15,412)$(5,993)$(24,596)$7,755 
Level III Valuation Methodologies
Financial instruments classified within Level III of the fair value hierarchy are generally comprised of CLOs, warrant liabilities and losses are included within net gainsnotes payable of consolidated funds in the Company’s consolidated statements of comprehensive income (loss):
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 (dollars in thousands)
Assets, at Fair Value       
Included within investments:       
CLOs$178
 $—
 $2,360
 $—
        
Investments of consolidated funds:       
Bank debt$61
 $242
 $142
 $322
Valuation Methodologies for Fair Value Measurements Categorized within Levels II and IIIentities.
Investments in CLOs and bank debt are valued using independent pricing services. The Company performs procedures over the values provided by the pricing services, as discussed above.
Warrant liabilities of the Company are valued by independent pricing services using Black-Scholes option pricing model with a probability-weighted value based upon merger and thus thereno merger scenarios. The Company’s Class A share price, warrant exercise price, risk free rate, volatility, term to expiry and probability of merger are nothe primary inputs to the valuation. The significant unobservable valuation inputsquantitative input used for the fair value measurement of the warrant liabilities of the Company was volatility. The volatility of 58.65% used in determining theirthe merger scenario was based on a 100-day historical volatility per the warrant contractual terms in case of a change of control and the volatility used in a no merger scenario was a term matched historical volatility of 55.96%, as of September 30, 2023.
Notes payable of consolidated entities are valued using independent pricing services. The Company measures the financial liabilities of its consolidated entity based on the fair value of the financial assets of the consolidated entity, as the Company believes the fair value of the financial assets is more observable. Refer to disclose. For valuation methodologies of investments that were deconsolidated on January 1, 2016, please refer toNote 2 in the Company’s Annual Report.
The Company elected to measure its investments in CLOs at fair value through consolidated net income (loss) in order to simplify its accountingReport for these instruments. Changes in fair value of these investments are included within net gains on investments in funds and joint ventures in the consolidated statements of comprehensive income (loss). The Company accrues interest income on its investments in CLOs using the effective interest method.
As further discussed in Note 6, the Company consolidated a CLO warehouse vehicle beginning in the second quarter of 2017, which was then deconsolidated during the third quarter of 2017. The Company elected to measure the debt obligationsadditional valuation considerations of the consolidated CLO at fair value through consolidated net income (loss) in order to mitigate the accounting mismatch between the carrying values of the assets and liabilities of the consolidated CLO. For the period the CLO was consolidated, changes in fair value of these assets and liabilities were included within net gains (losses)notes payable of consolidated funds in the consolidated statements of comprehensive income (loss). The Company accrued interest income and interest expense of the consolidated CLO using the effective interest method.entities.
Valuation Process forFinancial Instruments Not Measured at Fair Value Measurements Categorized within Level III
The Company has established a Valuation Committee to provide oversight of the monthly valuation results of the investments held by the Company and the funds. The Valuation Committee has assigned the responsibility of performing price verification and related quality controls in accordance with the Valuation Policy to the Valuation Controls Group. The Valuation Controls Group performs price verification procedures on all of the investments which include, but are not limited to the following: reviewing independent pricing provided by third-party valuation vendors, reviewing and collecting broker quotes and reviewing valuation models. The Valuation Controls Group performs additional quality controls to support valuation techniques including but not limited to: back testing, stale pricing reviews, and vendor due diligence. When pricing or verification sources cannot be obtained from external sources or if external prices are deemed unreliable, additional procedures are performed by the Valuation Controls Group, which may include comparing unobservable inputs to observable inputs for similar positions, reviewing subsequent market activities, performing comparisons of actual versus projected performance indicators, and reviewing the valuation methodology and key inputs. Independent third party valuation firms may be used to corroborate internal valuations.


18

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

Fair Value of Other Financial Instruments
Management estimates that the carrying value of the Company’s other financial instruments not measured at fair value, including its debt obligations and repurchase agreements, approximated their fair values as of September 30, 2017.2023. The Senior Notes are categorized as Level IIfair value measurements for the Company’s debt obligations and the CLO Investments Loans (as defined in Note 9)repurchase agreements are categorized as Level III within the fair value hierarchy. The fair value ofmeasurements for the Senior Notes and theCompany’s CLO Investments Loans (as defined in Note 7) and repurchase agreements were determined using independent pricing services.
Assets Measured at Fair Value on a Non-Recurring Basis
As of December 31, 2016, the Company measured its aircraft held for sale at fair value, less cost to sell, and loans held for sale at fair value. See Note 7 for the carrying values of these assets. These non-recurring fair value measurements are categorized as Level III for the aircraft and Level II for the loans held for sale. The fair value measurement for the aircraftCompany’s 2020 Term Loan (as defined in Note 7) was determined using recent market sales for comparable aircraft and bids received, anda discounted cash flow model.
26

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Loans Sold to CLOs Managed by the Company assessed whether recent bids were supportive of transactions seen in recent sales for similar aircraft. The fair value for the loans held for sale was determined using independent pricing services. During the nine months ended September 30, 2017,
From time to time the Company sold its aircraft and loans held for sale.
5. TRANSFERS OF FINANCIAL ASSETS
Investments in CLOs and Related Transactions
During the nine months ended September 30, 2017, the Company sold $45.6 million ofmay sell loans to CLOs managed by the Company. These loans were previouslyare purchased by the Company in the open market and weresimultaneously sold for cash at cost to the CLOs. The loans wereare accounted for as transfers of financial assets and metas they meet the criteria for derecognition under U.S. GAAP. AsNo loans were sold in each of the nine months ended September 30, 20172023 and December 31, 2016, the outstanding principal amount on the loans that have been sold to the CLOs was $61.0 million and $19.7 million, respectively. As of September 30, 2017, there were no delinquencies or credit losses related to the loans sold.
2022. The Company invests in senior secured and subordinated notes issued by certain CLOs to which it sold loans in the loans discussed above.past. These investments represent retained interests to the Company and are in the form of a 5% vertical strip (i.e., 5% of each of the senior and subordinated tranches of notes issuesissued by each CLO) in order to comply with recently enacted risk retention rules in the U.S. and Europe.. The retained interests are reported within investments on the Company’s consolidated balance sheet (see Note 4). In the nine months ended September 30, 2017 and in the year ended December 31, 2016, the Company made investments of $45.4 million and $21.5 million, respectively, related to these retained interests.sheet. As of September 30, 20172023 and December 31, 2016,2022, the Company’s investments in these retained interests had a fair value of $69.6$71.3 million and $21.3$78.6 million, respectively.
The Company is subject to risks associated with the performance of the underlying collateral and the market yield of the assets. The Company’s risk of loss from retained interest is limited to its investments in these interests. The Company receives quarterly payments of interestsinterest and principal, as applicable, on these retained interests. InFor the three and nine months ended September 30, 2017,2023 and 2022, the Company received $474 thousand$13.2 million and $2.0 million, respectively, of interest and principal payments related to the retained interests.
The Company may from time to time refinance its investment in CLOs. If a refinanced CLO investment is considered substantially different from the original CLO investment, the refinancing is accounted for as a sale and a new refinanced CLO investment is recognized at fair value that is used to determine the amount of gain or loss on derecognition that is presented within net gains (losses) on investments in the consolidated statements of operations. If the refinancing is not considered substantially different from the original CLO investment, a new effective interest rate that equates the revised cash flows to the carrying amount of the original CLO investment is calculated and applied prospectively.
The Company uses independent pricing services to value its investments in the CLOs, including the retained interests, and therefore the only key assumption is the price provided by such service. A corresponding adverse change of 10% or 20% on price would have a corresponding impact on the fair value of the Company’s investments in CLOs.
6.5. VARIABLE INTEREST ENTITIES
In the ordinary course of business, the Company sponsors the formation of fundsentities that are considered VIEs. In accordance with GAAP consolidation guidance, the Company consolidates certain VIEs for which it is the primary beneficiary either directly or indirectly through a consolidated entity. See Note 2 ofin the Company’s Annual Report for a discussion of entities that are VIEs and the evaluation of those entities for consolidation by the Company.
In the second quarter of 2017, the Company consolidated one of the CLOs it manages as a result of increasing its investment in the vehicle, which provided the Company with a controlling financial interest in the VIE. In the third quarter of 2017, the CLO issued notes to investors and as a result the Company’s interest in the CLO was limited to a 5% risk retention


27
19


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023

investment. Due to the reconsideration event, the Company deconsolidated the CLO in the third quarter of 2017. No gains or losses were recognized as a result of the deconsolidation.
The table below presents the assets and liabilities of VIEs consolidated by the Company:Company.
 September 30, 2017 December 31, 2016
    
 (dollars in thousands)
Assets 
  
Assets of consolidated funds: 
  
Investments of consolidated funds, at fair value$41,074
 $37,661
Other assets of consolidated funds12,416
 17,544
Total Assets$53,490
 $55,205
    
Liabilities 
  
Liabilities of consolidated funds: 
  
Other liabilities of consolidated funds8,965
 15,197
Total Liabilities$8,965
 $15,197
 September 30, 2023December 31, 2022
(dollars in thousands)
Assets  
Assets of consolidated entities:  
Cash and cash equivalents$391 $3 
Restricted cash and cash equivalents9,800 9,805 
Investments, at fair value322,516 306,590 
Other assets11,266 2,016 
Total Assets$343,973 $318,414 
Liabilities  
Liabilities of consolidated entities:  
Notes payable$220,702 $196,106 
Other liabilities5,070 1,601 
Total Liabilities$225,772 $197,707 
The assets presented in the table above belongof consolidated variable interest entities may only be used to the investors in those funds, are available for use only by the fund to which they belong,settle obligations of these entities and are not available for use byto creditors of the Company. The investors in these consolidated fundsentities have no recourse against the assets of the Company. There is no recourse to the general credit ofCompany for the Company with respect to any liability.consolidated VIEs’ liabilities.
The Company’s direct involvement with fundsVIEs that are VIEs and not consolidated by the Company is generally limited to providing asset management services and, in certain cases, directinsignificant investments in the VIEs. The maximum exposure to loss represents the potential loss of current investments or income and fees receivables from these entities, as well as the obligation to repay unearned revenues, primarily incentive income subject to clawback, in the event of any future fund losses. The Company haslosses, as well as unfunded commitments to certain funds that are VIEs, as discussed in Note 15.16. The Company does not provide, nor is it required to provide, any type of non-contractual financial or other support to its VIEs that are not consolidated.consolidated other than its own capital commitments.
The table below presents the net assets of unconsolidated VIEs in which the Company has variable interests:interests along with the maximum exposure to loss as a result of the Company’s involvement with non-consolidated VIEs:
September 30, 2023December 31, 2022
(dollars in thousands)
Net assets of unconsolidated VIEs in which the Company has a variable interest$12,598,243 $12,738,164 
Maximum risk of loss as a result of the Company’s involvement with unconsolidated VIEs:
Unearned income and fees40,359 53,869 
Income and fees receivable13,452 41,890 
Investments266,122 245,583 
Investments of consolidated entities263,932 237,699 
Unfunded commitments(1)
202,916 182,797 
Maximum Exposure to Loss$786,781 $761,838 
_______________
(1) Includes commitments from certain employees and executive managing directors in the amounts of $89.7 million and $65.4 million as of September 30, 2023 and December 31, 2022, respectively.
28
 September 30, 2017 December 31, 2016
 (dollars in thousands)
Net assets of unconsolidated VIEs in which the Company has a variable interest$7,177,884
 $4,069,617
    
Maximum risk of loss as a result of the Company's involvement with VIEs:   
Unearned revenues123,194
 96,409
Income and fees receivable6,811
 13,074
Investments in funds187,819
 35,868
Maximum Exposure to Loss$317,824
 $145,351


20


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023

7. OTHER ASSETS, NET6. LEASES
The following table presentsCompany has non-cancelable operating leases for its headquarters in New York and its offices in London, Hong Kong, Shanghai, and various other locations and data centers. The Company does not have renewal options for any of its current leases. The Company also subleases a portion of its office space in London and New York through the componentsend of other assets, net as reportedthe lease term. In addition, the Company has finance leases for computer hardware. As of September 30, 2023, the Company has pledged collateral related to its lease obligations of $6.2 million, which is included within restricted cash in the consolidated balance sheets:
 September 30, 2017 December 31, 2016
    
 (dollars in thousands)
Fixed Assets: 
  
Leasehold improvements$53,419
 $54,414
Computer hardware and software42,437
 40,093
Furniture, fixtures and equipment8,571
 8,919
Corporate aircraft held for sale—
 56,251
Accumulated depreciation and amortization(56,056) (49,890)
Fixed assets, net48,371
 109,787
Goodwill22,691
 22,691
Prepaid expenses9,415
 12,753
Trades receivable for loans subject to forward sale agreement—
 10,391
Loans held for sale—
 8,204
Other3,040
 6,158
Total Other Assets, Net$83,517
 $169,984
During the first half of 2017, the Company sold its corporate aircraft for $57.6 million. As a result, the Company recognized a net gain on sale of $1.3 million in the period. The gain is included within other revenues in the consolidated statements of comprehensive income (loss).
8. OTHER LIABILITIESsheets.
The following table presents thetables below represent components of other liabilities as reported in the consolidated balance sheets:lease expense and associated cash flows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Lease Cost
Operating lease cost$4,825 $4,628 $14,030 $13,992 
Short-term lease cost22 21 66 75 
Finance lease cost - amortization of leased assets51 113 222 296 
Finance lease cost - imputed interest on lease liabilities15 19 45 23 
Less: Sublease income(902)(779)(2,539)(2,413)
Net Lease Cost$4,011 $4,002 $11,824 $11,973 

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Supplemental Lease Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases$5,311 $5,140 $15,764 $15,631 
Operating cash flows for finance leases$— $6 $5 $6 
Finance cash flows for finance leases$— $155 $223 $318 
Right-of-use assets obtained in exchange for lease obligations
Operating leases$1,818 $— $1,818 $1,079 
Finance leases$— $1,016 $— $1,016 
September 30, 2023December 31, 2022
Lease Term and Discount Rate
Weighted average remaining lease term
Operating leases6.1 years6.7 years
Finance leases3.8 years4.5 years
Weighted average discount rate
Operating leases8.0 %7.8 %
Finance leases7.9 %7.9 %
29
 September 30, 2017 December 31, 2016
    
 (dollars in thousands)
Unearned incentive income$122,833
 $96,079
Accrued expenses28,232
 30,728
Deferred rent credit8,874
 15,046
Interest payable7,083
 2,654
Loan trades payable—
 10,391
Obligation to deliver loans subject to forward sale agreement, at fair value—
 8,204
Other13,421
 11,892
Total Other Liabilities$180,443
 $174,994
9. DEBT OBLIGATIONS
As of September 30, 2017, the Company’s outstanding indebtedness was primarily comprised of senior notes (the “Senior Notes”) and secured loans to finance the purchase of the Company’s investments in CLOs (“CLO Investments Loans”).


21


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Operating
Leases		Finance
Leases
(dollars in thousands)
Maturity of Lease Liabilities - Contractual Payments to be Paid
October 1, 2023 to December 31, 2023$4,786 $— 
202417,520 228 
202514,989 228 
202615,353 228 
202717,675 228 
Thereafter35,015 — 
Total Lease Payments105,338 912 
Imputed interest(22,170)(116)
Total Lease Liabilities - Contractual Payments to be Paid$83,168 $796 
Operating Leases
 (dollars in thousands)
Sublease Rent - Contractual Payments to be Received
October 1, 2023 to December 31, 2023$904 
20241,920 
20251,920 
20261,920 
20271,960 
Thereafter4,160 
Total Sublease Rent - Contractual Payments to be Received$12,784 
30

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20172023

7. DEBT OBLIGATIONS AND WARRANTS
2020 Term LoanCLO Investments LoansTotal
(dollars in thousands)
Maturity of Debt Obligations
October 1, 2023 to December 31, 2023$— $— $— 
2024— — — 
2025— 1,120 1,120 
202695,000 — 95,000 
2027— — — 
2028— — — 
Thereafter— 29,800 29,800 
Total Payments95,000 30,920 125,920 
Unamortized discounts & deferred financing costs(10,256)(178)(10,434)
Total Debt Obligations$84,744 $30,742 $115,486 
Senior Notes2020 Credit Agreement
On November 20, 2014,September 25, 2020, Sculptor Capital LP, as borrower, (the “Borrower”), and certain other subsidiaries of the Company, issued $400.0 millionas guarantors, entered into a credit and guaranty agreement, as amended on December 20, 2022, (the “2020 Credit Agreement”), consisting of Senior Notes due November 20, 2019, unless earlier redeemed or repurchased. The Senior Notes were issued at(i) a price of 99.417% of thesenior secured term loan facility in an initial aggregate principal amount of $320.0 million (the “2020 Term Loan”) and (ii) a senior secured revolving credit facility in an initial aggregate principal amount of $25.0 million (the “2020 Revolving Credit Facility”). The proceeds from the 2020 Term Loan were first allocated to the full fair value of the warrants issued in connection with the 2020 Credit Agreement (which establishes both a liability and a debt discount, as described below), and the residual proceeds, net of deferred offering costs and discounts, of $275.8 million was then recognized as the initial carrying value of the 2020 Term Loan.
Certain prepayments of the 2020 Term Loan are subject to a prepayment premium (the “Call Premium”) equal to (a) prior to the second anniversary of the Closing Date, a customary “make-whole” premium equal to the present value of all required interest payments that would be due from the date of prepayment through and including the second anniversary of the Closing Date plus a premium of 3.0% of the principal amount of loans prepaid, (b) on or after the second anniversary of the Closing Date but prior to the third anniversary of the Closing Date, a premium of 3.0% of the principal amount of loans prepaid, (c) on or after the third anniversary of the Closing Date but prior to the fourth anniversary of the Closing Date, a premium of 2.0% of the principal amount of loans prepaid and (d) thereafter, 0%. On June 21, 2021, the Company entered into a letter agreement amending the 2020 Credit Agreement to increase the amount of voluntary prepayments for which the Call Premium shall not apply from $175.0 million to $225.0 million in exchange for an amendment fee of $1.75 million. As such, no Call Premium was due on the first $225.0 million prepaid by the Company. The amendment fee was recorded as an additional discount to the 2020 Term Loan in the second quarter of 2021. In 2021, the Company prepaid $224.4 million of the 2020 Term Loan, resulting in an outstanding balance of $95.0 million, which is due at maturity. The Company recognized a $30.2 million loss on this retirement of debt. As a result of the $175.0 million of aggregate prepayments made through March 31, 2021, the Company is no longer subject to the cash sweep or financial maintenance covenants, other than the covenant requiring $20.0 billion minimum fee-paying Assets Under Management described below.
The 2020 Term Loan and the 2020 Revolving Credit Facility mature on the seventh and sixth anniversary, respectively, of the initial funding of the 2020 Term Loan, which occurred on November 13, 2020 (the “Closing Date”). Borrowings under the 2020 Credit Agreement bear interest at a per annum rate equal to, at the Company’s option, the one, three or six-month Secured Overnight Financing Rate (“SOFR”) (subject to a 0.75% floor), plus 6.25%. With respect to interest calculated using one-month SOFR, additional rate equal to 0.05% is applied and with respect to interest calculated using three-month or six-month SOFR,
31

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
additional rate equal to 0.10% is applied. The Borrower is also required to pay an undrawn commitment fee at a rate per annum of 4.50% payable semiannually in arrears. The Senior Notes are unsecured and unsubordinated obligations issued by a subsidiaryequal to 0.50% of the Company, Och-Ziff Finance Co. LLC (“Och-Ziff Finance”), and are fully and unconditionally guaranteed, jointly and severally, on an unsecured and unsubordinated basis by OZ Management LP, OZ Advisors LP and OZ Advisors II LP (collectively, the “Senior Notes Guarantors”).
The Senior Notes may be redeemed from time to time at the Company’s option, in whole or in part, at a redemption price equal to the greater of 100%undrawn portion of the principal amount to be redeemed and a make-whole redemption price (as defined in the Senior Notes indenture), in either case, plus any accrued and unpaid interest. If a change of control repurchase event occurs, the Company will be required to offer to repurchase the Senior Notes at a price equal to 101% of the aggregate principal amount, plus any accrued and unpaid interest.
The Senior Notes do not have any financial maintenance covenants. However, the Senior Notes include certain covenants, including limitations on Och-Ziff Finance’s and, as applicable, the Senior Notes Guarantors’ ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their respective subsidiaries or merge, consolidate or sell, transfer or lease all or substantially all assets. The Senior Notes also provide for customary events of default, bankruptcy, insolvency or reorganization that may cause the Senior Notes to become immediately due and payable, plus any accrued and unpaid interest.
Revolving Credit Facility
On November 20, 2014, the Company entered into a $150.0 million, 5-year unsecured Revolving Credit Facility, which was subsequently amended on December 29, 2015 and on June 13, 2017, the proceeds of which may be used for working capital, general corporate purposes or other liquidity needs. The facility matures on November 20, 2019. The borrower under the Revolving Credit Facility is OZ Management LP and the facility is guaranteed by OZ Advisors LP, OZ Advisors II LP and Och-Ziff Finance. The Company is able to increase the maximum amount of credit available under the facility to $225.0 million if certain conditions are satisfied.
The Company is subject to a fee of 0.10% to 0.25% per annum on undrawn commitments during the term of the2020 Revolving Credit Facility. Outstanding borrowings will bear interest at a rate per annum of LIBOR plus 1.00%
The 2020 Credit Agreement prohibits the total fee-paying Assets Under Management, subject to 2.00%, or a base rate plus 0% to 1.00%. The commitment fees and the spreads over LIBOR or the base rate are based on OZ Management LP’s credit rating throughout the termcertain exclusions, of the facility. As of September 30, 2017,Borrower, the current rates for borrowings would be LIBOR plus 2.00%,guarantors and the undrawn commitment fee was 0.25%.
In March 2017, the Company repaid its outstanding obligation under the Revolving Credit Facility in full, and as a result has $150.0 million available under the facility as of September 30, 2017.
The Revolving Credit Facility includes two financial maintenance covenants. The first covenant prohibits total fee-paying assets under managementtheir consolidated subsidiaries as of the last day of any fiscal quarter to be less than $22.0 billion$20.0 billion. The 2020 Credit Agreement contains customary events of default for two successive quarters.a transaction of this type, after which obligations under the 2020 Credit Agreement may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Borrower, the guarantors or any of the material subsidiaries of the foregoing after which the obligations under the 2020 Credit Agreement become automatically due and payable. The second covenant prohibits2020 Credit Agreement also provided the economic income leverage ratio (as defined incounterparty the right to appoint an individual to a seat on the Company’s Board of Directors.
The Company expects to repay all amounts outstanding under the 2020 Term Loan and the 2020 Revolving Credit Facility)Facility in connection with the closing of the proposed transaction between the Company and Rithm Capital Corp. Refer to Note 17 for details of the proposed transaction.
Warrants
In connection with the 2020 Credit Agreement, the Company has issued and outstanding warrants to purchase 4,338,015 Class A Shares. The warrants have a 10-year term from exceeding: (i) 4.00the Closing Date and an initial exercise price per share equal to 1.00 for each fiscal quarter ending$11.93. The exercise price is subject to reduction by an amount equal to any dividends paid on or prior to December 31, 2017; (ii) 3.50 to 1.00 for each fiscal quarter ending on or after March 31, 2018 but on or prior to December 31, 2018; and (iii) 3.00 to 1.00 for each fiscal quarter ending on or after March 31, 2019.Class A Shares. As a result, the exercise price was $7.95 per share as of September 30, 2017,2023. The warrants provide for customary adjustments in the event of a stock split, stock dividend, recapitalization or similar event. In lieu of making a cash payment otherwise contemplated upon exercise, the holder may exercise the warrants in whole or in part to receive a net number of Class A Shares. In addition, the 2020 Credit Agreement provides that, upon exercise in whole or in part by the holder, the Company wasmay decide in complianceits sole discretion whether the holder’s exercise of such warrant will be settled by delivery of Class A Shares (which shares may be reduced to a net number of Class A Shares in accordance with the financial maintenance covenants.
The Revolving Credit Facility allowsprocedure described in the preceding sentence) or by the Company’s payment to the holder of an amount in cash equal to the Black-Scholes value as provided for in the applicable warrant agreement. If the Company undergoes a limitedchange of control prior to the expiration date, the holder will have the right to cure an eventrequire the Company to repurchase any remaining portion of default resulting from noncompliancethe warrants not yet exercised at their Black-Scholes value as provided for in the applicable agreement. Refer to Note 17 for further details.
Warrants of the Consolidated SPAC
In the second quarter of 2023, the SPAC was liquidated in accordance with its charter and the economic income leverage ratio test with an equity contribution made11.2 million warrants to the borrower, OZ Management LP. Such cure right may not be used more than two times in any four-quarter period or more than three times duringCompany and 11.5 million warrants to third parties expired worthless. The warrants had a 5-year term from the termday of the facility.SPAC IPO and an initial exercise price per share equal to $11.50. The warrants were subject to other customary terms common for instruments of this type. The Company eliminated the SPAC warrants it held in consolidation.

Notes Payable of a Consolidated Entity
In the first quarter of 2022, the Company launched a structured alternative investment solution that it consolidated, which issued notes in the aggregate principal amount of $350.0 million, of which approximately $127.8 million were acquired by the Company and eliminated in consolidation. The notes held by the Company consisted of $20.0 million of Class A, $20.0 million of Class C and $87.8 million of subordinated notes. Changes in the fair value of the notes payable of the structured alternative investment solution are presented within net (losses) gains of consolidated entities in the consolidated statements of operations. The fair value of the notes payable as of September 30, 2023, was $220.7 million. The notes payable mature in May 2037.

32
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OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023

The Revolving table below summarizes material terms of the notes payable:
Class A NotesClass B NotesClass C Notes
Subordinated Notes(1)
(dollars in thousands)
TypeSenior SecuredSenior SecuredMezzanine SecuredUnsecured
Initial principal amount$140,000$70,000$35,000$105,000
Initial interest rate4.25%6.00%6.75%N/A
Interest rate after step up and effective date(2)
6.25%; May 20288.00%; May 20299.50%; May 2025N/A
_______________
(1) Subordinated notes do not have stated interest rates or principal entitlement but instead receive net proceeds from excess cash flows remaining after periodic payments have been made to more senior notes and after fees and expenses in accordance with the priority of payments.
(2) Interest rate after a one time step up in basis at the indicated effective date.
See Note 2 in the Company’s Annual Report for accounting policies for the notes payables of the consolidated entities.
Credit Facility includes provisions that restrict or limit, among other things,of a Consolidated Entity
In the abilityfirst quarter of 2022, the structured alternative investment vehicle entered into a $52.5 million credit facility which expires March 18, 2025. The credit facility is capped at $20.0 million of the Oz Operating Group from:
Incurring certain additional indebtedness or issuing certain equity interest.
Creating liens.
Paying dividends or making certaintotal borrowing capacity per quarter. The facility is subject to a SOFR reference rate, as defined in the agreement, plus 3.00%. The facility is also subject to an annual 1.15% unused commitment fee. As of September 30, 2023, the fund has not drawn on the facility. The credit facility agreement is subject to other payments when there is a default or eventcustomary terms common for instruments of default underthis type. The creditors of the Revolving Credit Facility.
Merging, consolidating, selling or otherwise disposing of its assets.
Engaging in certain transactions with shareholders or affiliates.
Engaging in a substantially different line of business.
Amending its organizational documents in a manner materially adverseCompany’s consolidated entities have no recourse to the lenders.Company.
The Revolving Credit Facility permits the Oz Operating Group to incur, among other things, up to $150.0 million of indebtedness, up to an additional $400.0 million of indebtedness for financing of investments in CLOs in order to comply with risk retention regulatory requirements, and additional indebtedness so long as, after giving effect to the incurrence of such indebtedness, it is in compliance with an economic income leverage ratio as described above and no default or event of default has occurred and is continuing. The facility also permits the Oz Operating Group to create liens to, among other things, secure indebtedness related to financing of CLO risk retention investments, as described above, as well as other indebtedness and obligations of up to $50.0 million.
Aircraft Loan
In February 2014, the Company entered into the Aircraft Loan to finance installment payments towards the purchase of a corporate aircraft. In March 2017, the Company sold the aircraft and repaid the outstanding principal balance in the amount of $46.4 million.
CLO Investments Loans
The Company entersentered into loans to finance portions of its investments in certain CLOs (collectively, “the CLOthe “CLO Investments Loans”). These loans are collateralized by the investments in CLOs held by the Company. In general, the Company will make interest and principal payments on the loans at such time interest payments are received on its investments in the CLOs, and will make principal payments on the loans to the extent principal payments are received on its investments in the CLOs, with any remaining balance due upon maturity.
The loans are subject to customary events of default and covenants and includesalso include terms that require the Company’s continued involvement with the CLOs.

In addition to customary events of default included in financing arrangements of this type, an event of default would also be triggered if there is an event of default at the CLO level. Prior to the relevant CLO’s maturity date, this would include certain material covenant breaches, regulatory and insolvency events for the relevant CLO issuer, as well as a payment default, where the relevant CLO is unable to make interest payments on the senior, non-deferrable interest notes issued by the CLO. The CLO Investments Loans do not have any financial maintenance covenants and are secured by the related investments in CLOs with fair values of $32.3 million and $40.0 million as of September 30, 2023 and December 31, 2022, respectively.

33
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OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023

TheCarrying amounts presented in the table below presents information related to CLO Investments Loans as of September 30, 2017. Carrying values presented below are net of discounts, if any, and unamortized deferred financing costs. The interest rates on the CLO Investments Loans are variable based on SOFR or EURIBOR (subject to a floor of zero percent). The final maturity date for each CLO Investments Loan is the earlier of the finalcontractual maturity date presented in the table below or the date at such a time whenwhich the Company no longer holds a risk retention investment in the respective CLO. The timing of principal payments on CLO Investments Loans is contingent on principal payments made to the Company on the investments in CLOs and the CLO Investments Loans may amortize well in advance of their contractual maturity dates.
Initial Borrowing DateContractual RateContractual Maturity DateCarrying Value
September 30, 2023December 31, 2022
(dollars in thousands)
June 7, 2017SOFR plus 1.48%November 16, 2029$12,478 $16,835 
August 2, 2017SOFR plus 1.41%January 21, 203017,144 21,594 
January 19, 2022EURIBOR plus 1.50%December 15, 2023— 2,285 
June 1, 2023EURIBOR plus 1.85%April 12, 20251,120 — 
$30,742 $40,714 
Borrowing Date Contractual Rate Final Maturity Date Carrying Value
      September 2017 December 2016
         
      (dollars in thousands)
December 15, 2016
EURIBOR plus 2.23%
December 15, 2023 $17,744
 $15,801
June 7, 2017
LIBOR plus 1.48%
November 16, 2029 17,037
 —
July 21, 2017
LIBOR plus 1.43%
January 22, 2029 21,671
 —
August 2, 2017 LIBOR plus 1.41% January 21, 2030 21,633
 —
August 17, 2017 LIBOR plus 1.43% April 30, 2030 22,890
 —
September 14, 2017
LIBOR plus 1.41%
April 22, 2030 25,410
 —
September 14, 2017
EURIBOR plus 2.21%
September 14, 2024 19,206
 —
      $145,591
 $15,801
8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
10. PREFERRED UNITS
PursuantThe Company has €200.0 million and $100.0 million master credit facility agreements (the “CLO Financing Facilities”) to a securities purchase agreement, dated September 29, 2016 (the “Purchase Agreement”), certainfinance portions of the Company’s executive managing directors, including Daniel S. Och (the “EMD Purchasers”), agreedrisk retention investments in certain CLOs managed by the Company. Subject to purchase up to a totalthe terms and conditions of 400,000 Preferred Units for an aggregate amount of up to $400.0 million. On October 5, 2016,the CLO Financing Facilities, the Company completedand the counterparty may enter into repurchase agreements on such terms agreed upon by the parties. Each transaction entered into under the CLO Financing Facilities will bear interest at a $250.0 million issuance and salerate based on the weighted average effective interest rate of 250,000 Preferred Units. On January 23, 2017,each class of securities that have been sold plus a spread to be agreed upon by the Company completed an additional $150.0 million issuance and sale of 150,000 Preferred Units.parties. As of September 30, 2017, 400,000 Preferred Units remained issued2023, €43.6 million and outstanding.
Distributions on the Preferred Units are payable on the liquidation preference amount and on a cumulative basis at an initial distribution rate of 0% per annum until February 19, 2020 (the “Step-up Date”), after which the distribution rate will increase in stages thereafter to a maximum of 10% per annum on and after the eighth anniversary$86.5 million of the Step-up Date. Subject to certain exceptions, unless distributions onCLO Financing Facilities remained available.
Each transaction entered into under the Preferred Units are declaredCLO Financing Facilities provides for payment netting and, paid in cash for the then current distribution period and all preceding periods after the initial closing, the Oz Operating Partnerships may not declarecase of a default or pay distributions on or repurchase any of their equity securities that rank equalsimilar event with or juniorrespect to the Preferred Units.
Following the occurrence of a change of control event, the Oz Operating Partnerships will redeem the Preferred Units at a redemption price equalcounterparty to the liquidation preference plusCLO Financing Facilities, provides for netting across transactions. Generally, upon a counterparty default, the Company can terminate all accumulated but unpaid distributions (collectively,transactions under the “liquidation value”). For so long as the Oz Operating Partnerships do not redeem all of the outstanding Preferred Units, the distribution rate will increase by 7% per annum, beginning on the 31st day following such change in control. The Oz Operating Partnerships will not be required to effect such redemption until the earlier of (i) 91 days after the maturity date of the Revolving Credit FacilityCLO Financing Facilities and (ii) the payment in full of all loans and other obligations and the termination of all commitments thereunder.
The Oz Operating Partnerships may, at their option, redeem the Preferred Units at a price equal to: (i) 105% of the liquidation value until the day immediately prior to the Step-up Date; (ii) 103% of the liquidation value thereafter until the day immediately prior to the first anniversary of the Step-up Date; (iii) 101% of the liquidation value thereafter until the day immediately prior to the second anniversary of the Step-up Date; and (iv) thereafter at a price equal to the liquidation value. In addition, from and after March 31, 2020, if theoffset amounts that were distributed to partners of the Oz Operating Partnershipsit owes in respect of their equity interests in the Oz Operating Partnerships (other than amounts distributedany one transaction against collateral it has received in respect of tax distributionsany other transactions under the CLO Financing Facilities; provided, however, that in the case of certain defaults, the Company may only be able to terminate and offset solely with respect to the transaction affected by the default. During the term of a transaction entered into under the CLO Financing Facilities, the Company will deliver cash or additional securities acceptable to the counterparty if the securities sold are in default. In addition to customary events of default included in financing arrangements of this type, an event of default would also be triggered if there is an event of default at the CLO level. Prior to the relevant CLO’s maturity date, this would include certain other distributions)material covenant breaches, regulatory and insolvency events for the relevant CLO issuer, as well as a payment default where the relevant CLO is unable to make interest payments on the senior, non-deferrable interest notes issued by the CLO. Upon termination of a transaction, the Company will repurchase the previously sold securities from the counterparty at a previously determined repurchase price. The CLO Financing Facilities may be terminated at any time upon certain defaults or utilized forcircumstances agreed upon by the parties.
The repurchase agreements may result in credit exposure in the event the counterparty to the transaction is unable to fulfill its contractual obligations. The Company minimizes the credit risk associated with these activities by monitoring counterparty credit exposure and collateral values. Other than margin requirements, the Company is not subject to additional terms or contingencies which would expose the Company to additional obligations based upon the performance of units by such entities (or which were available but not used for such

the securities pledged as collateral.

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OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The table below presents securities sold under agreements to repurchase that are offset, if any, as well as securities transferred to the counterparty related to such transactions (capped so that the net amount presented will not be reduced below zero). No other material financial instruments were subject to master netting agreements or other similar agreements:
Securities Sold under Agreements to RepurchaseGross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Amounts of Liabilities in the Consolidated Balance SheetSecurities TransferredNet Amount
 (dollars in thousands)
As of September 30, 2023$177,503 $— $177,503 $173,156 $4,347 
As of December 31, 2022$166,632 $— $166,632 $157,107 $9,525 
The securities sold under agreements to repurchase have a set scheduled maturity date that corresponds to the maturities of the securities sold under such transaction. The table below presents the remaining final contractual maturity of the securities sold to the counterparty under agreement to repurchase by class of collateral pledged:
Investments in CLOs
Securities Sold under Agreements to RepurchaseOvernight and ContinuousUp to 30 Days30-90 DaysGreater Than 90 DaysTotal
(dollars in thousands)
As of September 30, 2023$— $— $— $177,503 $177,503 
As of December 31, 2022$— $— $— $166,632 $166,632 
9. OTHER ASSETS, NET
The following table presents the components of other assets, net as reported in the consolidated balance sheets:
September 30, 2023December 31, 2022
(dollars in thousands)
Fixed Assets:  
    Leasehold improvements$47,826 $47,736 
    Computer hardware and software44,402 44,603 
    Furniture, fixtures and equipment8,013 8,013 
    Accumulated depreciation and amortization(82,475)(79,390)
Fixed assets, net17,766 20,962 
Goodwill22,691 22,691 
Cloud computing costs13,685 9,940 
Prepaid expenses11,440 16,698 
Redemption receivable(1)
— 28,721 
Other9,842 7,430 
Total Other Assets, Net$75,424 $106,442 
_______________
(1) Represents amounts receivable on a redeemed investment in a fund.
35

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20172023

10. OTHER LIABILITIES
purposes)The following table presents the components of other liabilities as reported in the consolidated balance sheets:
 September 30, 2023December 31, 2022
 (dollars in thousands)
Accrued expenses$21,468 $20,925 
Uncertain tax positions8,250 8,250 
Due to funds(1)
3,391 3,854 
Other10,069 10,020 
Total Other Liabilities$43,178 $43,049 
_______________
(1) To the extent that a fee-paying fund is an investor in another fee-paying fund, the Company rebates a corresponding portion of the management fees charged in the investee fund. Due to funds amounts also reflect certain incentive income and management fee waivers.
11. REVENUES
The following table presents management fees and incentive income recognized as revenues for the immediately preceding fiscal year were in excess of $100 million inthree months ended September 30, 2023 and 2022:
Three Months Ended September 30,
20232022
Management FeesIncentive IncomeManagement FeesIncentive Income
(dollars in thousands)
Multi-strategy funds$28,566 $781 $33,579 $209 
Credit
 Opportunistic credit funds11,524 6,290 12,001 698 
Institutional Credit Strategies11,354 — 11,550 — 
Real estate funds8,750 10,730 9,106 6,659 
Total$60,194 $17,801 $66,236 $7,566 

The following table presents management fees and incentive income recognized as revenues for the aggregate, then an amount equal to 20% of such excess shall be utilized to redeem Preferred Units on a pro rata basis for an amount equal tonine months ended September 30, 2023 and 2022:
Nine Months Ended September 30,
20232022
Management FeesIncentive IncomeManagement FeesIncentive Income
(dollars in thousands)
Multi-strategy funds$88,716 $1,504 $112,171 $329 
Credit
    Opportunistic credit funds36,205 20,412 37,167 20,603 
    Institutional Credit Strategies35,092 — 34,941 — 
Real estate funds26,331 40,467 27,164 52,856 
Total$186,344 $62,383 $211,443 $73,788 
36

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The following table presents the liquidation value.
Furthermore, if the average closing pricecomposition of the Company’s Class income and fees receivable as of September 30, 2023 and December 31, 2022:
September 30, 2023December 31, 2022
(dollars in thousands)
Management fees$23,652 $25,402 
Incentive income2,917 30,958 
Income and Fees Receivable$26,569 $56,360 
The Company recognizes management fees over the period in which the performance obligation is satisfied, and are generally recognized at the end of each reporting period. The Company records incentive income when it is probable that a significant reversal of income will not occur. The majority of management fees and incentive income receivable at each balance sheet date is generally collected during the following quarter.
The following table presents the Company’s unearned income and fees as of September 30, 2023 and December 31, 2022:
September 30, 2023December 31, 2022
(dollars in thousands)
Management fees$151 $2 
Incentive income40,359 53,867 
Unearned Income and Fees$40,510 $53,869 
A Shares exceeds $15.00 per shareliability for unearned incentive income is generally recognized when the previous 20 trading days,Company receives incentive income distributions from its funds, primarily its real estate funds, whereby the Oz Operating Partnershipsdistributions received have agreednot yet met the recognition threshold of being probable that a significant reversal of cumulative revenue will not occur. A liability for unearned management fees is generally recognized when management fees are paid to use their reasonable best efforts to redeemthe Company on a quarterly basis in advance, based on the amount of Assets Under Management at the beginning of the quarter. In the nine months ended September 30, 2023 and 2022, the Company recognized $35.6 million and $47.2 million, respectively, of the beginning balance of unearned incentive income for each respective year. The Company recognized all of the outstanding Preferred Units as promptly as practicable. If such event occurs prior to February 19, 2020,beginning balances of unearned management fees during the Company has agreed to use its reasonable best efforts to obtain consents from its lenders in order to redeem the Preferred Units as promptly as practicable.respective quarter.
Although the Preferred Units do not have voting rights, the consent of the holders’ committee, which initially consists of Daniel S. Och as sole member, is required to effect (i) any amendment to or waiver of the terms of the Preferred Units or (ii) any amendment to the limited partnership agreements of the Oz Operating Partnerships that would have an adverse effect on any holder of the Preferred Units. Under the terms of the Preferred Units, the Oz Operating Partnerships are prohibited from issuing any equity securities (or any debt or other securities convertible into equity securities of such entity) that rank equally with, or senior to, the Preferred Units, without the prior written consent of the holders’ committee.
11.12. INCOME TAXES
The computation of the effective tax rate and provision at each interim period requires the use of certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent differences, and the likelihood of recovering deferred tax assets existing as of the balance sheet date. The estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as tax laws and regulations change. Additionally, the amount of incentive income and discretionary cash bonuses recorded in any given quarter can have a significant impact on the Company’s effective tax rate. Accordingly, the effective tax rate for interim periods is not indicative of the tax rate expected for a full year.
37

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The Registrant and eachfollowing is a reconciliation of the Oz Operating Partnerships are partnerships forstatutory U.S. federal income tax purposes. Duerate to the Company’s legal structure, only a portion of theeffective income earned by the Company is subject to corporate-level tax rates in the United States and in foreign jurisdictions.rate:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Statutory U.S. federal income tax rate21.00 %21.00 %21.00 %21.00 %
Loss (income) passed through to noncontrolling interests-3.98 %-5.78 %-12.16 %-7.67 %
Foreign income taxes-7.39 %-4.58 %-18.11 %-4.76 %
RSU/RSA excess income tax benefit or expense-0.08 %-0.49 %-4.74 %3.76 %
State and local income taxes1.02 %0.53 %-2.73 %-7.34 %
Nondeductible amortization of Partner Equity Units-1.80 %-2.28 %-5.88 %-9.59 %
Foreign tax credits and deductions1.55 %0.96 %3.80 %1.00 %
Change in fair value of warrants-4.45 %-3.83 %-5.12 %25.74 %
Disallowed executive compensation-5.02 %-6.08 %-13.72 %-19.29 %
Other, net-0.11 %-0.20 %-2.00 %-0.36 %
SPAC Loss-0.01 %— %7.02 %— %
Effective Income Tax Rate0.73 %-0.75 %-32.64 %2.49 %
The provision for income taxes includes federal, state and local taxes in the United States and foreign taxes at an approximate effective tax rate of 10.9% and 24.1% for the three months ended September 30, 2017 and 2016, respectively, and 23.1% and -14.1% for the nine months ended September 30, 2017 and 2016, respectively. The reconciling items from the Company’s statutory rate to the effective tax rate were driven primarily by the following: (i) a portion of the Company’s consolidated net income is not subject to federal, state and local corporate income taxes in the United States, as these amounts are allocated to the executive managing directors on their Group A Units or to fund investors in the Company’s consolidated funds (each of which is included within noncontrolling interests); (ii) a portion of the income earned by the Company is subject to the New York City unincorporated business tax; (iii) certain foreign subsidiaries are subject to foreign corporate income taxes; in addition, in the year-to-date period, the valuation allowance on the Company’s foreign tax credits increased.
In accordance with GAAP, the Company recognizes tax benefits for amounts that are “more likely than not” to be sustained upon examination by tax authorities. For uncertain tax positions in which the benefit to be realized does not meet the “more likely than not” threshold, the Company establishes a liability, which is included within other liabilities in the consolidated balance sheets.
As of September 30, 20172023 and December 31, 2016,2022, the Company had a liability for unrecognized tax benefits of $7.0$8.3 million. As of and for the three and nine months ended September 30, 2017,2023, the Company did not accrue interest or penalties related to uncertain tax positions. As of September 30, 2017,2023, the Company does not believe that there will be a significant change to the uncertain tax positions during the next 12 months. The Company’s total unrecognized tax benefits that, if recognized, would affect its effective tax rate was $4.6expense by $4.8 million as of September 30, 2017.2023.


25

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

12.13. GENERAL, ADMINISTRATIVE AND OTHER
The following table presents the components of general, administrative and other expenses as reported in the consolidated statements of comprehensive income (loss):operations:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Professional services$20,112 $7,326 $40,480 $18,967 
Occupancy and equipment7,315 6,951 20,816 20,941 
Information processing and communications6,673 5,299 18,205 15,500 
Recurring placement and related service fees3,656 4,661 10,938 15,092 
Insurance2,312 2,226 6,947 6,661 
Business development587 799 2,607 2,094 
Other expenses1,433 1,028 5,818 2,776 
Total General, Administrative and Other$42,088 $28,290 $105,811 $82,031 
38
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Professional services$9,414
 $18,179
 $31,170
 $61,374
Occupancy and equipment7,391
 9,412
 25,868
 27,903
Information processing and communications6,611
 7,997
 20,822
 26,671
Recurring placement and related service fees4,829
 8,808
 15,490
 31,362
Insurance1,843
 3,999
 5,727
 12,030
Business development644
 2,458
 5,614
 10,916
Other expenses2,404
 7,456
 9,538
 13,964
 33,136
 58,309
 114,229
 184,220
Settlements expense—
 (2,184) —
 412,101
Total General, Administrative and Other$33,136
 $56,125
 $114,229
 $596,321

13. EARNINGS (LOSS)14. LOSS PER CLASS A SHARE
Basic earnings (loss)loss per Class A Share is computed by dividing the net income (loss)loss attributable to Class A Shareholders by the weighted-average number of Class A Shares outstanding for the period.
For the three months ended September 30, 20172023 and 20162022, the Company included 1,011,588207,458 and 1,060,924165,379 RSUs respectively, that have vested but have not been settled in Class A Shares in the weighted-average Class A Shares outstanding used to calculate basic and diluted earnings (loss)loss per Class A Share. For the nine months ended September 30, 20172023 and 20162022 the Company included 1,103,969206,360 and 1,162,390171,739 RSUs respectively, that have vested but have not been settled in Class A Shares in the weighted-average Class A Shares outstanding used to calculate basic and diluted earnings (loss)loss per Class A Share.
When calculating dilutive loss per Class A Share, the Company applies the treasury stock method to outstanding warrants, unvested RSUs and RSAs, which are only subject to a service condition. At the Sculptor Operating Group Level, the Company applies the if-converted method to vested Group A Units and vested Group E Units. For unvested Group A Units and unvested Group E Units, the Company applies the treasury stock method first to determine the number of incremental units that would be issuable and then applies the if-converted method to those resulting incremental units. The Company did not include theunvested RSAs, Group P Units or PSUs subject to service and market conditions in the calculationscalculation of dilutive earnings (loss)loss per Class A Share, as the applicable Performance Condition hasmarket conditions had not yet been met as of September 30, 2017 (see Note 3).the end of each reporting period presented below. The Company also did not include RSUs which will be settled in cash. The effect of dilutive securities on net loss attributable to Class A Shareholders is presented net of tax.
The following tables present the computation of basic and diluted earnings (loss)loss per Class A Share:
Three Months Ended September 30, 2023Net Loss Attributable to Class A ShareholdersWeighted- Average Class A Shares OutstandingLoss Per Class A ShareNumber of Antidilutive Units and Warrants Excluded from Diluted Calculation
(dollars in thousands, except per share amounts)
Basic$(31,113)25,204,848 $(1.23)
Effect of dilutive securities:
Group A Units— — 15,025,994 
Group E Units— — 13,020,157 
RSUs— — 2,412,996 
RSAs— — 1,099,947 
Warrants— — 4,338,015 
Diluted$(31,113)25,204,848 $(1.23)
39
Three Months Ended September 30, 2017Net Income Attributable to Class A Shareholders 
Weighted-Average
Class A Shares
Outstanding
 Earnings Per Class A Share 
Number of
Antidilutive Units
Excluded from
Diluted Calculation
        
 (dollars in thousands, except per share amounts)
Basic$5,726
 186,235,651
 $0.03
  
Effect of dilutive securities:       
Group A Units—
 —
   267,489,478
RSUs—
 —
   22,538,548
Diluted$5,726
 186,235,651
 $0.03
  


26


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Three Months Ended September 30, 2022Net Loss Attributable to Class A ShareholdersWeighted- Average Class A Shares OutstandingLoss Per Class A ShareNumber of Antidilutive Units and Warrants Excluded from Diluted Calculation
(dollars in thousands, except per share amounts)
Basic$(22,518)24,772,098 $(0.91)
Effect of dilutive securities:
Group A Units— — 15,025,994 
Group E Units— — 13,009,158 
RSUs— — 2,565,485 
RSAs— — 1,591,507 
Warrants— — 4,338,015 
Diluted$(22,518)24,772,098 $(0.91)
Nine Months Ended September 30, 2023Net Loss Attributable to Class A ShareholdersWeighted- Average Class A Shares OutstandingLoss Per Class A ShareNumber of Antidilutive Units and Warrants Excluded from Diluted Calculation
(dollars in thousands, except per share amounts)
Basic$(18,967)25,186,162 $(0.75)
Effect of dilutive securities:
Group A Units(21,280)15,025,994 — 
Group E Units— — 13,019,919 
RSUs— — 2,341,331 
RSAs— — 1,089,830 
Warrants— — 4,338,015 
Diluted$(40,247)40,212,156 $(1.00)
Nine Months Ended September 30, 2022Net Loss Attributable to Class A ShareholdersWeighted- Average Class A Shares OutstandingLoss Per Class A ShareNumber of Antidilutive Units and Warrants Excluded from Diluted Calculation
(dollars in thousands, except per share amounts)
Basic$(13,688)25,620,996 $(0.53)
Effect of dilutive securities:
Group A Units— — 15,025,994 
Group E Units— — 13,009,157 
RSUs— — 2,560,287 
RSAs— — 1,406,538 
Warrants(34,190)1,197,180 — 
Diluted$(47,878)26,818,176 $(1.79)
40

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20172023

Three Months Ended September 30, 2016Net Income Attributable to Class A Shareholders 
Weighted-Average
Class A Shares
Outstanding
 Earnings Per Class A Share 
Number of
Antidilutive Units
Excluded from
Diluted Calculation
        
 (dollars in thousands, except per share amounts)
Basic$14,285
 182,521,225
 $0.08
  
Effect of dilutive securities:       
Group A Units9,782
 297,317,019
   —
RSUs—
 —
   14,470,201
Diluted$24,067
 479,838,244
 $0.05
  
Nine Months Ended September 30, 2017Net Income Attributable to Class A Shareholders 
Weighted-Average
Class A Shares
Outstanding
 Earnings Per Class A Share 
Number of
Antidilutive Units
Excluded from
Diluted Calculation
        
 (dollars in thousands, except per share amounts)
Basic$11,660
 186,201,389
 $0.06
  
Effect of dilutive securities:       
Group A Units—
 —
   273,923,088
RSUs—
 —
   21,733,730
Diluted$11,660
 186,201,389
 $0.06
  
Nine Months Ended September 30, 2016Net Loss Attributable to Class A Shareholders 
Weighted-Average
Class A Shares
Outstanding
 Loss Per Class A Share 
Number of
Antidilutive Units
Excluded from
Diluted Calculation
        
 (dollars in thousands, except per share amounts)
Basic$(133,642) 182,508,296
 $(0.73)  
Effect of dilutive securities:       
Group A Units(226,476) 297,317,120
   —
RSUs—
 —
   14,092,299
Diluted$(360,118) 479,825,416
 $(0.75)  
14.15. RELATED PARTY TRANSACTIONS
Due from Related Parties
Amounts due from related parties relate primarily to amounts due from the funds for expenses paid on their behalf. These amounts are reimbursed to the Company on an ongoing basis.
DueCertain Amounts Related to Related PartiesTax Receivable Agreement Liability
Amounts due to related parties relate primarily to future payments owed to the Company’s executive managing directors and the Ziffscertain trusts related to Daniel S. Och, under the tax receivable agreement, as discussed further in Note 15.16. The tax receivable agreement liability was $173.1 million as of September 30, 2023, and $64.6 million of the balance was due to related parties. The Company made payments totaling $17.4 million, and $16.9 million under the tax receivable agreement (inclusive of interest thereon) in the nine months ended September 30, 2023 and 2022, respectively, of which $7.7 million and $7.4 million were paid to related parties, respectively. There were no payments made during the three months ended September 30, 2023 and 2022.
Management Fees and Incentive Income Earned from the FundsRelated Parties and Waived Fees
The Company earns substantially all of its management fees and incentive income from the funds, which are considered related parties as the Company manages the operations of and makes investment decisions for these funds.


27

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

Management Fees and Incentive Income Earned from Related Parties and Waived Fees
As of September 30, 20172023 and 2016,December 31, 2022, respectively, approximately $2.8 billion$809.9 million and $2.6 billion,$906.6 million of the Company’s assets under managementAssets Under Management represented investments by the Company, its executive managing directors, employees and certain other related parties in the Company’s funds. As of September 30, 20172023 and 2016,December 31, 2022, approximately 69%41% and 51%43%, respectively, of these affiliated assets under managementAssets Under Management were not charged management fees and were not subject to anor incentive income calculation.income.
The following table presents management fees and incentive income charged on investments held by related parties before the impact of eliminations related to the consolidated funds:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 (dollars in thousands)
Fees charged on investments held by related parties:       
Management fees$2,703
 $4,472
 $8,037
 $13,731
Incentive income$141
 $825
 $2,476
 $2,825

Corporate Aircraft
The Company’s corporate aircraft were sold in the first half of 2017. Until that time they were used primarily for business purposes. From time to time, certain executive managing directors, used the aircraft for personal use. For the three months ended September 30, 2017employees and 2016,certain other related parties:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(dollars in thousands)
Fees charged on investments held by related parties:   
Management fees$971 $1,243 $2,832 $3,392 
Incentive income$570 $192 $1,543 $1,005 
Investment in SPAC

The SPAC, sponsored by the Company, charged no feesdid not consummate an initial business combination within the time period required by its charter. As a result, in the second quarter of 2023, the SPAC redeemed all of its outstanding public shares for cash and $74 thousand, respectively, for personal usethe public and private placement of $11.2 million warrants held by the Company became worthless. The SPAC’s dissolution is in progress. The Company, prior to the SPAC liquidation, owned the majority of the aircraftClass B ordinary shares outstanding of the SPAC, and consolidated it under the voting interest model, and therefore the private placement warrants and Class B ordinary shares held by certain executive managing directors. For the nine months ended September 30, 2017 and 2016 the Company charged $360 thousandwere eliminated upon consolidation. Refer to Note 2 in the Company’s Annual Report for additional details on the SPAC.
Investment in Structured Alternative Investment Solution
In the first quarter of 2022, the Company closed on a $350.0 million structured alternative investment solution, a collateralized financing vehicle consolidated by the Company. The Company invested approximately $127.8 million in the vehicle.
41

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Refer to Note 2 in the Company’s Annual Report and $669 thousand, respectively,Note 4 for personal use ofadditional details on the aircraft by certain executive managing directors.structured alternative investment solution.
15.16. COMMITMENTS AND CONTINGENCIES
Tax Receivable Agreement
The purchase of Group A Units from thecurrent and former executive managing directors and the Ziffs with the proceeds from the 2007 Offerings, and subsequent taxable exchanges by them of Group A Units, Group E Units and Group P Units (“Partner Equity UnitsUnits”) for Class A Shares on a one-for-one basis (or, at the Company’s option, a cash equivalent), resulted, and, in the case of future exchanges, are anticipated to result, in an increase in the tax basis of the tangible and intangible assets of the OzSculptor Operating Group that would not otherwise have been available. As a result,The Company anticipates that any such tax basis adjustment resulting from an exchange will be allocated principally to certain intangible assets of the Sculptor Operating Group, and the Company expectswill derive its tax benefits principally through amortization of these intangibles over a 15-year period. Consequently, these tax basis adjustments will increase, for tax purposes, the Company’s depreciation and amortization expenses and will therefore reduce the amount of tax that itsSculptor Corp and any other future tax liability willcorporate taxpaying entities that acquire Group B Units in connection with an exchange, if any, would otherwise be reduced. Pursuantrequired to pay in the future. Accordingly, pursuant to the tax receivable agreement, entered into amongsuch corporate taxpaying entities (including Sculptor Capital Management, Inc. once it became treated as a corporate taxpayer following the Company,Company’s conversion from a partnership to a corporation for U.S. federal income tax purposes, effective April 1, 2019 (the “Corporate Classification Change”), have agreed to pay the executive managing directors and the Ziffs 75% of the amount of cash savings, if any, in federal, state and local income taxes in the U.S. that these entities actually realize related to their units as a result of such increases in tax basis. For tax years prior to 2019, such percentage was 85% of such annual cash savings under the tax receivable agreement.
In connection with the Recapitalization, the Company has agreedamended the tax receivable agreement to provide that, conditioned on Sculptor Capital Management, Inc. electing to be classified as, or converting into, a corporation for U.S. tax purposes, (i) no amounts are due or payable with respect to the 2017 tax year, (ii) only partial payments equal to 85% of the excess of such cash savings that would otherwise be due over 85% of such cash savings determined assuming that taxable income equals Economic Income are due and payable in respect of the 2018 tax year and (iii) the percentage of cash savings required to be paid with respect to the 2019 tax year and thereafter, as well as with respect to cash savings from subsequent exchanges, is reduced to 75%.
In connection with the departure of certain former executive managing directors since the 2007 Offerings, the right to receive payments under the tax receivable agreement by those former executive managing directors was contributed to the Sculptor Operating Group. As a result, the Company expects to pay to the other executive managing directors and the Ziffs 85%approximately 69% of the amount of taxcash savings, if any, actually realized byin federal, state and local income taxes in the Company.U.S. that the Company realizes as a result of such increases in tax basis with respect to future tax years. To the extent that the Company does not realize any cash savings, it would not be required to make corresponding payments under the tax receivable agreement.
The Company recorded its initial estimate of future payments under the tax receivable agreement as a decrease to additional paid-in capital and an increase in amounts due to related partiesthe tax receivable agreement liability in the consolidated financial statements. Subsequent adjustments to the liability for future payments under the tax receivable agreement related to changes in estimated future tax rates or state income tax apportionment are recognized through current period earnings in the consolidated statements of comprehensive income (loss).
In connection with the departure of certain former executive managing directors since the IPO, the right to receive payments under the tax receivable agreement by those former executive managing directors was contributed to the Oz Operating Group. As a result, the Company expects to pay to the remaining executive managing directors and the Ziffs approximately 78% (from 85% at the time of the IPO) of the amount of cash savings, if any, in federal, state and local income taxes in the United States that the Company actually realizes as a result of the increases in tax basis.operations.
The estimate of the timing and the amount of future payments under the tax receivable agreement involves several assumptions that do not account for the significant uncertainties associated with these potential payments, including an assumption that OzSculptor Corp will have sufficient taxable income in the relevant tax years to utilize the tax benefits that would give rise


28

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

to an obligation to make payments. The actual timing and amount of any actual payments under the tax receivable agreement will vary based upon these and a number of other factors. As of September 30, 2017,2023, the estimated future payment
42

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
under the tax receivable agreement was $520.8$173.1 million, which is recorded in due to related partiesthe tax receivable agreement liability balance on the consolidated balance sheets.
Lease Obligations
The table below presents management’s estimate as of September 30, 2023, of the maximum amounts that would be payable under the tax receivable agreement assuming that the Company has non-cancelablewill have sufficient taxable income each year to fully realize the expected tax savings. In light of the numerous factors affecting the Company’s obligation to make such payments, the timing and amounts of any such actual payments may differ materially from those presented in the table. The impact of any net operating leases for its headquarterslosses is included in New York expiringthe “Thereafter” amount in 2029 and various other operating leases for its offices in London, Hong Kong, Mumbai, Beijing, Shanghai and Houston expiring on various dates through 2024. The Company also has operating leases for other locations, as well as operating leases on computer hardware. The Company recognizes expense related to its operating leases on a straight-line basis over the lease term taking into account any rent holiday periods. The related lease commitments have not changed materially since December 31, 2016.table below.
 Potential Payments Under Tax Receivable Agreement
 (dollars in thousands)
October 1, 2023 to December 31, 2023$— 
202418,041 
20256,652 
202626,903 
202730,443 
Thereafter91,085 
Total Payments$173,124 
Litigation
From time to time, the Company is involved in litigation and claims incidental to the conduct of the Company’s business. The Company is also subject to extensive scrutiny by regulatory agencies globally that have, or may in the future have, regulatory authority over the Company and its business activities. This has resulted,
The Company accrues a liability for legal proceedings only when those matters present loss contingencies that it believes are both probable and reasonably estimable. As of September 30, 2023, the Company does not have any potential monetary liability related to any current legal proceeding or mayclaim that would individually, or in the future result, in regulatory agency investigations, litigationaggregate, materially affect its results of operations, financial position or cash flows.
Disclosure Complaints
As of November 6, 2023, the Company has received (i) four demand letters from purported stockholders of the Company claiming that the preliminary proxy statement filed on August 21, 2023 contained material misstatements and subpoenasomissions with respect to the discussion of the Mergers and costs related(ii) seven demand letters from purported stockholders of the Company claiming that the Original Proxy Statement or the Second Supplement contained material misstatements and omissions with respect to each.the discussion of the Mergers. In addition, lawsuits have been filed by purported stockholders of the Company making similar allegations with respect to the preliminary proxy: Yale David v. Sculptor Capital Management, Inc. et al., No. 23-cv-07921 (S.D.N.Y. September 7, 2023); Edward Edgerton v. Sculptor Capital Management, Inc., et al. No. 23-cv-07999 (S.D.N.Y. September 11, 2023) (together, the “Disclosure Complaints”).
Beauchemin Action
On May 5, 2014,September 11, 2023, stockholder Gilles Beauchemin filed a purported class action against the Company and each of shareholdersthe Company’s directors in the Court of Chancery of the State of Delaware, captioned Gilles Beauchemin v. Marcy Engel, et al., No. 2023-0921- (Del. Ch. September 11, 2023) (the “Beauchemin Action”). The Beauchemin Action alleges, among other things, that the Board and Special Committee violated their fiduciary duties in connection with the Mergers. The Beauchemin Action seeks, among other things, injunctive relief. Along with his September 11 complaint, the plaintiff in the Beauchemin Action filed a lawsuit
43

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
motion for a preliminary injunction, and a motion to expedite seeking expedited relief from the court. On September 25, 2023, plaintiff in the Beauchemin Action served requests for production on the defendants and issued subpoenas to certain advisors of the Company and the Special Committee and Saba Capital Management, LP. On September 26, 2023, the Court held argument on the motion to expedite, during which it denied the motion without prejudice on the grounds that it was premature given the ongoing nature of the Special Committee’s deliberations. The Court ordered the parties to negotiate a plan for expedited discovery in the event it ordered such discovery at a later date. On October 15, the plaintiff in the Beauchemin Action filed an amended complaint. A hearing in the matter is scheduled for November 14, 2023. The Company, Board and Special Committee believe that the allegations set forth in the Beauchemin Action are without merit and intend to oppose the request to enjoin the Special Meeting.
Former EMD Group Action
On October 17, 2023, stockholders and former Executive Managing Directors Daniel S. Och, Harold A. Kelly, Jr., Richard Lyon, James O’Connor, and Zoltan Varga (the “Former EMD Group’’) filed a purported class action complaint on behalf of themselves and purportedly all other similarly situated stockholders of the Company against Marcy Engel, Bharath Srikrishnan, Charmel Maynard, David Bonanno, James Levin, Wayne Cohen, Sculptor Capital Management, Inc., Sculptor Capital LP, Sculptor Capital Advisors LP, Sculptor Capital Advisors II LP, Calder Sub, Inc., Calder Sub I, LP, Calder Sub II, LP, Calder Sub III, LP, and Rithm Capital Corp. in the Court of Chancery of the State of Delaware, captioned Och, et al. v. Engel, et al., C.A. No. 2023-1043-SG (the “Former EMD Group Action”). The complaint in the Former EMD Group Action alleges, among other things, that the Board and Special Committee violated their fiduciary duties in connection with the Mergers. The Former EMD Group complaint sought, among other things, injunctive relief.
On October 20, 2023, the parties in the Beauchemin Action and the Former EMD Group Action jointly filed a proposed stipulation coordinating and consolidating the two proceedings in connection with discovery and a preliminary injunction hearing on November 9, 2023. The Court ordered the stipulation coordinating and consolidating the two proceedings on October 23, 2023.
On October 27, 2023, Rithm filed a letter with the Court, providing an update regarding the Founder EMD Group’s agreement to vote their shares in favor of a revised merger agreement between Rithm and the Company and seeking the Court’s approval to enter a stipulation and proposed order withdrawing the claims in the Former EMD Group Action with prejudice as to the Former EMD Group. The stipulation provides that stockholder Gilles Beauchemin will continue to represent the putative class in the consolidated action, including with respect to the preliminary injunction hearing.
On October 29, 2023, the plaintiff in the Beauchemin Action filed a consolidated amended complaint, adding the Former EMD Group as defendants, alleging that they breached duties to the class in connection with their settlement, and Rithm as a defendant, alleging it aided and abetted the former EMD Group’s breach of duties. The Company, Board and Special Committee believe that the allegations set forth in the Beauchemin Action are without merit and intend to oppose the request to enjoin the Special Meeting.
Section 220 Demands
The Company has also received four books and records demands pursuant to 8 Del. C. § 220 (the “Section 220 Demands”), including one submitted by the Former EMD Group, seeking, among other things, meeting minutes concerning the Mergers or any strategic alternatives, all materials considered by the Board and Special Committee in connection with its consideration of the Mergers or any strategic alternatives, and communications from the Board, the Special Committee, and the Company’s management related to the same. The Company received the fourth Section 220 Demand on October 9, 2023. The Company has sent a letter objecting to each of the four Section 220 Demands. The Company has commenced production in response to three of the demands, and will produce additional records in response to the Section 220 Demands as deemed appropriate. The Company has entered into an NDA with three of the Section 220 shareholders, which governs the treatment of all materials produced in response to the Section 220 Demands. On October 27, 2023, the Former EMD Group agreed to withdraw its Section 220 Demand.

44

SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023

Class E Unitholder Action
On November 1, 2023, former executive managing directors and holders of LP Class E Units Akhil Mago, David Becker, Andrew Frank, and Nathaniel Ewing filed an action against the Company in the U.S. DistrictSupreme Court forof the Southern DistrictState of New York, (Menaldicaptioned Akhil Mago et al. v. Och-ZiffSculptor Capital Mgmt.,Management et al. (N.Y. Sup. Ct. Nov. 1, 2023) (the “Class E Unitholder’s Complaint”). The amended complaint asserted claims under the Securities Exchange Act of 1934 on behalf of all purchasers of Company securities from February 9, 2012 to August 22, 2014. Daniel Och, Joel Frank and Michael Cohen were also named as defendants. On March 16, 2015, all defendants moved to dismiss the amended complaint. On February 17, 2016, the court entered, along with an order granting in partto show cause why the motion to dismiss filedCourt should not issue an order preliminarily enjoining the Company from holding the Special Meeting on November 16, 2023.The Class E Unitholders’ Complaint alleges that the proposed cancellation of the LP Class E Units contemplated by the Companytransactions without the consent of the Class E Unitholders violates the terms of the limited partnership agreements of the Operating Partnerships.It seeks a declaration that the consummation of the transactions without the consent of the Class E Unitholders constitutes a breach of those agreements, and Messrs. Och and Frank and dismissing Mr. Cohen from the action. On March 23, 2016,an injunction precluding the Company and Messrs. Och and Frank filed their answer tofrom consummating the amended complaint. On November 18, 2016, plaintiffs filed a second amended complaint asserting claims under the Securities Exchange Act of 1934 on behalf of all purchasers of Company securities from November 18, 2011 to April 11, 2016. The second amended complaint alleges, among other things, breaches of certain disclosure obligations with respect to matters that were under investigation by the SEC and the DOJ, and names the Company and Messrs. Och, Frank and Cohen as defendants. On November 23, 2016, Mr. Cohen objected to being named as a defendant in the second amended complaint on procedural grounds. On December 21, 2016, the court directed the plaintiffs to file a motion for permission to renew their claims against Mr. Cohen. Plaintiffs filed their motion on January 7, 2017. On January 11, 2017, the Company filed a motion to dismiss those portions of the second amended complaint that seek to revive dismissed claims or assert new claims against it, and Messrs. Och and Frank filed motions to dismiss as well. On September 29, 2017, the Court granted the Company’s motion to dismiss in its entirety and dismissed Plaintiffs’ revived claims and new claims against the Company and Messrs. Och and Frank. The Court also dismissed Mr. Cohen from the case entirely and denied Plaintiffs’ request to file a further amended complaint.
transactions.The Company believes that the pending case isallegations set forth in the Class E Unitholders’ Complaint are without merit and intends to defend it vigorously. The Company is unableoppose the request to reasonably estimateenjoin the amount of loss or range of loss possibleSpecial Meeting. On November 14, 2023, the Court will hear oral argument on the Class E Unitholders’ request for this case.


29

OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

Unearned Incentive Income
The Company receives incentive income distributions from certain funds that are subject to clawback in the event of future losses in the respective fund. The Company recognizes this incentive income when it is no longer subject to clawback. These clawback contingencies will be resolved as remaining investments in the respective funds are realized, the timing of which is uncertain. The following table presents the activity in the Company’s unearned incentive income liability:
 Unearned Incentive Income
 (dollars in thousands)
Balance as of December 31, 2016$96,079
Incentive income collected but subject to clawback30,024
Incentive income recognized(3,270)
Balance as of September 30, 2017$122,833
a preliminary injunction.
Investment Commitments
From time to time, certain funds consolidated by the Company may have commitments to fund investments. These commitments are funded through contributions from investors in those funds, including the Company if it is an investor in the relevant fund.
The Company has unfunded capital commitments of $24.5$203.0 million to certain funds it manages. Itmanages, of which $72.0 million relates to commitments of the Company’s consolidated structured alternative investment solution. The remaining $131.0 million relates to commitments of the Company to unconsolidated funds. Approximately $89.7 million of the Company’s commitments will be funded by contributions to the Company from certain employees and executive managing directors. The Company expects to fund these commitments over the approximately next five5 years. In addition, certain of the Company’s executive managing directors, collectively, have capital commitments to funds managed by the Company of up to $39.9 million. The Company has guaranteed these commitments in the event any executive managing director fails to fund any portion when called by the fund. The Company has historically not funded any of these commitments and does not expect to in the future, as these commitments are expected to be funded by the Company’s executive managing directors individually.
Other Contingencies
In the normal course of business, the Company enters into contracts that provide a variety of general indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
Additionally, the Company has agreements with certain of the funds it manages to reimburse certain expenses in excess of an agreed-upon cap. During the nine months ended September 30, 2023 and 2022, these amounts were not material.
16. SEGMENT INFORMATION
The Company’s operating segments are17. SUBSEQUENT EVENTS
Agreement and Plan of Merger
On July 23, 2023, the Oz Funds segmentCompany entered into an Agreement and Plan of Merger, as amended on October 12, 2023 by Amendment No. 1 to Agreement and Plan of Merger, as further amended on October 26, 2023 by Amendment No. 2 to Agreement and Plan of Merger (including the Company’s real estate business. The Oz Funds segment, which provides asset management servicesschedules and exhibits thereto, the “Merger Agreement”), by and among the Company, Rithm Capital Corp., a Delaware corporation (“Rithm”), the Sculptor Operating Partnerships, Calder Sub, Inc., a Delaware corporation and subsidiary of Rithm (“Merger Sub Inc.”), Calder Sub I, LP, a Delaware limited partnership and subsidiary of Rithm (“Merger Sub I”), Calder Sub II, LP, a Delaware limited partnership and subsidiary of Rithm (“Merger Sub II”), and Calder Sub III, LP, a Delaware limited partnership and subsidiary of Rithm (“Merger Sub III” and, collectively with Merger Sub I and Merger Sub II, the “LP Merger Subs” and, collectively with Merger Sub Inc., the “Merger Subs”).
Pursuant to the Company’s multi-strategy funds, dedicated credit funds and other alternative investment vehicles, is currently the Company’s only reportable operating segment under GAAP. The Company’s real estate business, which provides asset management services to its real estate funds, is included in the Other Operations, as it does not meet the threshold of a reportable operating segment under GAAP.
In addition to analyzing the Company’s results on a GAAP basis, management also reviews its results on an “Economic Income” basis. Economic Income excludes the adjustments described below that are required for presentationterms of the Company’s results on a GAAP basis, but that management does not consider when evaluating operating performance in any given period. Management uses Economic IncomeMerger Agreement, (i) Merger Sub Inc. will merge with and into the Company, with the Company surviving such merger as the basis on which it evaluatessurviving corporation (the “Surviving Corporation”) (the “Public Merger”), (ii) Merger Sub I will merge with and into Sculptor Capital LP, with Sculptor Capital LP surviving such merger as the Company’s financial performance and makes resource allocation and other operating decisions. Management considers it important that investors review the same operating information that it uses.

surviving partnership,

45
30


OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 20172023

(iii) Merger Sub II will merge with and into Sculptor Capital Advisors LP, with Sculptor Capital Advisors LP surviving such merger as the surviving partnership, and (iv) Merger Sub III will merge with and into Sculptor Capital Advisors II LP, with Sculptor Capital Advisors II LP surviving such merger as the surviving partnership (collectively, the “Mergers”).
Economic IncomeThe merger of Merger Sub Inc. and the Company will become effective at the time the certificate of merger is a measurefiled with the Delaware Secretary of pre-tax operating performanceState or at such later effective time and date that excludesis agreed to by Rithm and the following fromCompany and specified in the Company’s results on a GAAP basis:certificate of merger (the “Effective Time”) and the mergers of each of the Sculptor Operating Partnerships will become effective at the time the applicable certificates of merger is filed with the Delaware Secretary of State or at such later effective time and date that is agreed to by Rithm and the Company and specified in the applicable certificates of merger.
Income allocationsOn the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time, (i) each Class A Share issued and outstanding immediately prior to the Effective Time (but excluding (x) any shares of Class A Shares and Class B Shares (the “ Company Common Stock” that are owned directly by Rithm, Merger Sub Inc. or any of their subsidiaries immediately prior to the Effective Time or held in treasury of the Company, (y) any shares of the Company Common Stock as to which appraisal rights have been properly exercised and (z) any unvested and outstanding award of service-based restricted shares of the Company Common Stock granted pursuant to the Company’s executive managing directors on their direct interestsequity incentive plans to be cancelled without payment in respect thereof pursuant to Section 3.06(c) of the Merger Agreement) will be cancelled and converted into the right to receive an amount in cash equal to $12.70, without interest (the “Public Merger Consideration”), (ii) each Class B Share issued and outstanding immediately prior to the Effective Time will be cancelled and no payment will be made in respect thereof and (iii) each issued and outstanding share of common stock, par value $0.01 per share, of Merger Sub Inc. issued and outstanding immediately prior to the Effective Time will be converted into and become one (1) fully paid and non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation.
The Merger Agreement contains certain customary representations and warranties made by each party, which, in the Ozcase of the Company and the Sculptor Operating Group. Management reviews operating performance atPartnerships, are qualified by the Oz Operating Group level, whereconfidential disclosures provided to Rithm in connection with the Merger Agreement, as well as matters included in the Company’s operations are performed,reports filed with the SEC prior to making any income allocations.
Equity-based compensation expenses, depreciationthe date of the Merger Agreement. Rithm, the Company and amortization expenses,the Sculptor Operating Partnerships have agreed to various customary covenants, including covenants regarding the conduct of the Company’s business prior to the closing of the Mergers, covenants requiring the Company to recommend that its stockholders approve the Merger Agreement and gains and losses on fixed assets,covenants prohibiting the Company from soliciting alternative acquisition proposals or providing information to or engaging in discussions with third parties, in each case, except in limited circumstances as management does not consider these items to be reflective of operating performance. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement.
Changesprovided in the tax receivable agreement liabilityMerger Agreement.
The Merger Agreement also includes customary termination rights for both the Company and gains and losses on investmentsRithm, subject, in funds, as management does not consider these to be reflective of operating performance.
Amounts relatedcertain circumstances, to the consolidated funds, including the related eliminations of management fees and incentive income, as management reviews the total amount of management fees and incentive income earned in relation to total assets under management and fund performance.
In addition, expenses related to incentive income profit-sharing arrangements are generally recognized at the same time the related incentive income revenue is recognized, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earnedpayment by the relevant fund. Further, deferred cash compensation is expensedCompany of a termination fee of approximately $22.4 million.
Warrant Exercise
On October 12, 2023, Rithm acquired warrants to purchase an aggregate of 4,338,015 shares of the Company’s Class A Common Stock from Delaware Life Insurance Company. On October 13, 2023, the Company issued 4,338,015 shares of Class A Common Stock to Rithm following their exercise in full inof such warrants for an aggregate purchase price of approximately $34.5 million. As a condition to Rithm’s willingness to increase the year granted for Economic Income, rather than over the service period for GAAP.
Finally, management reviews Economic Income revenues by presenting management fees net of recurring placement and related service fees, rather than considering these fees an expense, and by excluding the impact of eliminations related to the consolidated funds.
Management does not regularly review assets by operating segment in assessing operating segment performance and the allocation of company resources; therefore,merger consideration, Rithm requested that the Company does not present total assetswaive certain elements of the “standstill” provision in Rithm’s non-disclosure agreement in order to permit the negotiations and purchase by operating segment. Substantially all interest income and all interest expense related to outstanding indebtedness is allocated toRithm of the Oz Funds segment. The Company’s investigation-related settlements were all allocated to the Oz Funds segment.
Oz Funds Segment Resultswarrants.
46
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 (dollars in thousands)
Oz Funds Segment:       
Economic Income Revenues$119,390
 $131,101
 $380,999
 $433,542
Economic Income$49,768
 $52,725
 $157,891
 $(229,800)


31


OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
SEPTEMBER 30, 2017

Reconciliation of Oz Funds Segment Revenues to Consolidated Revenues
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 (dollars in thousands)
Total consolidated revenues$131,999
 $148,105
 $420,097
 $489,105
Adjustment to management fees(1) 
(4,827) (8,808) (15,488) (31,362)
Adjustment to other revenues(2)
141
 —
 (1,117) —
Other Operations revenues(5,868) (7,738) (18,975) (22,939)
Income of consolidated funds(2,055) (458) (3,518) (1,262)
Economic Income Revenues - Oz Funds Segment$119,390
 $131,101
 $380,999
 $433,542
_______________
(1)Adjustment to present management fees net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense. The impact of eliminations related to the consolidated funds is also removed.
(2)Adjustment to exclude realized gains on sale of fixed assets.
Reconciliation of Oz Funds Segment Economic Income to Net Income (Loss) Attributable to Class A Shareholders
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 (dollars in thousands)
Net Income (Loss) Attributable to Class A Shareholders—GAAP$5,726
 $14,285
 $11,660
 $(133,642)
Change in redemption value of Preferred Units—
 —
 2,853
 —
Net Income (Loss) Attributable to Och-Ziff Capital Management Group LLC—GAAP$5,726
 $14,285
 $14,513
 $(133,642)
Net income (loss) attributable to Group A Units9,500
 16,313
 41,145
 (187,338)
Equity-based compensation, net of RSUs settled in cash22,128
 18,298
 63,566
 56,311
Income taxes1,942
 9,986
 17,242
 39,436
Allocations to Group D Units1,554
 950
 4,914
 2,850
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance7,470
 2,741
 13,242
 5,430
Changes in tax receivable agreement liability—
 (11,819) —
 (11,990)
Depreciation, amortization and net gains and losses on fixed assets2,237
 7,965
 7,693
 14,947
Other adjustments(568) (1,299) (2,177) (2,672)
Other Operations(221) (4,695) (2,247) (13,132)
Economic Income - Oz Funds Segment$49,768
 $52,725
 $157,891
 $(229,800)
17. SUBSEQUENT EVENTS
Dividend
On November 2, 2017, the Company announced a cash dividend of $0.02 per Class A Share. The dividend is payable on November 20, 2017, to holders of record as of the close of business on November 13, 2017.


32


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the related notes included in Item 1 of this quarterly report and with our audited consolidated financial statements and the related notes included in our Annual Report. In addition, this discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Forward-Looking Statements” in “Part II—Itemthis report, and under the heading “Item 1A. Risk Factors” ofin this report. Actualquarterly report and in our Annual Report, and in other reports we file with the SEC, that could cause actual results mayto differ materially from thosethe results described in or implied by the forward-looking statements contained in any forward-looking statements. This MD&A should be read in conjunction with the consolidated financial statementsfollowing discussion and related notes included elsewhere in this quarterly report.analysis. An investment in our Class A Shares is not an investment in any of our funds.
Overview
Overview of Our Business
Sculptor Capital is a leading global alternative asset manager and a specialist in opportunistic investing. With offices in New York, London, Hong Kong and Shanghai, we provide asset management services and investment products across Credit, Real Estate and Multi-Strategy platforms with approximately $32.8 billion in Assets Under Management as of November 1, 2023. We serve our global client base through our commingled funds, separate accounts and specialized products. For over 25 years, the Company has pursued consistent outperformance by building an operating model and culture which balance the ability to act swiftly on market opportunity with rigorous diligence that minimizes risk. The Company’s model is driven by a global team that is predominantly home-grown, long tenured and incentivized to put client outcomes first. The Company’s capabilities span all major geographies and asset classes, including corporate credit, structured credit, real estate debt and equity, fundamental equities, merger arbitrage, and convertible and derivative arbitrage.
We manage dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds, multi-strategy funds, and other alternative investment vehicles. Through Institutional Credit Strategies, our asset management platform that invests in performing credits, we manage CLOs, aircraft securitization vehicles, collateralized bond obligations (“CBOs”), structured alternative investment solutions, commingled products and other customized solutions for clients.
Pending Merger with Rithm Capital
On July 23, 2023, we entered into an Agreement and Plan of Merger, as amended on October 12, 2023 by Amendment No. 1 to Agreement and Plan of Merger, as further amended on October 26, 2023 by Amendment No. 2 to Agreement and Plan of Merger (including the schedules and exhibits thereto, the “Merger Agreement”), by and among the Company, Rithm Capital Corp., a Delaware corporation (“Rithm”), the Sculptor Operating Partnerships, Calder Sub, Inc., a Delaware corporation and subsidiary of Rithm (“Merger Sub Inc.”), Calder Sub I, LP, a Delaware limited partnership and subsidiary of Rithm (“Merger Sub I”), Calder Sub II, LP, a Delaware limited partnership and subsidiary of Rithm (“Merger Sub II”), and Calder Sub III, LP, a Delaware limited partnership and subsidiary of Rithm (“Merger Sub III” and, collectively with Merger Sub I and Merger Sub II, the “LP Merger Subs” and, collectively with Merger Sub Inc., the “Merger Subs”).
Pursuant to the terms of the Merger Agreement, (i) Merger Sub Inc. will merge with and into the Company, with the Company surviving such merger as the surviving corporation, (ii) Merger Sub I will merge with and into Sculptor Capital LP, with Sculptor Capital LP surviving such merger as the surviving partnership, (iii) Merger Sub II will merge with and into Sculptor Capital Advisors LP, with Sculptor Capital Advisors LP surviving such merger as the surviving partnership, and (iv) Merger Sub III will merge with and into Sculptor Capital Advisors II LP, with Sculptor Capital Advisors II LP surviving such merger as the surviving partnership (collectively, the “Mergers”).
On October 12, 2023, Rithm acquired warrants to purchase an aggregate of 4,338,015 shares of our Class A Common Stock from Delaware Life Insurance Company. The warrants had an exercise price of $7.95 per share and on October 13, 2023, we issued 4,338,015 shares of Class A Common Stock to Rithm following their exercise in full of such warrants for an aggregate purchase price of approximately $34.5 million. As a condition to Rithm’s willingness to increase the merger consideration, Rithm requested that the Company waive certain elements of the “standstill” provision in Rithm’s non-disclosure agreement in order to permit the negotiations and purchase by Rithm of the warrants.
For additional information related to the Merger Agreement, please refer to our Current Reports on Form 8-K filed with the SEC on July 24, 2023, October 12, 2023 and October 27, 2023 and Note 17 to the accompanying unaudited consolidated
47

financial statements. For additional information related to certain litigation matters related to the Merger Agreement, please refer to Note 16 to the accompanying unaudited consolidated financial statements and Part II, Item 1. Legal Proceedings.
Overview of Our Financial Results
As a global alternative asset manager, our results of operations are impacted by a variety of factors, including conditions in the global financial markets and economic and political environments. Financial markets came under pressure as long-term interest rates experienced one of the steepest increases of the past decade. This repricing towards a “higher for longer” regime resulted in a sharp correction across most risk assets during the quarter, disrupting a resilient market rally that persisted throughout much of 2023. In the third quarter of 2023, Sculptor Credit Opportunities Master Fund and Sculptor Master Fund extended strong year-to-date absolute and relative performance versus peer indices amidst continued volatility and an uncertain economic environment. Market conditions remain challenged, and we believe both our funds, through their unconstrained investment style, and our platform, from our business diversification and currently strong balance sheet, are well positioned to navigate these challenging conditions.
As of September 30, 2023, our AUM was $33.8 billion, a decrease of $2.4 billion year-over-year, and our longer-term AUM was $25.1 billion or 74% of our total AUM. Our AUM decreased primarily due to (i) net outflows in multi-strategy funds and (ii) distributions and other reductions in credit and real estate funds. These decreases were partially offset by (i) performance related appreciation in multi-strategy and opportunistic credit funds and (ii) net inflows primarily in Institutional Credit Strategies and real estate funds.
We reported a GAAP net loss of $31.1 million in the third quarter of 2023, compared to net loss of $22.5 million for the third quarter of 2022, and GAAP net loss of $19.0 million in the first nine months of 2023, compared to a GAAP net loss of $13.7 million in the first nine months of 2022.
Management fees were $60.2 million in the third quarter of 2023, a decrease of $6.0 million compared to the third quarter of 2022. Our management fees fell primarily due to lower average assets under management in our multi-strategy funds, as a result of net outflows as well as certain distributions in our credit and real estate funds.
Incentive income was $17.8 million in the third quarter of 2023 , an increase of $10.2 million compared to the third quarter of 2022. Incentive income for the quarter was driven primarily by crystallizations in our real estate and opportunistic credit funds.
Expenses were $111.1 million in the third quarter of 2023, up by $10.8 million from the third quarter of 2022. This was primarily driven by elevated legal costs related to activities of the Special Committee of our Board of Directors.
Other loss in the third quarter of 2023 increased by $4.4 million from the third quarter of 2022, primarily as a result of changes in the fair value of warrant liabilities and net losses of consolidated funds, partially offset by net gains on our investments.
Please see the “Results of Operations” section of this MD&A for commentary regarding changes in net loss attributable to Class A Shareholdersnoncontrolling interests.
Economic income was a loss of $3.0 million for the third quarter of 2023, which decreased from a gain of $5.7 million for the third quarter of 2017, compared to net2022. Economic income of $14.3was $18.7 million for the third quarter of 2016, and GAAP net income of $11.7 million forin the first nine months of 2017,2023, compared to a net loss of $133.6$67.5 million forin the first nine months of 2016.
2022. The quarter-to-date decrease in GAAP earningsthe quarter was primarily due to lower management fees and higher general, administrative and other expenses, largely as a result of elevated legal costs for the activities of the Special Committee of our Board of Directors, partially offset by higher incentive income, lower taxes and lower general, administrative and other expenses. Higher bonus expenses also contributed to the decrease in our GAAP earnings, due to our decision to provide a minimum annual discretionary cash bonus. As a result of this decision, we accrue the minimum annual discretionary cash bonus on a straight-line basis during the year. The total amount of discretionary cash bonuses ultimately recognized for the full year, which is determined in the fourth quarter of each year, could differ materially from the minimum amount accrued, as the total discretionary cash bonus is dependent upon a variety of factors, including fund performance for the year.
The year-to-date improvement in GAAP earnings was primarily due to investigation-related settlements expense of $412.1 million taken in 2016, as well as higher incentive income and lower income taxes year-over-year, partially offset by lower management fees. These improvements were also partially offset by higher bonus expense, which was driven by our decision to provide a minimum annual discretionary cash bonus, as discussed above.
We reported Economic Income of $50.0 million for the third quarter of 2017, compared to $57.4 million for the third quarter of 2016. The quarter-to-date decrease was driven primarily by lower management fees and higher bonus expense due to our decision to provide a minimum annual discretionary cash bonus as discussed above. These decreases were partially offset by higher incentive income and lower non-compensation expenses.
We reported Economic Income of $160.1 million for the first nine months of 2017, compared to a net loss of $216.7 million for the first nine months of 2016. The year-to-date period improvement was driven primarily by the settlements expense taken in 2016, as well as higher incentive income. These increases were partially offset by lower management fees and higher bonus expense.
Economic Income is a non-GAAP measure. For additional information regarding non-GAAP measures, as well as for a discussion of the drivers of the year-over-year change in Economic Income, please see “—Economic Income Analysis.”
Overview of Assets Under Management and Fund Performance
48
Assets under management totaled $32.7 billion as of September 30, 2017. Longer-dated assets under management, which are those subject to initial commitment periods of three years or longer, were $16.8 billion, comprising 51% of our total assets under management as of September 30, 2017.
Assets under management in our multi-strategy funds totaled $14.6 billion as of September 30, 2017, decreasing 37%, or $8.8 billion, year-over-year. This change was driven by net capital outflows of $10.9 billion, primarily in the OZ Master Fund, our largest multi-strategy fund, partially offset by performance-related appreciation of $2.2 billion. Our multi-strategy funds experienced elevated redemptions and reduced inflows during 2016 and into the first nine months of 2017 which were driven in-part by the investigation matter and the related inability to rely on Regulation D.
OZ Master Fund generated a gross return of 13.6% and a net return of 9.7% year-to-date through September 30, 2017. Each of the five core investment strategies in the multi-strategy funds - long/short equity special situations, merger arbitrage,


33



corporate credit, structured credit and convertible and derivative arbitrage - generated positive returns this period. Please see “—Assets Under Management and Fund Performance—Multi-Strategy Funds” for additional information regarding the returns of the OZ Master Fund.
Assets under management in our dedicated credit products totaled $14.9 billion as of September 30, 2017, increasing $2.3 billion, or 19%, year-over-year. This change was driven by capital net inflows of $1.9 billion and performance-related appreciation of $656.3 million, partially offset by $226.2 million of distributions and other reductions in our closed-end opportunistic credit funds.
Assets under management in our opportunistic credit funds were $5.4 billion as of September 30, 2017. OZ Credit Opportunities Master Fund, our global opportunistic credit fund, generated a gross return of 11.8% and a net return of 8.0% year-to-date through September 30, 2017. Performance was broad based across corporate and structured credit. Assets under management for the fund were $1.7 billion as of September 30, 2017.
Assets under management in Institutional Credit Strategies were $9.5 billion as of September 30, 2017, increasing $2.2 billion, or 30%, year-over-year. The increase was primarily driven by five new CLOs, including our first European CLOs. We also priced eight refinancing transactions in existing CLOs, totaling $4.2 billion during the first nine months of 2017.
Assets under management in our real estate funds totaled $2.6 billion as of September 30, 2017, increasing $452.7 million year-over-year. Since inception through September 30, 2017, the gross internal rate of return (“IRR”) was 32.7% and 21.2% net for Och-Ziff Real Estate Fund II (for which the investment period ended in 2014), and 25.1% gross and 15.7% net for Och-Ziff Real Estate Fund I (for which the investment period ended in 2010).
Assets Under Management and FundManaging Business Performance
Our financial results are primarily driven by the combination of our assets under managementAUM and the investment performance of our funds. Both of these factors directly affect the revenues we earn from management fees and incentive income. Growth in assets under management due to capital placed with us by investorsAUM in our funds and positive investment performance of our funds drive growth in our revenues and earnings. Conversely, poor investment performance slows our growth by decreasing our assets under managementAUM and increasing the potential for redemptions from our funds, which would have a negative effect on our revenues and earnings.
We typically accept capital from new and existing investors in our multi-strategy and certain open-end opportunistic credit funds on a monthly basis on the first day of each month. Investors in our multi-strategy and our open-end opportunistic creditthese funds (other than with respect to capital invested in Special Investments) typically have the right to redeem their interests in a fundeither following an initial lock-up period of one to three years.four years, or on a quarterly basis for certain multi-strategy fund investors. Following the expiration of these lock-up periods, subject to certain limitations, investors may redeem capital generally on a quarterly, annual or annualthree-year basis upon giving 30 to 90 days’days prior written notice. However, upon the payment of a redemption fee to the applicable fund and upon giving 30 days’ prior written notice, certain investors may redeem capital during the lock-up period. The lock-up requirements for our funds may generally be waived or modified at the sole discretion of each fund’sfunds’ general partner or board of directors, as applicable.
With respect to investors with quarterly redemption rights, requests for redemptions submitted during a quarter generally reduce assets under managementAUM on the first day of the following quarter. Accordingly, quarterly redemptions generally will have no impact on management fees during the quarter in which they are submitted. Instead, these redemptions will reduce management fees in the following quarter. With respect to investors with annual redemption rights, redemptions paid prior to the end of a quarter impact assets under managementAUM in the quarter in which they are paid, and therefore impact management fees for that quarter.
Investors in our closed-end credit funds, CLOs,securitization vehicles, real estate and certain other funds are not able to redeem their investments. In those funds, investors generally make a commitment that is funded over an investment period (or at launch for our CLOs)securitization vehicles). Upon the expiration of the investment period, the investments are then sold or realized over time, and distributions are made to the investors in the fund.


34


In a declining market, during periods when the hedge fund industry generally experiences outflows, or in response to specific company events, we could experience increased redemptions and a consequent reduction in our assets under management. Recently, our assets under management have declined and we believe this trend will likely continue to some extent for some period of time in light of the recently settled investigation matter and the related inability to rely on Regulation D.
Information with respect to our assets under managementAUM throughout this report, including the tables set forth below, includes investments by us, our executive managing directors, employees and certain other related parties. As of September 30, 2017,2023, approximately 8%2% of our assets under managementAUM represented investments by us, our executive managing directors, employees and certain other related parties in our funds. As of that date, approximately 69%41% of these affiliated assets under managementAUM are not charged management fees and are not subject to an incentive income calculation. Additionally, to the extent that a fund is an investor in another fund or vehicle, we waive or rebate a corresponding portion of the management fees charged to the fund.
As further discussed below in “—Understanding Our Results—Revenues,Revenues—Management Fees,” we generally calculate management fees based on assets under managementAUM as of the beginning of each quarter. The assets under managementAUM in the tables below are presented net of management fees and incentive income as of the end of the period. Accordingly, the assets under managementAUM presented in the tables below are not the amounts used to calculate management fees for the respective periods.
Appreciation (depreciation) in the tables below reflects the aggregate net capital appreciation (depreciation) for the entire period and is presented on a total return basis, net of all fees and expenses (except incentive income on Special Investments), and includes the reinvestment of all dividends and other income. Management fees and incentive income vary by product.
As a result of the performance-related depreciation in Sculptor Master Fund and Sculptor Credit Opportunities Master Fund in 2022, we will not earn incentive income in future periods on the AUM of certain investors until such losses from 2022 have been recovered. As of September 30, 2023, we had $245.2 million of fund-related losses remaining in Sculptor Master Fund, versus $1.4 billion as of December 31, 2022, representing substantial progress against our high watermark position given fund appreciation year-to-date. In Sculptor Credit Opportunities Master Fund, we fully recovered our 2022 losses in the second quarter of 2023 given fund appreciation year-to-date.
49

Summary of Changes in Assets Under ManagementAUM
The tables below present the changes to our assets under managementAUM for the respective periods based on the type of funds or investment vehicles we manage. During
Three Months Ended September 30, 2023
June 30, 2023
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2023
(dollars in thousands)
Multi-strategy funds$8,519,226 $(667,709)$— $229,859 $— $8,081,376 
Credit
   Opportunistic credit funds5,831,145 (156,987)(221,363)87,598 — 5,540,393 
   Institutional Credit Strategies16,175,187 247,092 (257,905)3,909 (286,244)15,882,039 
Real estate funds4,232,951 62,652 (48,278)6,706 (5,733)4,248,298 
Total$34,758,509 $(514,952)$(527,546)$328,072 $(291,977)$33,752,106 
Three Months Ended September 30, 2022
June 30, 2022
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2022
(dollars in thousands)
Multi-strategy funds$9,749,477 $(228,265)$— $(162,931)$— $9,358,281 
Credit
   Opportunistic credit funds6,026,297 3,836 (10,400)(30,782)— 5,988,951 
   Institutional Credit Strategies16,459,864 71,228 (61,481)809 (234,836)16,235,584 
Real estate funds4,623,952 18,646 (102,218)1,083 (11,783)4,529,680 
Total$36,859,590 $(134,555)$(174,099)$(191,821)$(246,619)$36,112,496 

Nine Months Ended September 30, 2023
December 31, 2022
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2023
(dollars in thousands)
Multi-strategy funds$9,174,103 $(2,038,434)$— $945,707 $— $8,081,376 
Credit
   Opportunistic credit funds5,970,962 (198,740)(646,702)414,873 — 5,540,393 
   Institutional Credit Strategies16,273,736 338,843 (499,551)12,297 (243,286)15,882,039 
Real estate funds4,563,692 115,443 (454,368)21,925 1,606 4,248,298 
Total$35,982,493 $(1,782,888)$(1,600,621)$1,394,802 $(241,680)$33,752,106 
50

Nine Months Ended September 30, 2022
December 31, 2021
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2022
(dollars in thousands)
Multi-strategy funds$11,112,445 $(55,543)$(49)$(1,698,572)$— $9,358,281 
Credit
   Opportunistic credit funds6,350,474 (19,017)(113,989)(228,517)— 5,988,951 
   Institutional Credit Strategies16,052,406 991,508 (214,877)(2,138)(591,315)16,235,584 
Real estate funds4,544,862 233,039 (221,998)1,416 (27,639)4,529,680 
Total$38,060,187 $1,149,987 $(550,913)$(1,927,811)$(618,954)$36,112,496 
_______________
(1)Includes transfers between Sculptor funds.
(2)Includes the second quartereffects of 2017, we reclassified a certain fund fromchanges in the par value of the underlying collateral of the CLOs, foreign currency translation changes in the measurement of AUM of our European CLOs and other funds, and changes in the portfolio appraisal value for aircraft securitization vehicles. For FP AUM, this also includes movements in or out of FP AUM.
AUM totaled $33.8 billion as of September 30, 2023. In the nine months ended September 30, 2023, AUM decreased by $2.2 billion, driven by: (i) net outflows of $1.8 billion, primarily in our multi-strategy funds, and (ii) distributions and other reductions of $1.6 billion in credit funds intoand real estate funds. Prior period amountsThese decreases were partially offset by performance-related appreciation of $1.4 billion, primarily in our multi-strategy and opportunistic credit funds.
AUM net outflows of $1.8 billion in the nine months ended September 30, 2023, were comprised of (i) $2.5 billion of gross outflows due to redemptions, primarily in our multi-strategy and opportunistic credit funds, and (ii) $717.4 million of gross inflows net of transfers, driven primarily by $176.2 million in opportunistic credit funds largely due to an additional close in STAX and $341.7 million in Institutional Credit Strategies largely from the launch of an additional CLO. In 2023, excluding securitization vehicles within Institutional Credit Strategies, our largest sources of gross inflows were from sovereign wealth and corporates, high net worth and family offices and pensions, while the largest sources of gross outflows were attributable to pensions, sovereign wealth and corporates and high net worth and family offices.
Also as to flows, following a strong fundraising start to 2022, inflows slowed in the second half of 2022, and we are experiencing elevated redemption requests and negative impact on our ability to raise new capital from investors into our funds so far in 2023, driven by a variety of factors, primarily the uncertainty and perceived instability created by actions taken by certain former executive managing directors over the last year. Also relevant are market factors impacting investor allocations, idiosyncratic factors related to one or more investors (e.g., rebalancing), idiosyncratic factors related to one or more of our funds (e.g., fund performance) and other factors.
The actions (as described in the Risk Factor in our Annual Report titled, “The founder and former Chief Executive Officer of Och-Ziff has taken certain actions that have been reclassifiedhad an adverse impact on our business”) by the founder and former CEO of Och-Ziff have created headwinds for our business including negative effects on fund investor sentiment.
Distributions and other reductions of $1.6 billion in the nine months ended September 30, 2023, were driven primarily by: (i) $646.7 million of distributions from our opportunistic credit funds, primarily the Customized Credit Focused Platform, (ii) $499.6 million of distributions from Institutional Credit Strategies primarily from paydowns in certain of our CLOs, and (iii) $454.4 million of distributions from our real estate funds as a result of the liquidation of our SPAC and realizations as legacy funds harvest assets, primarily in Sculptor Real Estate Credit Fund I and Sculptor Real Estate Fund III.
As of November 1, 2023, estimated AUM decreased to conform to the current presentation.$32.8 billion, driven by $471.2 million of net outflows, $357.6 million of distributions and other reductions, as well as $128.4 million of performance-related depreciation since September 30, 2023.
 Three Months Ended September 30, 2017
 June 30, 2017 Inflows / (Outflows) Distributions / Other Reductions Appreciation / (Depreciation) September 30, 2017
          
 (dollars in thousands)
Multi-strategy funds$16,091,042
 $(1,810,922) $—
 $345,756
 $14,625,876
Credit         
Opportunistic credit funds5,341,522
 (9,969) (16,510) 119,655
 5,434,698
Institutional Credit Strategies8,514,811
 924,089
 —
 14,473
 9,453,373
Real estate funds2,617,832
 8,079
 (28,344) (43) 2,597,524
Other632,452
 (31,573) (1,078) 3,903
 603,704
Total$33,197,659
 $(920,296) $(45,932) $483,744
 $32,715,175
 Three Months Ended September 30, 2016
 June 30, 2016 Inflows / (Outflows) Distributions / Other Reductions Appreciation / (Depreciation) September 30, 2016
          
 (dollars in thousands)
Multi-strategy funds$26,094,394
 $(3,452,066) $—
 $735,076
 $23,377,404
Credit         
Opportunistic credit funds5,192,756
 (11,375) (206,973) 301,937
 5,276,345
Institutional Credit Strategies7,245,508
 15,432
 —
 4,871
 7,265,811
Real estate funds2,213,821
 8,494
 (76,620) (838) 2,144,857
Other1,233,959
 20,895
 (50,284) 34,794
 1,239,364
Total$41,980,438
 $(3,418,620) $(333,877) $1,075,840
 $39,303,781


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 Nine Months Ended September 30, 2017
 December 31, 2016 Inflows / (Outflows) Distributions / Other Reductions Appreciation / (Depreciation) September 30, 2017
          
 (dollars in thousands)
Multi-strategy funds$21,084,548
 $(8,175,198) $—
 $1,716,526
 $14,625,876
Credit         
Opportunistic credit funds5,376,080
 (249,550) (36,279) 344,447
 5,434,698
Institutional Credit Strategies8,019,510
 1,437,740
 —
 (3,877) 9,453,373
Real estate funds2,213,364
 459,476
 (75,943) 627
 2,597,524
Other1,186,801
 (597,581) (31,094) 45,578
 603,704
Total$37,880,303
 $(7,125,113) $(143,316) $2,103,301
 $32,715,175
 Nine Months Ended September 30, 2016
 December 31, 2015 Inflows / (Outflows) Distributions / Other Reductions Appreciation / (Depreciation) September 30, 2016
          
 (dollars in thousands)
Multi-strategy funds$29,510,248
 $(6,213,273) $—
 $80,429
 $23,377,404
Credit         
Opportunistic credit funds5,383,629
 (54,727) (495,373) 442,816
 5,276,345
Institutional Credit Strategies7,241,680
 29,608
 —
 (5,477) 7,265,811
Real estate funds2,048,559
 239,489
 (137,985) (5,206) 2,144,857
Other1,310,745
 (553) (50,284) (20,544) 1,239,364
Total$45,494,861
 $(5,999,456) $(683,642) $492,018
 $39,303,781

In the nine months ended September 30, 2017, our funds experienced performance-related appreciation2022, AUM net inflows of $2.1$1.1 billion and net outflowswere comprised of $7.1 billion, which was comprised of(i) $2.2 billion of gross inflows net of transfers, driven by $1.0 billion in Institutional Credit Strategies, from the launch of additional CLOs, $700.3
51

million in multi-strategy funds, $213.5 million in opportunistic credit funds due to the launch of STAX, and $9.3$233.0 million in real estate funds, driven by the launch of Real Estate Credit Fund II; and (ii) $1.0 billion of gross outflows due to redemptions. We also had $143.3 million in distributions and other reductions related to investors in our real estate, closed-end opportunistic credit and other funds. We experienced elevated redemptions, and reduced inflowsprimarily in our multi-strategy funds during 2016 and 2017 as a result of the investigation matter and the related inability to rely on Regulation D.opportunistic credit funds. In the first nine months of 2017,ended September 30, 2022, excluding CLOs, our largest source of gross inflows was from corporate, institutional and other, while pensions and private banks weresecuritization vehicles within Institutional Credit Strategies, our largest sources of gross inflows were from high net worth and family offices, sovereign wealth and corporates, and pensions, while pensions, high net worth and family offices, and fund-of-funds were the largest source of gross outflows. Our assets under
Summary of Changes in FP AUM
The tables below present the changes to our FP AUM for the respective periods based on the type of funds or investment vehicles we manage. FP AUM represents the AUM on which we earn management were $31.8fees and / or incentive income.
Three Months Ended September 30, 2023
June 30, 2023
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2023
(dollars in thousands)
Multi-strategy funds$8,389,660 $(657,743)$— $226,811 $18,282 $7,977,010 
Credit
   Opportunistic credit funds5,169,983 (193,837)(219,582)85,216 19,789 4,861,569 
   Institutional Credit Strategies11,112,003 — (163,823)2,122 (227,757)10,722,545 
Real estate funds3,781,610 61,320 (41,109)6,706 (5,721)3,802,806 
Total$28,453,256 $(790,260)$(424,514)$320,855 $(195,407)$27,363,930 
Three Months Ended September 30, 2022
June 30, 2022
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2022
(dollars in thousands)
Multi-strategy funds$9,540,651 $(193,345)$— $(160,887)$(1,895)$9,184,524 
Credit
   Opportunistic credit funds5,499,913 (99,818)— (29,946)(29,694)5,340,455 
   Institutional Credit Strategies11,235,812 70,601 (28,698)596 (239,044)11,039,266 
Real estate funds3,894,282 11,106 (91,150)— (4,719)3,809,519 
Total$30,170,658 $(211,456)$(119,848)$(190,237)$(275,353)$29,373,764 
Nine Months Ended September 30, 2023
December 31, 2022
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2023
(dollars in thousands)
Multi-strategy funds$9,020,989 $(1,963,882)$— $935,002 $(15,099)$7,977,010 
Credit
   Opportunistic credit funds5,387,491 (383,436)(641,759)405,710 93,563 4,861,569 
   Institutional Credit Strategies11,158,253 58,543 (296,507)8,449 (206,193)10,722,545 
Real estate funds3,717,036 108,673 (192,321)17,615 151,803 3,802,806 
Total$29,283,769 $(2,180,102)$(1,130,587)$1,366,776 $24,074 $27,363,930 
52

Nine Months Ended September 30, 2022
December 31, 2021
Inflows / (Outflows)(1)
Distributions / Other ReductionsAppreciation / (Depreciation)
Other(2)
September 30, 2022
(dollars in thousands)
Multi-strategy funds$10,877,541 $(35,203)$(49)$(1,661,426)$3,661 $9,184,524 
Credit
   Opportunistic credit funds5,742,605 (126,041)(100,715)(224,818)49,424 5,340,455 
   Institutional Credit Strategies11,142,956 529,050 (96,550)(1,764)(534,425)11,039,266 
Real estate funds3,875,427 173,317 (178,637)— (60,588)3,809,519 
Total$31,638,529 $541,123 $(375,951)$(1,888,008)$(541,929)$29,373,764 
_______________
(1)Includes transfers between Sculptor funds.
(2)Includes the effects of changes in the par value of the underlying collateral of the CLOs, foreign currency translation changes in the measurement of AUM of our European CLOs and other funds, and changes in the portfolio appraisal value for aircraft securitization vehicles. For FP AUM, this also includes movements in or out of FP AUM.
FP AUM totaled $27.4 billion as of October 1, 2017, asSeptember 30, 2023. FP AUM is lower than AUM primarily due to:
•Amounts held by our employees or other related parties who do not pay fees in our multi-strategy funds, opportunistic credit funds, and real estate funds
•Uncalled capital net outflows continuedfor funds where we do not earn management fees until it is invested for our opportunistic credit funds and real estate funds; and
•Fee rebates when our funds invest in the equity of CLOs in Institutional Credit Strategies, in addition to decrease.the AUM associated with the structured alternative investment solution, which becomes FP AUM once it is invested in our funds. Refer to the “Institutional Credit Strategies” section below for further details.
In the nine months ended September 30, 2016, our funds experienced performance-related appreciation2023, FP AUM decreased by $1.9 billion, primarily as a result of $492.0 million and net outflowsdrivers discussed in the Summary of $6.0 billion, which was comprised of $732.6 million of gross inflows and $6.7 billion of gross outflows due to redemptions. We also had $683.6 millionChanges in distributions and other reductions, which were primarily related to investors in our closed-end opportunistic credit and real estate funds. Excluding CLOs, pensions and fund-of-funds were the largest sources of our gross inflows, while fund-of-funds, pensions and private banks were our largest sources of gross outflows during the first nine months of 2016.


36


AUM section above.
Weighted-Average Assets Under ManagementFP AUM and Average Management Fee Rates
The table below presents our weighted-average assets under managementFP AUM and average management fee rates.rates for our FP AUM. Weighted-average assets under managementFP AUM exclude the impact of third quarter investment performance for the periods presented, as these amounts generally do not impact management fees calculated for those periods. The average management fee rates presented below take into account the effect of non-fee paying assets under management. Please see the respective sections below for average management fee rates by fund type.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
 
(dollars in thousands)

Weighted-average assets under management$32,032,309
 $38,794,212
 $32,532,857
 $41,640,771
Average management fee rates0.90% 1.23% 0.94% 1.27%
The decline in our average management fee rate for the periods presented occurred primarily because of a change in the mix of products that comprise our assets under management, as well as due to reductions in the management fee rates in certain of our multi-strategy assets under management that took effect during the fourth quarter of 2016. Our average management fee willmay vary from period to period based on the mix of products that comprise our assets under management.FP AUM. The average management fee rates below consider management fees on an Economic Income basis. For reconciliations of our non-GAAP measures to the respective GAAP measures, please see “—Economic Income Reconciliations” section of this MD&A.
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Weighted-average fee-paying assets under management$27,460,554 $29,790,066 $27,814,570 $30,819,835 
Average management fee rates0.81 %0.82 %0.84 %0.85 %
Fund Performance Information
The tables below present performance information for the funds we manage. AllThe return information presented represents, where applicable, the composite performance of ourall feeder funds that comprise each of the master funds presented. Gross return information is generally calculated using the total return of all feeder funds, net of all fees and expenses except
53

management fees and incentive income of such feeder funds and master funds, and the returns of each feeder fund include the reinvestment of all dividends and other income. Net return information is generally calculated as the gross returns less management fees and incentive income. Return information that includes Special Investments excludes incentive income on unrealized gains attributable to such investments, which could reduce returns at the time of realization. Special Investments and initial public offering investments are managed bynot allocated to all investors in the Oz Funds segment with the exception of our real estate funds, which are managed by the real estate management business included in Other Operations.and investors that were not allocated Special Investments and initial public offering investments may experience materially different returns.
The performance information presented in this report“Fund Performance Information” section is not indicative of the performance of our Class A Shares and is not necessarily indicative of the future results of any particular fund, including the accrued unrecognized amounts of incentive income. An investment in our Class A Shares is not an investment in any of our funds. There can be no assurance that any of our existing or future funds will achieve similar results. The timing and amount of incentive income generated from our funds are inherently uncertain. Incentive income is a function of investment performance and realizations of investments, which vary period-to-period based on market conditions and other factors. We cannot predict when, or if, any realization of investments will occur. Incentive income recognized for any particular period is not a reliable indicator of incentive income that may be earned in subsequent periods.
TheMulti-Strategy Funds
Our multi-strategy funds invest globally in high-conviction investment ideas across asset classes, regions and investment strategies with a primary focus on idiosyncratic opportunities where return information presented in this report represents, where applicable,drivers are less sensitive to direction of broader financial markets and which tend to arise when value is obscured by attributes such as complexity, corporate actions, market dislocations, or investor misunderstandings. Additionally, we have the composite performance of all feeder fundsflexibility to take on market-directional risk when we believe that comprise each of the master funds presented. Gross return information is generally calculated using the total return of all feeder funds, net of all fees and expenses except management fees and incentive income of such feeder funds and master funds and the returns of each feeder fund include the reinvestment of all dividends and other income. Net return information is generally calculated as the gross returns less management fees and incentive income (except incentive income on unrealized gains attributable to Special Investments in certain funds that could reduce returns on these investments at the time of realization). Return information also includes realized and unrealized gains and losses attributable to Special Investments and initial public offering investments that are not allocated to all investors in the feeder funds. Investors that were not allocated Special Investments and initial public offering investments may experience materially different returns.
Multi-Strategy Fundsbroad market dislocations have created asymmetric upside/downside potential.
The table below presents assets under managementAUM and investment performance for our multi-strategy funds. Assets under managementAUM are generally based on the net asset value of these products.funds plus any unfunded commitments, if applicable. Management fees generally range from 0.97%1.00% to 2.50%2.00% annually of assets under management.FP AUM. For the third quarter of 2017,2023, our multi-strategy funds had an average management fee rate of 1.25%. of FP AUM.
We generally crystallize incentive income from the majority of our multi-strategy funds on an annual basis. Incentive income is generally equal to 20% of the realized and unrealized profits attributable to each investor. A portion of the assets under


37


managementAUM in each of the OZSculptor Master Fund and our other multi-strategy funds is subject to initial commitment periods of three years, and for certain of these assets, including assets that subsequently moved to shorter commitment periods at the end of their initial commitment period, we only earn incentive income once profits attributable to an investor exceed a preferential return, or “hurdle rate,”rate”, which is generally equal to the 3-month T-bill or LIBOR rate for our multi-strategy funds. Once the investment performance has exceeded the hurdle rate for these assets, we may receive a “catch-up” allocation, resulting in a potential recognition by us of a full 20% of the net profits attributable to investors in these assets.
 Assets Under Management as of September 30, Returns for the Nine Months Ended September 30, Annualized Returns Since Inception Through September 30, 2017 
     2017 2016  
 2017 2016 Gross Net Gross Net Gross Net 
                 
Fund(dollars in thousands)             
OZ Master Fund(1)
$12,133,186
 $19,777,558
 13.6% 9.7% 2.7 % 1.1 % 16.9%
(1) 
11.9%
(1) 
OZ Asia Master Fund702,375
 1,018,175
 23.1% 18.1% -2.1 % -3.4 % 10.2% 6.1% 
OZ Europe Master Fund260,525
 467,741
 7.5% 4.8% 2.5 % 1.2 % 11.6% 7.6% 
OZ Enhanced Master Fund654,062
 824,597
 22.9% 16.8% 4.0 % 2.3 % 15.0% 10.2% 
Other funds875,728
 1,289,333
 n/m
 n/m
 n/m
 n/m
 n/m
 n/m
 
 $14,625,876
 $23,377,404
             
assets upon crystallization at the end of the multi-year commitment period.
Returns for the Nine Months Ended September 30,Annualized Returns Since Inception Through September 30, 2023
Assets Under Management as of September 30,20232022
20232022GrossNetGrossNetGrossNet
Fund(dollars in thousands)
Sculptor Master Fund(1)
$8,072,922 $9,346,943 12.9 %11.7 %-13.3 %-14.2 %15.4 %(2)10.7 %(3)
Other funds8,454 11,338 n/mn/mn/mn/mn/mn/m
$8,081,376 $9,358,281 
_______________
n/m not meaningful
(1)
The annualized returns since inception are those of the Och-Ziff Multi-Strategy Composite, which represents the composite performance of all accounts that were managed in accordance with our broad multi-strategy mandate that were not subject to portfolio investment restrictions or other factors that limited our investment discretion since inception on April 1, 1994. Performance is calculated using the total return of all such accounts net of all investment fees and expenses of such accounts, except incentive income on unrealized gains attributable to Special Investments that could reduce returns in these investments at the time of realization, and the returns include the reinvestment of all dividends and other income. The performance calculation for the OZ Master Fund excludes realized and unrealized gains and losses attributable to currency hedging specific to certain investors investing in OZ Master Fund in currencies other than the U.S. Dollar. For the period from April 1, 1994 through December 31, 1997, the returns are gross of certain overhead expenses that were reimbursed by the accounts. Such reimbursement arrangements were terminated at the inception of the OZ Master Fund on January 1, 1998. The size of the accounts comprising the composite during the time period shown vary materially. Such differences impacted our investment decisions and the diversity of the investment strategies followed. Furthermore, the composition of the investment strategies we follow is subject to our discretion, has varied materially since inception and is expected to vary materially in the future. As of September 30, 2017, the gross and net annualized returns since the OZ Master Fund’s inception on January 1, 1998 were 13.2% and 8.9%, respectively.
(1)The $8.8 billion,returns for the Sculptor Master Fund exclude Special Investments. Special Investments in the Sculptor Master Fund are held by investors representing a small percentage of AUM in the fund. Inclusive of these Special Investments, the returns of the Sculptor Master Fund for the nine months ended September 30, 2023 were 13.0% gross and 11.8% net, for the nine months ended September 30, 2022 were -13.3% gross and -14.2% net, and annualized since inception through September 30, 2023 were 15.2% gross and 10.5% net.
54

(2)The annualized returns since inception are those of the Sculptor Multi-Strategy Composite, which represents the composite performance of all accounts that were managed in accordance with our broad multi-strategy mandate that were not subject to portfolio investment restrictions or 37%, year-over-year decreaseother factors that limited our investment discretion since inception on April 1, 1994. Performance is calculated using the total return of all such accounts net of all investment fees and expenses of such accounts, and the returns include the reinvestment of all dividends and other income. The performance calculation for the Sculptor Master Fund excludes realized and unrealized gains and losses attributable to currency hedging specific to certain investors investing in assets under managementSculptor Master Fund in currencies other than the U.S. dollar. For the period from April 1, 1994 through December 31, 1997, the returns are gross of certain overhead expenses that were reimbursed by the accounts. Such reimbursement arrangements were terminated at the inception of the Sculptor Master Fund on January 1, 1998. The size of the accounts comprising the composite during the time period shown vary materially. Such differences impacted our investment decisions and the diversity of the investment strategies followed. Furthermore, the composition of the investment strategies we follow is subject to our discretion, has varied materially since inception and is expected to vary materially in the future. As of September 30, 2023, the annualized returns since the Sculptor Master Fund’s inception on January 1, 1998 were 12.4% gross and 8.3% net excluding Special Investments and 12.1% gross and 8.1% net inclusive of Special Investments.
AUM in our multi-strategy funds decreased by $1.3 billion, or 14%, year-over-year. This was driven primarily due to capitalby $2.3 billion of net outflows of $10.9 billion, primarily from the OZ Master Fund, our largest multi-strategy fund,and transfers, partially offset by $1.1 billion of performance-related appreciation of $2.2 billion. We continued to experience redemptions in 2017 as a result of the investigation matter and the related inability to rely on Regulation D; however, our redemption rate has continued to decrease since the previous several quarters.appreciation. In the first nine months of 2017,2023, the largest sources of gross inflows into our multi-strategy funds were from high net worth and family offices, pensions and fund-of-funds, while the largest sources of gross outflows from our multi-strategy funds were attributable to pensions, sovereign wealth and private banks.corporates and high net worth and family offices.
For the first nine months of 2017, the OZThe Sculptor Master Fund generated a gross return of 13.6%12.9% and a net return of 9.7%. Each of the five core investment strategies11.7% in the multi-strategy funds - long/short equity special situations, merger arbitrage, corporate credit, structured credit and convertible and derivative arbitrage - generated positive returns this period. Long/short equity special situations and merger arbitrage had a solid first nine months, achieving gains across all three geographies, and combined have contributed 9.2% gross year-to-date. The fund’s global credit business also had a strong first nine months, achieving gains in both structured and corporate credit across geographies, contributing 3.1% gross year-to-date.
For the first nine months of 2016,2023 as compared to the OZHFRI Fund Weighted Composite Index which generated 3.9%. The fund delivered strong absolute and relative performance on a historically low risk position for the fund, recovering a majority of our 2022 losses and reducing our high watermark.
In the first nine months of 2022, the Sculptor Master Fund generated a gross return of 2.7%-13.3% and a net return of 1.1%-14.2%. OnOur investment model, which benefits from conservative positioning, a gross basis, performance-related depreciationcentralized risk framework and inherent diversification, protected capital during a volatile period, minimizing losses as compared to the broader market. Losses in long/short equity special situations was more than offset by strong positive performance in merger arbitrage,the fund were predominately from equities, while positions within convertible and derivative arbitrage and credit-related strategies.corporate credit were also detractors. These losses were partially offset by gains in structured credit.


38


Credit
 Assets Under Management as of September 30,
 2017 2016
    
 (dollars in thousands)
Opportunistic credit funds$5,434,698
 $5,276,345
Institutional Credit Strategies9,453,373
 7,265,811
 $14,888,071
 $12,542,156
Assets Under Management as of September 30,
20232022
(dollars in thousands)
Opportunistic credit funds$5,540,393 $5,988,951 
Institutional Credit Strategies15,882,039 16,235,584 
$21,422,432 $22,224,535 
Opportunistic Credit Funds
Our opportunistic credit funds seek to generate risk-adjusted returns by capturing value in mispriced investments across disrupted, dislocated and distressed corporate, structured and private credit markets globally.
Certain of our opportunistic credit funds are open-end and allow for contributions and redemptions (subject to initial lock-up and notice periods) on a periodic basis similar to our multi-strategy funds. Our remaining opportunistic credit funds are closed-end, whereby investors make a commitment that is funded over an investment period. Upon the expiration of an investment period, the investments are then sold or realized over a period of time, and distributions are made to the investors in the fund.
Assets under managementAUM for our opportunistic credit funds are generally based on the net asset value of those funds plus any unfunded commitments.commitments, if applicable. Management fees for our opportunistic credit funds generally range from 0.50%0.75% to 1.75% annually of the net asset value of these funds. For the third quarter of 2017,2023, our opportunistic credit funds had an average management fee rate of 0.84%.0.95% of FP AUM.
The table below presents assets under managementAUM and investment performance information for certain of our opportunistic credit funds. Incentive income related to these funds (excluding the closed-end opportunistic fund, which is explained further below) is generally equal to 20% of realized and unrealized profits attributable to each investor, and a portion of these assets under managementAUM is subject to hurdle rates, which are generally 5% to 8% for our open-end opportunistic credit funds. Once the cumulative investment performance has exceeded the hurdle rate, we maytypically receive a “catch-up” allocation, resulting in athe potential recognition by us of a full 20% of the net profits attributable to investors in these funds. The measurement periods for these assets under managementAUM generally range from one to five years.
55

 Assets Under Management as of September 30, Returns for the Nine Months Ended September 30, Annualized Returns Since Inception Through September 30, 2017
 2017 2016 2017 2016 
     Gross Net Gross Net Gross Net
                
Fund(dollars in thousands)            
OZ Credit Opportunities Master Fund$1,739,676
 $1,728,712
 11.8% 8.0% 13.1% 11.4% 17.3% 12.8%
Customized Credit Focused Platform2,918,757
 2,630,186
 9.4% 7.0% 15.6% 11.8% 19.4% 14.7%
Closed-end opportunistic credit funds308,278
 458,102
 See below for return information on our closed-end opportunistic credit funds.
Other funds467,987
 459,345
 n/m
 n/m
 n/m
 n/m
 n/m
 n/m
 $5,434,698
 $5,276,345
            
We generally crystallize incentive income from our opportunistic credit funds at the end of a multi-year measurement period. This results in a timing difference between when we can recognize incentive income and when we accrue the associated discretionary bonus expense. Incentive income accrued at the fund level that cannot yet be recognized drives an increase in our ABURI balance. Compensation expense related to ABURI generated from our opportunistic credit funds is generally recognized in the fourth quarter of the year the underlying fund performance is generated which may not occur at the same time that the related revenues are recognized by us. In addition, we recognize incentive income on our opportunistic credit funds related to certain tax distributions on realizations at the fund level. Realizations at the fund level may give rise to tax liabilities for our investors and us. Funds distribute capital back to us to cover these tax liabilities and this in turn drives the recognition of tax distribution-related incentive income.
Returns for the Nine Months Ended September 30,Annualized Returns Since Inception Through September 30, 2023
Assets Under Management as of September 30,20232022
20232022GrossNetGrossNetGrossNet
Fund(dollars in thousands)
Sculptor Credit Opportunities Master Fund(1)
$1,421,591 $1,742,713 10.0 %8.1 %-3.3 %-3.9 %12.6 %8.9 %
Customized Credit Focused Platform3,462,874 3,817,442 See below for return information on our Customized Credit Focused Platform.
Closed-end opportunistic credit funds655,928 428,796 See below for return information on our closed-end opportunistic credit funds.
$5,540,393 $5,988,951 
_______________
n/m not meaningful(1)The returns for the Sculptor Credit Opportunities Master Fund exclude Special Investments, which are held by investors representing a small percentage of AUM in the fund. Inclusive of these Special Investments, the returns of the Sculptor Credit Opportunities Master Fund for the nine months ended September 30, 2023 were 10.1% gross and 8.2% net, for the nine months ended September 30, 2022 were -3.3% gross and -3.9% net, and annualized since inception through September 30, 2023 were 12.3% gross and 8.7% net.
Assets under managementAUM in our opportunistic credit funds increaseddecreased by $158.4$448.6 million, or 3%7%, year-over-year. This change was driven primarily by $661.0(i) distributions and other reductions of $715.2 million primarily from the Customized Credit Focused Platform, and (ii) net outflows and transfers of $210.3 million, primarily in the Sculptor Credit Opportunities Master Fund, partially offset by $477.0 million of performance-related appreciation, partially offset by $226.2primarily from our open-end funds. We continue to raise capital for STAX with total committed capital of $471 million to date. We plan to hold additional closes and have seen previous periods of distributions and $276.4 millionmarket volatility act as a catalyst for capital raising in these types of net outflows.strategies.
ForIn the first nine months of 2017,2023, the OZSculptor Credit Opportunities Master Fund, our global opportunistic credit fund, delivered strong absolute and relative performance versus relevant credit indices and benchmarks, fully recovering 2022 losses and eliminating our high watermark and building upon its long-term track record. The fund generated a gross return of 10.0% and a net return of 8.1%, as compared to BAML Global High Yield of 5.4% and HFRX Fixed Income Credit Index of 2.9% for the first nine months of 2023. In the first nine months of 2023, both corporate credit and structured credit contributed to performance.
In the first nine months of 2022, the Sculptor Credit Opportunities Master Fund, our global opportunistic credit fund, generated a gross return of 11.8%-3.3% and a net return of 8.0%-3.9%. Performance was broad basedDuring the period, the fund delivered strong results as compared to BAML Global High Yield and HFRX Fixed Income Credit Index. In 2022, the fund experienced losses in corporate credit and experienced gains in structured credit.
Our Customized Credit Focused Platform invests under a flexible credit mandate across corporatethe credit spectrum to allow timely investments as market conditions change and structured


39


credit. For the first nine months of 2016, OZ Credit Opportunities Master Fund, our global opportunistic credit fund, generated a gross return of 13.1% and a net return of 11.4%. On a gross basis, performance was driven by the fund’s U.S. portfolio.
dislocate. The table below presents assets underinvestment performance for the fund.

56

Weighted Average Return for the Nine Months Ended September 30,(2)
Inception to Date as of September 30, 2023
20232022IRR
Net Invested Capital Multiple(5)
Customized Credit Focused PlatformGrossNetGrossNet
Gross(3)
Net(4)
Opportunistic Credit Performance(1)
10.3 %7.9 %-4.0 %-3.6 %14.3 %10.8 %4.5x
_______________
(1)Performance presented is for the opportunistic credit strategies in the Customized Credit Focused Platform. As of September 30, 2023, approximately 92% of the invested capital in the Customized Credit Focused Platform is invested in the Platform’s opportunistic credit strategies.
(2)Weighted Average Returns reflect the total profit & loss divided by the weighted average capital base, which represents net asset value plus net contributions (distributions) for the period.
(3)Gross IRR represents estimated, unaudited, annualized pre-tax returns based on the timing of cash inflows and outflows for each investment. It is calculated in the same manner as Net IRR, however, it does not reflect adjustments to cash flows related to incentive income, management fees and the applicable fund expenses. Gross IRR represents the estimated, unaudited, annualized pre-tax return based on the actual and/or projected timing of cash inflows from, and outflows to, investors for each investment (irrespective of any funding from a credit facility or other third-party financing source used by the Customized Credit Focused Platform). In certain cases, funding from a credit facility or other third party financing source was initially used by the Customized Credit Focused Platform to acquire an investment or pay certain expenses, which may have the effect of increasing the Gross IRR above that which would have been presented, had drawdowns from limited partners been initially used to acquire the investment or pay such expenses. Gross IRR includes the effect of investment hedges as determined by us. There can be no assurance that an appropriate hedge will be identified for each investment or that an appropriate hedge will be available for all investments.
(4)Net IRR is the Gross IRR adjusted to reflect actual management fees, incentive income and expenses incurred by the Customized Credit Focused Platform.
(5)Net invested capital multiple measures the current net asset value over the net invested capital, where net invested capital represents cumulative contributions less cumulative distributions. The Customized Credit Focused Platform has an active liquid investment program, a key element of which includes ramping up and ramping down depending on market conditions.
The table below presents AUM investment performance and other information for our closed-end opportunistic credit funds. Our closed-end opportunistic credit funds follow a European-style waterfall, whereby incentive income may be paid to us only after a fund investor receives distributions in excess of their total contributed capital and a preferential return, which is generally 5%6% to 6%8%. Incentive income related to these funds is generally equal to 20% of the cumulative realized profits in excess of the preferential return attributable to each investor over the life of the fund. Once the investment performance has exceeded the preferential return, we maytypically receive a “catch-up” allocation, resulting in a potential recognition by us of a full 20% of the net profits attributable to investors in these funds.
Once These funds, unless otherwise noted, have concluded their investment periods, and therefore we begin to collect incentive income from our closed-end credit funds, such amounts are generally not subject to clawback, and are therefore recognized as revenue by us when collected. The investment periodsexpect AUM for these funds may generally be extended for an additional one to two years.
 Assets Under Management as of September 30, Inception to Date as of September 30, 2017
         IRR  
 2017 2016 Total Commitments 
Total Invested Capital(1)
 
Gross(2)
 
Net(3)
 
Gross MOIC(4)
              
Fund (Investment Period)(dollars in thousands)      
OZ European Credit Opportunities Fund (2012-2015)(5)
$64,538
 $110,418
 $459,600
 $305,487
 16.5% 12.5%  1.5x
OZ Structured Products Domestic Fund II (2011-2014)(5)
111,596
 156,860
 326,850
 326,850
 19.5% 15.2% 2.0x
OZ Structured Products Offshore Fund II (2011-2014)(5)
118,512
 158,404
 304,531
 304,531
 16.9% 13.0% 1.8x
OZ Structured Products Offshore Fund I (2010-2013)(5)
5,627
 11,573
 155,098
 155,098
 24.0% 19.2%  2.1x
OZ Structured Products Domestic Fund I (2010-2013)(5)
5,055
 7,901
 99,986
 99,986
 22.9% 18.2%  2.0x
Other funds2,950
 12,946
 298,250
 298,250
 n/m
 n/m
 n/m
 $308,278
 $458,102
 $1,644,315
 $1,490,202
      
decrease as investments are sold and the related proceeds are distributed to the investors in these funds.
Assets Under Management as of September 30,Inception to Date as of September 30, 2023
20232022Total Commitments
Total Invested Capital(1)
Gross IRR(2)
Net IRR(3)
Gross MOIC(4)
Fund (Investment Period)(dollars in thousands)
Sculptor Tactical Credit Fund (2022 - 2025)$441,822 $221,604 $470,671 $244,582 15.0 %11.1 %1.1x
Sculptor European Credit Opportunities Fund (2012-2015)— — 459,600 305,487 15.7 %11.8 %1.5x
Sculptor Structured Products Domestic Fund II (2011-2014)— — 326,850 326,850 19.2 %15.1 %2.1x
Sculptor Structured Products Offshore Fund II (2011-2014)— — 304,531 304,531 16.5 %12.9 %1.9x
Sculptor Structured Products Offshore Fund I (2010-2013)— — 155,098 155,098 23.7 %18.9 %2.1x
Sculptor Structured Products Domestic Fund I (2010-2013)— 3,645 99,986 99,986 22.4 %17.8 %2.0x
OZ Global Credit Master Fund I (2008-2009)— — 214,141 214,141 5.5 %4.2 %1.1x
Other funds214,106 203,547 779,671 453,721 n/mn/mn/m
$655,928 $428,796 $2,810,548 $2,104,396 
_______________
n/m not meaningful
(1)Represents funded capital commitments net of recallable distributions to investors.
(2)
Gross IRR for our closed-end opportunistic credit funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the fund as of September 30, 2017, including the fair value of unrealized investments as of such date, together with any appreciation or depreciation from related hedging activity. Gross IRR does not include the effects of management fees or incentive income, which would reduce the return, and includes the reinvestment of all fund income.
57

(1)Represents funded capital commitments net of recallable distributions to investors.
(2)Gross IRR for our closed-end opportunistic credit funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the fund as of September 30, 2023, including the fair value of unrealized investments as of such date, together with any appreciation or depreciation from related hedging activity. Gross IRR does not include the effects of management fees or incentive income, which would reduce the return, and includes the reinvestment of all fund income.
(3)Net IRR is calculated as described in footnote (2), but is reduced by all management fees, as well as paid incentive and accrued incentive income that will be payable upon the distribution of each fund’s capital in accordance with the terms of the relevant fund. Accrued incentive income may be higher or lower at such time. The net IRR represents a composite rate of return for a fund and does not reflect the net IRR specific to any individual investor.
(4)Gross Multiple on Invested Capital (“MOIC”) for our closed-end opportunistic credit funds is calculated by dividing the sum of the net asset value of the fund, accrued incentive income, life-to-date incentive income and management fees paid and any non-recallable distributions made from the fund by the invested capital.
(3)Net IRR is calculated as described in footnote (2), but is reduced by all management fees, as well as paid incentive and accrued incentive income that will be payable upon the distribution of each fund’s capital in accordance with the terms of the relevant fund. Accrued incentive income may be higher or lower at such time. The net IRR represents a composite rate of return for a fund and does not reflect the net IRR specific to any individual investor.
(4)Gross MOIC for our closed-end opportunistic credit funds is calculated by dividing the sum of the net asset value of the fund, accrued incentive income, life-to-date incentive income and management fees paid and any non-recallable distributions made from the fund by the invested capital.
(5)These funds have concluded their investment periods, and therefore we expect assets under management for these funds to decrease as investments are sold and the related proceeds are distributed to the investors in these funds.
Institutional Credit Strategies
Institutional Credit Strategies is our asset management platform that invests in performing credits, including leveraged loans, high-yield bonds, private credit/bespoke financing and investment grade credit via CLOs, aircraft securitization vehicles, CBOs, structured alternative investment solutions, commingled products and other customized solutions for clients.
Assets under managementAUM for our CLOsInstitutional Credit Strategies are generally based on the amount of equity outstanding for CLOs and CBOs (during the warehouse period), the par value of the collateral assets and cash held inat CLOs and CBOs (after the CLOs.warehouse period), and adjusted portfolio appraisal values for the aircraft collateral within the securitization vehicles. AUM also includes the net asset value of other investment vehicles within the strategy. However, assets under managementAUM are reduced for any investments in our CLOs and securitization vehicles held by our other funds in order to


40


avoid double counting these assets.funds. Management fees for the CLOs areInstitutional Credit Strategies generally range from 0.25% to 0.50% annually of assets under management.AUM. For the third quarter of 2017, our2023, Institutional Credit Strategies products had an average management fee rate of 0.40%. of FP AUM net of rebates on cross-investments from other funds we manage.
Incentive income from our CLOs and CBO is generally equal to 20% of the excess cash flows due to the holders of the subordinated notes issued by the CLOs and CBO and is generally subject to a 12% hurdle rate. Because of the hurdle rate and structure of our CLOs and CBO, we do not expect to earn a meaningful amount of incentive income from these entities, and therefore no return information is presented for these vehicles. We do not earn incentive income from our aircraft securitization vehicles.
During the first quarter of 2022, we closed on a $350.0 million structured alternative investment solution, which was tailored to meet the needs of insurance investors. The OZLMfinancing vehicle issued senior and subordinated notes to investors and used those proceeds to invest in a diversified portfolio of funds managed by us. Prior to investing in the portfolio of funds, the AUM was included within Institutional Credit Strategies. Upon investment in the funds, which began during April 2022, we earn management and incentive fees based on the terms of the underlying funds in which the vehicle invests and the associated AUM is included in those funds.
58

Most Recent Launch or Refinancing YearAssets Under Management as of September 30,
Deal Size20232022
(dollars in thousands)
Collateralized loan obligations(1)
2017$1,658,282 $886,532 $1,024,168 
20185,315,728 3,606,929 3,944,934 
2019653,250 — — 
20201,868,287 1,611,711 1,653,498 
20218,174,069 6,792,707 6,844,575 
2022852,334 786,676 757,188 
2023— 261,077 — 
18,521,950 13,945,632 14,224,363 
Aircraft securitization vehicles2018696,000 357,259 432,723 
20191,128,000 280,531 295,813 
2020472,732 151,757 171,383 
2021821,529 542,297 579,783 
3,118,261 1,331,844 1,479,702 
Collateralized bond obligation2021367,050 284,923 286,141 
Other funds319,640 245,378 
$22,007,261 $15,882,039 $16,235,584 
_______________
(1)AUM for collateralized loan obligations includes AUM of CLOs in their warehouse period presented below arewithin Other funds.

AUM in Institutional Credit Strategies totaled $15.9 billion as of September 30, 2023, decreasing $353.5 million, or 2%, year-over-year. This was driven primarily by: (i) the amortization of certain of our U.S. CLOs, whereasas a result of natural life-cycle events; and (ii) decreases driven by changes in the OZLME CLOs areportfolio appraisal value for our aircraft securitization vehicles. These decreases were partially offset by (i) net inflows primarily from the launch of an additional CLO; and (ii) foreign currency translation adjustments in our European CLOs.
     Assets Under Management as of September 30,
 Initial Closing Date Initial Deal Size 2017 2016
        
   (dollars in thousands)
CLOs       
OZLM IJuly 19, 2012 $510,700
 $496,684
 $497,908
OZLM IINovember 1, 2012 560,100
 509,048
 513,343
OZLM IIIFebruary 20, 2013 653,250
 608,852
 612,283
OZLM IVJune 27, 2013 600,000
 535,978
 541,515
OZLM VDecember 17, 2013 501,250
 467,159
 469,042
OZLM VIApril 16, 2014 621,250
 595,547
 597,638
OZLM VIIJune 26, 2014 824,750
 793,458
 796,600
OZLM VIIISeptember 9, 2014 622,250
 595,657
 596,991
OZLM IXDecember 22, 2014 510,208
 499,437
 495,255
OZLM XIMarch 12, 2015 510,500
 490,284
 491,540
OZLM XIIMay 28, 2015 565,650
 549,377
 547,914
OZLM XIIIAugust 6, 2015 511,600
 495,529
 496,370
OZLM XIVDecember 21, 2015 507,420
 502,433
 497,179
OZLM XVDecember 20, 2016 409,250
 395,804
 —
OZLME IDecember 15, 2016 430,490
 470,404
 —
OZLM XVIJune 8, 2017 410,250
 401,172
 —
OZLM XVIIAugust 3, 2017 512,000
 499,692
 —
OZLME IISeptember 14, 2017 494,708
 468,738
 —
   9,755,626
 9,375,253
 7,153,578
Other fundsn/a n/a
 78,120
 112,233
   $9,755,626
 $9,453,373
 $7,265,811
The year-over-year increase in assets under management was driven primarily by the closing of five new CLOs, including our first European CLOs. Institutional Credit Strategies also priced eight refinancing transactions in existing CLOs, totaling $4.2 billion during CLO issuance for 2022 and the first nine months of 2017. Refinancing CLOs produces further returns for2023 was below our historical levels, given the CLO subordinated note holders.current market environment as well as the current strategic transaction process.
Real Estate Funds
Our real estate funds generally make investments in commercial and residential real estate, including real property, multi-property portfolios, real estate-related joint ventures, real estate operating companies and other real estate-related assets. We seek to build portfolios that are balanced between traditional and non-traditional asset classes, employing moderate leverage, using creative structures and targeting high cash-on-cash returns.
Assets under managementAUM for our real estate funds are generally based on the amount of capital committed by our fund investors during the investment period and the amount of actual capital invested for periods following the investment period. However, assets under managementAUM are reduced for unfunded commitments by our executive managing directors that will be funded through transfers from other fundsfunds. AUM for the real estate vehicle launched in order to avoid double counting these assets.December 2022 is based on net asset value. Management fees for our real estate funds, exclusive of co-investment vehicles, generally range from 0.75%0.50% to 1.50% annually of assets under management;FP AUM, however, management fees for Och-ZiffSculptor Real Estate


41


Credit Fund I and Sculptor Real Estate Credit Fund II are based on invested capital.capital both during and after the investment period. For the third quarter of 2017,2023, our real estate funds, inclusive of co-investment vehicles, had an average management fee rate of 0.79%.0.92% of FP AUM.
The tabletables below presents assets under management,present AUM, investment performance and other information for our real estate funds. The amounts included within “co-investment and other funds” below mainly relate to co-investment vehicles in which we partner with clients on investment opportunities, typically with lower fees.
59

Our real estate funds generally follow an American-style waterfall, whereby incentive income may be paid to us after a fund investment is realized if a fund investor receives distributions in excess of the capital contributed for such investment, as well as a preferential return on such investment, which is generally 6% to 10%. Upon each subsequent realization, incentive income, which is generally 20% of realized profits, is recalculated based on the cumulative realized profits in excess of the preferential return attributable to each investor over the life of the fund. Once the investment performance has exceeded the hurdlepreferential rate, we may receive a “catch-up” allocation, resulting in a potential recognition by us of a full 20% of the realized net profits attributable to investors in these funds.
In addition, we recognize incentive income on our real estate funds related to certain tax distributions on realizations at the fund level. Realizations at the fund level may give rise to tax liabilities for our investors and us. Funds distribute capital back to us to cover these tax liabilities and this in turn drives the recognition of tax distribution-related incentive income. In addition, incentive income is recognized as investments are sold and related distributions are made to investors and us. Due to the recalculation of cumulative realized profits upon each realization, the fund may clawback incentive income previously paid to us. As a result, we generally record incentive income paid to us by the real estate funds as unearned revenue in our consolidated balance sheets until such amountsthe criteria for revenue recognition has been met as we have received cash before we can recognize the revenue.
For additional information on incentive income accrued at fund level for our real estate, as well as other funds, see “Longer-Term AUM and Accrued Unrecognized Incentive Income” for additional information.
For funds that have concluded their investment periods, we expect AUM to decrease as investments are no longer subjectsold and the related proceeds are distributed to clawback.the investors in these funds.
Assets Under Management as of September 30,
20232022
Fund (Investment Period)(dollars in thousands)
Sculptor Real Estate Fund I (2005-2010)$— $— 
Sculptor Real Estate Fund II (2011-2014)19,291 20,413 
Sculptor Real Estate Fund III (2014-2019)
136,427 253,224 
Sculptor Real Estate Fund IV (2019-2023)2,595,257 2,593,846 
Sculptor Real Estate Credit Fund I (2015-2020)151,441 283,070 
Sculptor Real Estate Credit Fund II (2022-2025)158,726 143,211 
Co-investment and other funds1,187,156 1,235,916 
$4,248,298 $4,529,680 
Inception to Date as of September 30, 2023
Total Investments
Realized/Partially Realized Investments(1)
Total Commitments
Invested Capital(2)
Total
Value(3)
Gross IRR(4)
Net IRR(5)
Gross MOIC(6)
Invested CapitalTotal
Value
Gross IRR(4)
Gross MOIC(6)
Fund(dollars in thousands)
Sculptor Real Estate Fund I$408,081 $386,298 $847,612 25.5 %16.1 %2.2x$386,298 $847,612 25.5 %2.2x
Sculptor Real Estate Fund II839,508 762,588 1,606,663 32.8 %21.6 %2.1x762,588 1,606,663 32.8 %2.1x
Sculptor Real Estate Fund III1,500,000 1,112,924 2,239,242 30.2 %20.0 %2.0x1,045,110 2,188,466 31.7 %2.1x
Sculptor Real Estate Fund IV2,596,024 1,594,151 2,015,549 26.8 %14.5 %1.3x337,506 522,909 56.7 %1.5x
Sculptor Real Estate Credit Fund I736,225 735,888 959,659 18.0 %12.7 %1.3x578,931 760,056 18.6 %1.3x
Sculptor Real Estate Credit Fund II(7)
180,540 69,916 80,039 n/mn/mn/mn/mn/mn/mn/m
Co-investment and other funds1,574,520 1,356,926 1,772,165 n/mn/mn/m196,791 353,355 n/mn/m
$7,834,898 $6,018,691 $9,520,929 $3,307,224 $6,279,061 
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 Assets Under Management as of September 30,
 2017 2016
    
Fund(dollars in thousands)
Och-Ziff Real Estate Fund I$13,102
 $16,554
Och-Ziff Real Estate Fund II286,003
 307,108
Och-Ziff Real Estate Fund III1,453,133
 1,455,032
Och-Ziff Real Estate Credit Fund I695,464
 285,522
Other funds149,822
 80,641
 $2,597,524
 $2,144,857
 Inception to Date as of September 30, 2017
   Total Investments 
Realized/Partially Realized Investments(1)
 Total Commitments 
Invested Capital(2)
 
Total
Value(3)
 
Gross IRR(4)
 
Net IRR(5)
 
Gross MOIC(6)
 Invested Capital 
Total
Value
 
Gross IRR(4)
 
Gross MOIC(6)
                    
Fund (Investment Period)(dollars in thousands)
Och-Ziff Real Estate Fund I(7) (2005-2010)
$408,081
 $385,457
 $811,342
 25.1% 15.7% 2.1x $372,355
 $807,672
 26.6% 2.2x
Och-Ziff Real Estate Fund II(7) (2011-2014)
839,508
 762,588
 1,422,955
 32.7% 21.2% 1.9x 573,690
 1,197,277
 38.4% 2.1x
Och-Ziff Real Estate Fund III(8) (2014-2019)
1,500,000
 606,679
 843,218
 n/m
 n/m
 n/m 182,134
 291,895
 n/m
 n/m
Och-Ziff Real Estate Credit Fund I(8) (2015-2019)
736,225
 97,396
 116,247
 n/m
 n/m
 n/m 48,771
 58,468
 n/m
 n/m
Other funds292,671
 121,619
 230,735
 n/m
 n/m
 n/m —
 —
 n/m
 n/m
 $3,776,485
 $1,973,739
 $3,424,497
       $1,176,950
 $2,355,312
    
 Unrealized Investments as of September 30, 2017
 Invested Capital 
Total
Value
 
Gross
MOIC(6)
      
Fund (Investment Period)(dollars in thousands)  
Och-Ziff Real Estate Fund I (2005-2010)(7)
$13,102
 $3,670
 0.3x
Och-Ziff Real Estate Fund II (2011-2014)(7)
188,898
 225,678
 1.2x
Och-Ziff Real Estate Fund III (2014-2019)(8)
424,545
 551,323
 n/m
Och-Ziff Real Estate Credit Fund I (2015-2019)(8)
48,625
 57,779
 n/m
Other funds121,619
 230,735
 n/m
 $796,789
 $1,069,185
  


42



Unrealized Investments as of September 30, 2023
Invested CapitalTotal
Value
Gross
MOIC(6)
Fund(dollars in thousands)
Sculptor Real Estate Fund I$— $— — 
Sculptor Real Estate Fund II— — — 
Sculptor Real Estate Fund III67,814 50,776 0.7x
Sculptor Real Estate Fund IV1,256,646 1,492,640 1.2x
Sculptor Real Estate Credit Fund I156,957 199,603 1.3x
Sculptor Real Estate Credit Fund II(7)
69,916 80,039 n/m
Co-investment and other funds1,160,135 1,418,810 n/m
$2,711,468 $3,241,869 
_______________
n/m not meaningful
(1)An investment is considered partially realized when the total amount of proceeds received, including dividends, interest or other distributions of income and return of capital, represents at least 50% of invested capital.
(2)Invested capital represents total aggregate contributions made for investments by the fund.
(3)
Total value represents the sum of realized distributions and the fair value of unrealized and partially realized investments as of September 30, 2017. Total value will be impacted (either positively or negatively) by future economic and other factors. Accordingly, the total value ultimately realized will likely be higher or lower than the amounts presented as of September 30, 2017.
(4)
Gross IRR for our real estate funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the aggregated investments as of September 30, 2017, including the fair value of unrealized and partially realized investments as of such date, together with any unrealized appreciation or depreciation from related hedging activity. Gross IRR is not adjusted for estimated management fees, incentive income or other fees or expenses to be paid by the fund, which would reduce the return.
(5)
(1)An investment is considered partially realized when the total amount of proceeds received, including dividends, interest or other distributions of income and return of capital, represents at least 50% of invested capital.
(2)Invested capital represents total aggregate contributions made for investments by the fund.
(3)Total value represents the sum of realized distributions and the fair value of unrealized and partially realized investments as of September 30, 2023. Total value will be impacted (either positively or negatively) by future economic and other factors. Accordingly, the total value ultimately realized will likely be higher or lower than the amounts presented as of September 30, 2023.
(4)Gross IRR for our real estate funds represents the estimated, unaudited, annualized return based on the timing of cash inflows and outflows for the aggregated investments as of September 30, 2023, including the fair value of unrealized and partially realized investments as of such date, together with any unrealized appreciation or depreciation from related hedging activity. Gross IRR is not adjusted for estimated management fees, incentive income or other fees or expenses to be paid by the fund, which would reduce the return.
(5)Net IRR is calculated as described in footnote (4), but is reduced by all management fees and other fund-level fees and expenses not adjusted for in the calculation of gross IRR. Net IRR is further reduced by paid incentive and accrued incentive income that will be payable upon the distribution of each fund’s capital in accordance with the terms of the relevant fund. Accrued incentive income may be higher or lower at such time. The net IRR represents a composite rate of return for a fund and does not reflect the net IRR specific to any individual investor.
(6)Gross MOIC for our real estate funds is calculated by dividing the value of a fund’s investments by the invested capital, prior to adjustments for incentive income, management fees or other expenses to be paid by the fund.
(7)These funds have concluded their investment periods, and therefore we expect assets under management for these funds to decrease as investments are sold and the related proceeds are distributed to the investors in these funds.
(8)These funds recently launched and have only invested a small portion of their committed capital; therefore, IRR and MOIC information is not presented, as it is not meaningful.
The $452.7 million year-over-year increasenet IRR represents a composite rate of return for a fund and does not reflect the net IRR specific to any individual investor. For Sculptor Real Estate Fund IV, the Net IRR presented above reflects the effect of proration of management fees and certain expenses based on the portion of committed capital that is reflected in assets underinvested capital. Removing the effects of this proration results in a Net IRR of 12.9%.
(6)Gross MOIC for our real estate funds is calculated by dividing the value of a fund’s investments by the invested capital, prior to adjustments for incentive income, management fees or other expenses to be paid by the fund.
(7)This fund has not yet invested a level of committed capital that would lead to presentation of meaningful IRR and MOIC information. Therefore, such information is not presented.Sculptor Real Estate Credit Fund II total commitments include 34,300,000 associated with the structured alternative investment solution.
AUM in our real estate funds totaled $4.2 billion as of September 30, 2023, decreasing $281.4 million, or 6%, year-over-year. This was driven primarily by additional commitments to Och-Ziff$623.2 million of distributions and other reductions, primarily related to: (i) distributions from Sculptor Real Estate Credit Fund I which had its final closing duringand Sculptor Real Estate Fund III as these funds are harvesting investments; and (ii) the second quarterliquidation of 2017, andour SPAC, which was non-fee paying. These decreases were partially offset by distributions,net inflows and transfers of $305.9 million, primarily relatedin a real estate investment vehicle. Our real estate funds continue to Och-Ziffdeploy capital and generate strong returns with a 30.2% annualized gross return in Sculptor Real Estate Fund II.III and an 18.0% annualized gross return in Sculptor Real Estate Credit Fund I.
Other
61
Our other assets under management are comprised of funds that are generally strategy-specific, including our equity and energy funds. Management fees for these funds range from 0.75% to 2.25% of assets under management, generally based on the amount of capital committed to these platforms by our fund investors. For the third quarter of 2017, our other funds had an average management fee rate of 0.67%.

Incentive income for our equity funds is generally 20% of realized and unrealized annual profits attributable to each investor. Incentive income related to the energy funds is generally 20% of cumulative realized profits attributable to each investor, and is subject to hurdle rates (generally 3% to 8%). Incentive income for the energy funds is generally not recognized as revenue until near the end of the life of the fund when it is no longer subject to clawback.
Longer-Term Assets Under ManagementAUM and Accrued But Unrecognized Incentive Income (“ABURI”)
As of September 30, 2017,2023, approximately 51%74% of our assets under management wereAUM was subject to initial commitment periods of three years or longer. We earn incentive income on these assets based onlonger, excluding AUM that had initial commitment periods of three years or longer and subsequently moved to shorter commitment periods at the cumulative investment performance generated over thisend of their initial commitment period. The table below presents the amount of these assets underAUM.
September 30, 2023December 31, 2022
(dollars in thousands)
Multi-strategy funds$409,085 $408,171 
Credit
Opportunistic credit funds4,608,831 4,742,929 
Institutional Credit Strategies15,868,986 16,259,128 
Real estate funds4,248,297 4,562,718 
$25,135,199 $25,972,946 
Longer-term AUM has increased from 26% in 2013 to 45% in 2016 to 74% as of September 30, 2023, driven by growth in opportunistic credit, Institutional Credit Strategies and real estate funds. Longer-term AUM creates stability in our platform and provides more consistency in our management as well asfee earnings.
The table below presents the grosschanges in the amount of incentive income accrued at the fund level but for which the commitment periodthat has not concluded. These amounts have not yet been recognized in our revenues as we recognize incentive(ABURI) during the nine months ended September 30, 2023:
December 31, 2022Recognized Incentive IncomePerformanceSeptember 30, 2023
(dollars in thousands)
Multi-strategy funds$359 $(759)$1,563 $1,163 
Credit
Opportunistic credit funds37,328 (18,365)67,618 86,581 
Real estate funds122,815 (40,487)35,951 118,278 
$160,502 $(59,612)$105,132 $206,022 
Incentive income, atif any, on our longer-term AUM is based on the end ofcumulative investment performance generated over the respective commitment period when amounts are no longer subject to clawback. Further, theseperiod. These amounts may ultimately not be recognized as revenue by us in the event of future losses in the respective funds. See “—Understanding Our Results—Revenues—Incentive Income” for additional information. As of September 30, 2023, our ABURI was $206.0 million, up $45.5 million in the first nine months of 2023 primarily from the positive performance in our opportunistic credit and real estate funds, partially offset by the crystallization of ABURI into incentive income. We generated $67.6 million of performance in our opportunistic credit funds, largely in the Customized Credit Focused platform and $36.0 million of performance in our real estate funds, largely in Sculptor Real Estate Fund IV, in the first nine months of 2023.

Our ABURI from longer-term AUM generally comprise the following:

43


 September 30, 2017
 Longer-Term Assets Under Management Accrued Unrecognized Incentive Income
    
 (dollars in thousands)
Multi-strategy funds$631,526
 $24,362
Credit   
Opportunistic credit funds3,873,188
 210,774
Institutional Credit Strategies9,408,698
 —
Real estate funds2,597,524
 165,720
Other287,055
 1,628
 $16,797,991
 $402,484
We recognize•Multi-strategy funds. Multi-strategy ABURI is derived from clients in the three-year liquidity tranche, where incentive income on our longer-term assets under management in our multi-strategy funds and open-end opportunistic credit fundsother than tax distributions will be recognized at the end of their respective commitment periods, which are generallyeach client’s three-year period.
•Opportunistic credit funds. Opportunistic credit funds ABURI is derived from three to five years. Incentivesources:
◦Clients in the three-year and four-year liquidity tranches of an open-end opportunistic credit fund, where incentive income related to assets under management in ourother than tax distributions will be recognized at the end of each client’s three-year or four-year period.
◦Long-dated closed-end opportunistic credit funds, where incentive income will be recognized during each fund’s harvest period after invested capital and a preferred return has been distributed to the clients, other than tax distributions.
62

◦The Customized Credit Focused Platform, where incentive income is recognized at the end of a multi-year term; previously crystallized on December 31, 2020, other than tax distributions.
•Real estate funds. Real Estate ABURI is derived from long-dated real estate funds, where incentive income will start to be recognized following the completion of each fund’s investment period as investments are realized and after invested capital and a preferred return has been distributed to the clients other than tax distributions.
Certain ABURI amounts will generally have compensation expense (on an Economic Income basis) that will reduce the amount ultimately realized on a net basis. Compensation expense relating to ABURI from our real estate funds is generally recognized nearat the endsame time the related incentive income revenue is recognized as the compensation is structured as carried interest in these vehicles. Compensation expense relating to ABURI generated from our multi-strategy funds and opportunistic credit funds is generally recognized in the fourth quarter of the life of each fund. These funds generally begin to make distributions afteryear the conclusion of their respective investment period, as presented inunderlying fund performance is generated which may not occur at the tables above. However, these investment periods may generally be extended for an additional one to two years.same time that the related revenues are generated.
Understanding Our Results
Revenues
Our operations historically have been financed primarily by cash flows generated by our business. Our principal sources of revenues are management fees and incentive income. For any given period, our revenues are influenced by the amount of our assets under management,AUM, the investment performance of our funds and the timing of when we recognize incentive income for certain assets under managementAUM as discussed below.
The ability of investors to contribute capital to and redeem capital from our funds causes our assets under managementAUM to fluctuate from period to period. Fluctuations in assets under managementAUM also result from our funds’ investment performance. Both of these factors directly impact the revenues we earn from management fees and incentive income. For example, a $1$1.0 billion increase or decrease in assets under managementAUM subject to a 1% management fee would generally increase or decrease annual management fees by $10$10.0 million. If profits, net profitsof management fees, attributable to a fee-paying fund investor were $10$10.0 million in a given year, we generally would earn incentive income equal to $2$2.0 million, assuming a 20% incentive income rate, a one-year commitment period, no hurdle rate and no high-water marks from prior years.
For any given quarter, our revenues are influenced by the combination of assets under managementAUM and the investment performance of our funds. For the first three quarters of each year, our revenues are primarily comprised of the management fees we have earned for each respective quarter. In addition, we may recognizeexample, incentive income for assets under management for which the measurement period expiredmajority of our multi-strategy AUM is recognized in that quarter, such as assets subject to three-year commitment periods, or incentive income related to fund investor redemptions, and these amounts may be significant. In the fourth quarter our revenues are primarily comprised of the management fees we have earned for the quarter, as well as incentive income related to the full-yeareach year, based on full year investment performance generated on assets under management that are subject to one-year commitment periods, or for other assets under management for which the commitment period expired in that quarter.performance.
Management Fees. Management fees are generally calculated and paid to us on a quarterly basis in advance, based on the amount of assets under managementAUM at the beginning of the quarter. Management fees are prorated for capital inflows and redemptions during the quarter. Accordingly, changes in our management fee revenues from quarter to quarter are driven by changes in the quarterly opening balances of assets under management,AUM, the relative magnitude and timing of inflows and redemptions during the respective quarter, as well as the impact of differing management fee rates charged on those inflows and redemptions.redemptions, as well as the impact of the deferral of subordinated management fees from certain CLOs. See “—Weighted-Average Assets Under ManagementFP AUM and Average Management Fee Rates” for information on our average management fee rate.rate and Note 11 to our consolidated financial statements for additional information regarding management fees.


44


Incentive Income. We earn incentive income based on the cumulative performance of our funds over a commitment period. Incentive income is typically equal to 20% of the net realized and unrealized profits attributable to each fund investor in our multi-strategy funds, open-end opportunistic credit funds and certain other funds, but it excludes unrealized gains and losses attributable to Special Investments. For our closed-end opportunistic credit funds, real estate funds and certain other funds,We recognize incentive income is typically equalwhen such amounts are probable of not significantly reversing. See Note 11 to 20%our consolidated financial statements for additional information regarding incentive income.
Other Revenues. Other revenues consist primarily of the realized profits attributable to each fund investor. For ourinterest income on investments in CLOs, incentive income is typically 20% of the excess cash flows available to the holders of the subordinated notes. Our ability to earn incentive income from some of our funds may be impacted by hurdle ratesequivalents and long-term U.S. government obligations, as further discussed below.  
For funds that we consolidate, incentivewell as subrental income. Interest income is recognized by allocating a portion of the net income of the consolidated funds to us rather than to the fund investors (noncontrolling interests). Incentive income allocated to us is not reflected as incentive income in our consolidated revenues, as these amounts are eliminated in consolidation. The allocation of incentive income to us is based on the contractual terms of the relevant fund agreements. As a result, we may recognize earnings related to our incentive income allocation from the consolidated funds prior to the end of their respective commitment periods, and therefore we may recognize earnings that are subject to clawback to the extent a consolidated fund generates subsequent losses. For Economic Income purposes, we defer recognition of these earnings until they are no longer subject to clawback.
For funds that we do not consolidate, incentivean effective yield basis. Subrental income is recognized at the end of the applicable commitment period when the amounts are contractually payable, or “crystallized,” and when no longer subject to clawback. Additionally, all of our multi-strategy funds and open-end opportunistic credit funds are subject to a perpetual loss carry forward, or a perpetual “high-water mark,” meaning we would not be able to earn incentive income with respect to positive investment performance we generate for a fund investor in any year following negative investment performance until that loss is recouped, at which point a fund investor’s investment surpasses the high-water mark. We earn incentive income on any net profits in excess of the high-water mark.
The commitment period for most of our multi-strategy assets under management is for a period of one year on a calendar-yearstraight-line basis and therefore we generally crystallize incentive income annually on December 31. We may also recognize incentive income related to fund investor redemptions at other times duringover the year, as well as on assets under management subject to commitment periods that are longer than one year. We may also recognize incentive income for tax distributions related to these assets. Tax distributions are amounts distributed to us to cover tax liabilities related to incentive income that has been accrued at the fund level but will not be recognized by us until the end of the relevant commitment period (if at all). These tax distributions are not subject to clawback once distributed to us.lease term.
Approximately $16.8 billion, or 51%, of our assets under management as of September 30, 2017 were subject to initial commitment periods of three years or longer. These assets under management include assets subject to three-year commitment periods in the OZ Master Fund and certain other multi-strategy funds, as well as assets in our opportunistic credit funds, CLOs, real estate funds and certain other funds. Incentive income related to these assets is based on the cumulative investment performance over a specified commitment period (in the case of CLOs, based on the excess cash flows available to the holders of the subordinated notes), and, to the extent a fund is not consolidated, is not earned until it is no longer subject to repayment to the respective fund. Our ability to earn incentive income on these longer-term assets is also subject to hurdle rates whereby we do not earn any incentive income until the investment returns exceed an agreed upon benchmark. However, for a portion of these assets subject to hurdle rates, once the investment performance has exceeded the hurdle rate, we may receive a preferential “catch-up” allocation, resulting in a potential recognition by us of a full 20% of the net profits attributable to investors in these assets.
Income of Consolidated Funds. Entities.Revenues recorded as income of consolidated fundsentities consist primarily of interest income, dividend income, fees and other miscellaneous items.income.
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Expenses
Compensation and Benefits. Compensation and benefits consist of salaries, employee benefits, payroll taxes, and discretionary and guaranteed cash bonus expenses. We generally recognize compensation and benefits expenses over the related service period.
On an annual basis, compensation and benefits comprise a significant portion of total expenses, with discretionary cash bonuses generally comprising a significant portion of total compensation and benefits. These cash bonuses are based on total annual revenues, which are significantly influenced by the amount of incentive income we earn in the year. Through 2016,We accrue minimum annual discretionary cash bonuses were generally determined and expensed in the fourth quarter of each year. In the first quarter of 2017, we decided to provide a minimum annual discretionary cash bonus. As a result of this decision,


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we accrue the minimum annual discretionary cash bonus on a straight-line basis during the year. The total amount of discretionary cash bonusbonuses ultimately recognized for the full year, which is determined in the fourth quarter of each year, could differ materially from the minimum amount accrued, as the total discretionary cash bonus is dependent upon a variety of factors, including fund performance for the year.
Due to multi-year crystallizations in our credit and real estate funds, we may recognize discretionary bonus expense as incentive is generated at the fund level but before we recognize the related incentive income. As our discretionary cash bonuses are generally determined based on fund performance in a given year, there may be differences in the timing of when bonuses are accrued and when the corresponding incentive income is recognized, particularly for performance generated on our longer-term AUM and AUM that have annual incentive income crystallization dates other than at year-end. In the fourth quarter we recognize discretionary bonuses, which are largely based on current year fund performance regardless of the year in which incentive income is recognized. It is best to look at our compensation ratio on incentive income over a multi-year period given the difference in timing of these line items. For additional information on incentive income recognized at fund level but not yet recognized by us see “—Longer-Term AUM and Accrued Unrecognized Incentive Income” for additional information. We generally pay our bonuses in January of the year following the year in which bonuses were accrued.
Compensation and benefits also includesinclude equity-based compensation expense, which is primarily in the form of RSUs granted to our independent board members, employees and executive managing directors, as well as RSAs, PSUs and Partner Equity Units granted to executive managing directors. See Note 3These awards are structured to create strong alignment of economic interest between our consolidated financial statements includedexecutives and shareholders, in this report for a description of these units.
We also issue Group D Unitsaddition to executive managing directors. The Group D Units are not considered equity under GAAP, and therefore no equity-based compensation expense is recognized related to these units when they are granted. Distributions to holders of Group D Units are included within compensation and benefits in the consolidated statements of comprehensive income (loss). These distributions are accrued in the quarter in which the related income was earned and are paid out the following quarter at the same time distributions on the Group A Units and dividends on the Company’s Class A Shares are paid.
A Group D Unit converts into a Group A Unit to the extent the Company determines that it has become economically equivalent to a Group A Unit, at which point it is considered a grant of equity-based compensation for GAAP purposes. Upon the conversion of Group D Units into Group A Units, we recognize a one-time charge for the grant-date fair value of the vested units and begin to amortize the grant-date fair value of the unvested units over the vesting period. As additional Group D Units are converted into Group A Units in the future, we may see increasing non-cash equity-based compensation expense related to these units.
Effective March 1, 2017, the Board of Directors approved amendments to the Limited Partnership Agreements of the Oz Operating Group entities to adjust the measurement thresholds used in calculating the appreciation necessary to permit a determination that Group D Units issued prior to March 1, 2017 have become economically equivalent to Group A Units, making it more likely that outstanding Group D Units (and, due to the fact that economic equivalence is determined chronologically based on order of issuance, subsequently issued Group D Units) will convert to Group A Units. This adjustment had no impact on the combined total number of Group A Units, D Units and P Units outstanding, which was 417,072,691 as of September 30, 2017.retaining key talent.
We also have profit-sharing arrangements whereby certain employees or executive managing directors are entitled to a share of incentive income distributed by certainthat we earn primarily from our real estate funds. This incentive income is typically paid to us and then we pay a portion is paid to the profit-sharing participant as investments held by these funds are realized. We defer the recognition of any portion of this incentive income to the extent it is subject to clawback and relates to a fund that is not consolidated. See “—Incentive Income” above. To the extent that the payments to the employees or executive managing directors are probable and reasonably estimable, we accrue these payments as compensation expense for GAAP purposes, which may occur prior to the recognition of the related incentive income.
In August 2012,Deferred cash interests (“DCIs”) are also granted to certain employees and executive managing directors as a form of compensation. DCIs reflect notional fund investments made by us on behalf of an employee or executive managing director. DCIs generally vest over a three-year period, subject to an employee’s or executive managing director’s continued service. Upon vesting, we adoptedpay the Och-Ziff Capital Management Group LLC 2012 Partner Incentive Plan (the “PIP”), under which certainemployee or executive managing director an amount in cash equal to the notional investment represented by the DCIs, as adjusted for notional fund performance. Except as otherwise provided in the relevant DCI plan or in an award agreement, in the event of a termination of the employee’s or executive managing director’s service, any portion of the DCIs that is unvested as of the date of termination will be forfeited. These awards are designed to create strong alignment of economic interest between our executives and fund investors, in addition to retaining key talent.
Sculptor’s compensation structure is designed to align the interests of our executive managing directors at the timeand employees with those of the IPO may be eligible to receive discretionaryinvestors in our funds and our Class A Shareholders. Our compensation structure focuses on both individual and firm-wide performance through bonus compensation in a combination of equity and deferred cash awards and discretionary grants of Group D Unitsinterests that vest over a five-year period that commenced in 2013. Each year, an aggregate of up to 2,246,246 Group D Units may be granted under the PIP to the participating executive managing directors. Aggregate discretionary cash awards for each year under the PIP will be capped at 10% of our incentive income earned during such year, up to a maximum of $31.7 million per year. In addition to awards under the PIP, we may also issue additional performance-related Group D Units or make discretionary performance cash payments to our executive managing directors.time.
Interest Expense. Amounts included within interest expense relate primarily to indebtedness outstanding under our Senior Notes, Aircraft Loan, Revolving Credit Facility and CLO Investments Loans (as defined below). See “—Liquidity and Capital Resources—Debt Obligations” for a summary of the terms related to these borrowings. We repaid the outstanding balance under our Revolving Credit Facility and our Aircraft Loan in the first quarter of 2017.outstanding.


46


General, Administrative and Other. General, administrative and other expenses are comprised of professional services, occupancy and equipment, information processing and communications, recurring placement and related service fees, business development, insurance, impairment of right-of-use lease assets, foreign currency transaction gains and losses, and other miscellaneous expenses. In addition, the settlements expense incurred in 2016 isLegal costs are also included in this line item.within general, administrative and other.
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Expenses of Consolidated Funds.Entities. Expenses recorded as expenses of consolidated fundsentities consist of interest expense, general, administrative and other miscellaneous expenses.
Other (Loss) Income
Changes in Fair Value of Warrant Liabilities. Changes in fair value of warrant liabilities represent gains (losses) from changes in fair value of warrants.
Changes in Tax Receivable Agreement Liability. Changes in tax receivable agreement liability primarily consists of changes in our estimate of the future payments related to the tax receivable agreement describedthat result from changes in detailfuture income tax savings due to changes in tax rates. See Note 15.16 to our consolidated financial statements included in this report for additional information.
Net Gains (Losses) on Investments in Funds and Joint Ventures.Investments. Net gains (losses) on investments in funds and joint ventures primarily consist of realized and unrealized net gains and losses on investments in U.S. government obligations and investments in our funds, made by usincluding CLOs and net gains and losses on investments in joint ventures established to expand certain of our private investments platforms.other funds we manage.
Net (Losses) Gains of Consolidated Funds.Entities. Net (losses) gains of consolidated fundsentities primarily consist of net realized and unrealized gains (losses) on investments held by consolidated entities, changes in the fair value of the structured alternative investment solution’s assets and liabilities and related interest and other income, as well as changes in the fair value of warrant liabilities related to our consolidated funds.SPAC that was liquidated in the second quarter of 2023.
Income Taxes
Income taxes consist of our provision for federal, state and local income taxes in the United StatesU.S. and foreign income taxes, including provisions for deferred income taxes resulting from temporary differences between the tax and GAAP bases. The computation of the provision requires certain estimates and significant judgment, including, but not limited to, the expected taxable income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent differences between the tax and GAAP bases and the likelihood of being able to fully utilize deferred income tax assets existing as of the end of the period.
The Registrant and the OzSculptor Operating Partnerships are partnerships for U.S. federal income tax purposes and the Registrant is a corporation for U.S. federal income tax purposes. Due to our legal structure, only a portionGenerally all of the income we earn isallocated to the Registrant from the Sculptor Operating Group will be subject to corporate-level income taxes in the United States and foreign jurisdictions. The amount of incentive income we earn in a given year, the resultant flow of revenues and expenses throughU.S. See Note 12 to our legal entity structure, the effect that changes in our Class A Share price may have on the ultimate deduction we are able to take related to the settlement of RSUs, and any changes in future enacted income tax rates may have aconsolidated financial statements for additional information regarding significant impact onitems impacting our income tax provision and effective income tax rate.
Net Income (Loss)Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
Noncontrolling interests represent ownership interests in our subsidiaries held by parties other than us and are primarily made up of GroupA Units and fund investors’ interests in the consolidated funds.Units. Increases or decreases in net (loss) income (loss) attributable to the GroupA Units are driven by the earnings of the Oz SculptorOperating Group. Increases or decreasesSee Note 3 in the net income attributable to fund investors’ interests in consolidated funds are driven by the earnings of those funds as allocated under the contractual terms of the relevant fund agreements.
Ourour Annual Report for additional information regarding our ownership interest in the Oz SculptorOperating Group is expected to continue to increase over time as additionalGroup.
During second quarter of 2023, our consolidated SPAC was liquidated and its Class A Shares are issued upon the exchange of Group A Units and Group P Units, as well as the settlement of vested RSUs. These increases will be offset upon the conversion of Group D Units, which are not considered equity for GAAP purposes, into Group A Units. Additionally, the Company’s interest in the Oz Operating Group will decline when Group P Units begin to participate in the economics of the Oz Operating Group, as described in Note 3 to our consolidated financial statements included in this report.
We also consolidate certain of our opportunistic credit funds, wherein investors are able to redeem their interests after an initial lock-up period of up to three years.shares were redeemed. Allocations of earnings to these interests areshares were reflected within net income (loss) attributable to redeemable noncontrolling interests in the consolidated statements of comprehensiveoperations. Prior to its liquidation, increases or decreases in the net income (loss).

attributable to SPAC investors’ interests in the SPAC were driven primarily by interest income generated on investments in U.S. Treasury bills, changes in fair value of warrant liabilities of the SPAC and various expenses related to legal costs, business development and insurance. Change in redemption value of Class A Shares of the consolidated SPAC, including the impact of the deferred underwriting fee reversal as a result of the SPAC liquidation, were reflected within change in redemption value of redeemable noncontrolling interests in the consolidated statements of operations.

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47



Results of Operations
RevenuesThree and Nine Months Ended September 30, 2023Compared to Three and Nine Months Ended September 30, 2022
Net Loss Attributable to Class A Shareholders
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Net Loss Attributable to Class A Shareholders$(31,113)$(22,518)$(18,967)$(13,688)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Management fees$77,171
 $128,513
 $243,508
 $428,822
Incentive income51,249
 18,754
 168,990
 57,477
Other revenues1,524
 380
 4,081
 1,544
Income of consolidated funds2,055
 458
 3,518
 1,262
Total Revenues$131,999
 $148,105
 $420,097
 $489,105
Refer below for the discussion of the contributing factors to changes in net loss attributable to Class A Shareholders from the prior year.
Revenues
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Management fees$60,194 $66,236 $186,344 $211,443 
Incentive income17,801 7,566 62,383 73,788 
Other revenues7,683 3,576 20,931 8,526 
(Loss) income of consolidated entities(23)1,453 4,535 1,603 
Total Revenues$85,655 $78,831 $274,193 $295,360 
Total revenues for the quarter-to-date period decreased by $16.1were $85.7 million, increasing $6.8 million from prior year period, and total revenues for the year-to-date period were $274.2 million, decreasing $21.2 million when compared to the prior year period. These changes were primarily due to the following:
Management Fees
A $51.3Management fees decreased by $6.0 milliondecreasein management fees, for the quarter-to-date period and $25.1 million for the year-to-date period, driven primarily by lower average assets under management in our multi-strategy funds, as a result of net outflows as well as lower average management fee rates. See “Assets Under Managementcertain distributions in our credit and real estate funds. Please see “—Managing Business Performance—Multi-Strategy Funds” for additional information regarding the performance of the Sculptor Master Fund and “—Managing Business Performance—Weighted-Average Assets Under ManagementFP AUM and Average Management Fee Rate”Rates” and “—Managing Business Performance—Summary of Changes in FP AUM” above for information regarding our average management fee rate.rates and further detail on changes in FP AUM, respectively.
Incentive Income
Incentive income increased by $10.2 million for the quarter-to-date period and decreased by $11.4 million for the year-to-date period. This was primarily driven by:
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A $32.5

•Opportunistic credit funds. We recognized $6.3 millionincrease in incentive income, primarily due to the following:
•Multi-strategy funds. A $38.5 million increase in incentive income from our multi-strategy funds, primarily due to: (i) a $24.5 million increase due to crystallization of incentive related to fund investor redemptions; (ii) a $13.0 million increase related to fund investors with annual commitment periods that matured during the quarter; and (iii) a $1.0 million increase related to longer-term assets under management.
•Opportunistic credit funds. A $2.7 million increase in incentive income from our opportunistic credit funds, primarily due to increases in incentive income related to fund investors with annual commitment periods that matured during the quarter and $20.4 million year-to-date primarily from distributions in the Customized Credit Focused Platform. A $5.6 million increase for the quarter-to-date period was due to incentive income related to longer-term assets under management.recognized on distributions, whereas incentive is generally recognized at the end of a multi-year investment period, the timing of which will vary by fund and individual investor. Incentive income was flat year-over-year for the year-to-date period.
•Real estate funds. funds. We recognized $10.7 million of incentive in the quarter and $40.5 million year-to-date driven by crystallizations in Sculptor Real Estate Fund III, as the fund is realizing investments during its harvest period. A $9.2$4.1 million increase for the quarter-to-date period and a $12.4 million decrease for the year-to-date period was driven by timing of realizations in incentive income from our real estate funds primarily duewhich will vary from period to lower realizations in one of our real estate co-investment vehicles as compared toperiod based on exit opportunities.
Other Revenues
Other revenues increased by $4.1 million for the prior year period.
Total revenuesquarter-to-date period and increased $12.4 million for the year-to-date period primarily driven by higher interest income earned on both cash and cash equivalents, longer-term treasury bills and our risk retention investments in CLOs driven by higher interest rates.
Income of Consolidated Entities
Income of consolidated entities decreased by $69.0$1.5 million primarily due tofor the following:
A $185.3quarter-to-date period and increased $2.9 million for the year-to-date period. The quarter-to-date decreasein management fees, and year-to-date increase were driven primarily by lowerhigher interest income generated on the trust assets under managementof our consolidated SPAC invested in our multi-strategy funds, as well as lower average management fee rates. See “Assets Under Management and Fund Performance—Weighted-Average Assets Under Management and Average Management Fee Rate” above for information regarding our average management fee rate.
A $111.5 millionincreaseU.S. government obligations that were subsequently liquidated in incentivethe second quarter of 2023. For the year-to-date period, the increase in interest income primarilywas due to the following:
higher interest rates.
•Multi-strategy funds. A $109.6 million increase in incentive income from our multi-strategy funds, primarily due to: (i) a $46.6 million increase due to crystallization of incentive related to fund investor redemptions; (ii) a $37.3 million increase related to longer-term assets under management; (iii) a $23.2 million increase related to fund investors with annual commitment periods that matured during the period; and (iv) a $2.5 million increase related to tax distributions taken to cover tax liabilities on incentive income that has been accrued on certain longer-term assets under management, but that will not be realized until the end of the relevant commitment period.
•Opportunistic credit funds. A $10.9 million increase in incentive income from our opportunistic credit funds, primarily due to: (i) a $4.6 million increase from tax distributions; (ii) a $2.7 million increase related to fund investors with annual commitment periods that matured during the period; (iii) a $2.5 million increase related to longer-term assets under management; and (iv) a $1.1 million increase due to crystallization of incentive related to fund investor redemptions.


48


•Real estate funds. A $12.5 million decrease in incentive income from our real estate funds, primarily due to lower realizations in one of our real estate co-investment vehicles and Och-Ziff Real Estate Fund I, as compared to the prior year period.
Expenses
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Compensation and benefits$74,490
 $57,758
 $214,112
 $169,762
Interest expense5,611
 6,129
 17,043
 17,452
General, administrative and other33,136
 56,125
 114,229
 596,321
Expenses of consolidated funds8,824
 17
 9,368
 316
Total Expenses$122,061
 $120,029
 $354,752
 $783,851
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Compensation and benefits$62,081 $67,130 $188,187 $224,658 
Interest expense6,712 3,876 18,462 10,588 
General, administrative and other42,088 28,290 105,811 82,031 
Expenses of consolidated entities229 1,031 2,080 2,943 
Total Expenses$111,110 $100,327 $314,540 $320,220 
Total expenses for the quarter-to-date period increased by $2.0were $111.1 million, increasing $10.8 million year-over-year, and total expenses for the year-to-date period were $314.5 million, decreasing $5.7 million year-over-year, primarily due to the following:
Compensation and Benefits
A $16.7 millionincrease in compensationCompensation and benefits expenses,decreased by $5.0 million and $36.5 million for the quarter-to-date and year-to-date periods, respectively, primarily driven by:
•Bonus expense was relatively flat for the quarter-to-date period and decreased $16.1 million for the year-to-date period primarily as a result of lower carried interest profit sharing expense linked to incentive income generated by Sculptor Real Estate Fund III and Sculptor Real Estate Credit Fund I.
•Equity-based compensation expenses decreased by $4.8 million and $22.4 million for the following: (i) a $15.0 million increase in bonus expensequarter-to-date and year-to-date periods, respectively, primarily due to the decision to provide and accrue for minimum discretionary bonuses; and (ii) a $4.0 million increase in equity-based compensation. The increase in equity-based compensation expenses was primarily driven by $6.1 million of Group P Units amortization, which units were granted in 2017, partially offset by a $3.1following:
◦A $3.8 million decrease in Group A Units amortizationfor the quarter-to-date period and a $18.4 million decrease for the year-to-date period, primarily related to amortizations of RSUs and RSAs due to fewer units outstanding, and lower weighted-average grant date fair value year-over-year for the RSUs.
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◦A $1.1 million decrease for the quarter-to-date period and a lower number of unvested$3.7 million decrease for the year-to-date period related to Group E Units, as fewer units outstanding. Theseremain unvested.
Interest Expense
$2.8 million and $7.9 million increases in compensationinterest expense for the quarter-to-date and benefits expenses were partially offset by a $2.8 million decrease in salaries and benefits,year-to date periods, respectively, primarily due to lower headcount as our global headcount decreased to 491 as of September 30, 2017 from 548 as of September 30, 2016.
higher interest rates.
An $8.8 millionincrease in expenses of consolidated funds was primarily due to consolidation of a CLO in warehouse during the secondGeneral, Administrative and third quarters of 2017. The CLO was deconsolidated at launch in September of 2017.
Other Expenses
An offsetting $23.013.8 milliondecrease and $23.8 million increases in general, administrative and other expenses driven primarily by the following: (i) an $8.8 million decrease in professional services, which was driven primarily by lower legal fees; (ii) a $4.4 million decrease in the prior year period related to one of our corporate aircraft that was reclassified as held for sale during the third quarter of 2016; (iii) a $4.0 million decrease in recurring placement and related service fees; and (iv) a $2.2 million decrease in insurance expense. The remainder of the decrease was due to reductions across various other expenses.
An offsetting $518 thousanddecrease in interest expense, primarily due to the repayments of the Revolving Credit Facility and the Aircraft Loan in the first quarter of 2017. These decreases were partially offset by increases due to interest expense on the CLO Investments Loans that were entered into in November 2016 and throughout 2017.
Total expenses for the year-to-date period decreased $429.1 million, primarily due to the following:
A $482.1 milliondecrease in general, administrative and other expenses driven primarily by $412.1 million of settlements expense accrued in 2016, as well as a $30.2 million decrease in professional services, which was driven primarily by lower legal fees, as well as reductions across various other expenses.
An offsetting $44.4 millionincrease in compensation and benefits expenses primarily driven by the following: (i) a $46.9 million increase in bonus expense primarily due to the decision to provide and accrue for minimum discretionary bonuses; and (ii) a $7.4 million increase in equity-based compensation expense. The increase in equity-based compensation expense was primarily driven by $14.2 million of Group P Units amortization, which units were granted in 2017, and a $2.6 million increase in RSU amortization, offset by a $9.4 million decrease in Group A Units amortization due to a lower number of unvested units outstanding. Further contributing to the increase in compensation and benefits expenses was a $2.1 million increase in distributions accrued on the Group D Units. These increases were partially offset by a $12.0 million decrease in salaries and benefits, which was primarily due to lower headcount, as discussed above.


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A $9.1 millionincrease in expenses of consolidated funds was primarily due to consolidation of a CLO in warehouse during the second and third quarters of 2017. The CLO was deconsolidated at launch in September of 2017.
Other Income
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Changes in tax receivable agreement liability$—
 $11,819
 $—
 $11,990
Net gains on investments in funds and joint ventures264
 803
 1,050
 1,302
Net gains of consolidated funds7,658
 821
 8,278
 2,182
Total Other Income$7,922
 $13,443
 $9,328
 $15,474
Total other income decreased for the quarter-to-date and year-to-date periods, respectively, primarily due to decreasean increase in professional services expenses, largely as a result of elevated legal costs for the activities of the Special Committee of our Board of Directors.
Other (Loss) Income
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Changes in fair value of warrant liabilities$(9,717)$(2,386)$(9,977)$40,690 
Changes in tax receivable agreement liability225 (14)(302)206 
Net gains (losses) on investments7,051 (2,989)17,187 (39,171)
Net gains (losses) of consolidated entities(9,440)(3,498)303 (5,792)
Other$(1,406)$— $(1,406)$— 
Total Other (Loss) Income$(13,287)$(8,887)$5,805 $(4,067)
Total other loss for the quarter-to-date period was $13.3 million, increasing from a loss of $8.9 million by $4.4 million year-over-year. Total other income for the year-to-date period was $5.8 million increasing from a loss of $4.1 million by $9.9 million year-over-year, which resulted from the following:
•Changes in fair value of warrant liabilities. These represent the change in the fair value of warrants to purchase our Class A Shares that were issued in connection with the 2020 Credit Agreement. The primary driver of the changes in fair value for both 2023 and 2022 was the change in our Class A Share price and the warrants strike price during each of the respective periods. See Note 4 to our consolidated financial statements included in this report for additional details on warrants valuation inputs.
•Changes in tax receivable agreement liability. These are a result of changes in projected future tax rates impacting the anticipated liability partially offsetunder the tax receivable agreement.
•Net gains (losses) on investments. Investment income increased by higher$10.0 million and $56.4 million for the quarter-to-date and year-to-date periods, respectively. This was primarily due to gains on our risk retention investments in our CLOs and equity method investments in our multi-strategy funds, compared to the prior year period in which these investments generated losses.
•Net gains (losses) of consolidated entities. Losses of consolidated entities increased by $5.9 million for the quarter-to-date period and decreased by $6.1 million for the year-to-date period. These changes were primarily due to fair value changes on our investment in our consolidated funds.structured alternative investment solution. Additionally the year-to-date period increase in gains includes changes in the fair value of the warrant liabilities related to our consolidated SPAC, which was subsequently liquidated in the second quarter of 2023.
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Income Taxes
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Income taxes$1,942
 $9,986
 $17,242
 $39,436
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(dollars in thousands)
Income taxes$(280)$227 $11,277 $(720)
Income tax expense for the quarter-to-date period and year-to-date period decreased by $8.0$0.5 million and $22.2 million, respectively. For the quarter-to-date period, the decrease was due to lower income before taxes, as well as a higher percentage of incentive income earned inprofitability for the current period, not subject to corporate level income taxes.
Forand increased by $12.0 million for the year-to-date period, although our GAAP income was higher period-over-period, our taxable income was lower primarily due to increase in foreign taxes and disallowed expenses partially offset by loss recognized on the non-deductible settlements expense accrued in the first nine monthsdissolution of 2016, as well as a higher percentage of incentive income earned in the current period not subject to corporate level income taxes.SPAC.
Net Income (Loss) AllocatedLoss Attributable to Noncontrolling Interests
The following table presents the components of the net income (loss) allocatedloss attributable to noncontrolling interests and net income attributable to redeemable noncontrolling interests:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Group A Units$(8,667)$(9,478)$(26,776)$(17,260)
Other1,318 68 3,400 1,423 
Noncontrolling Interests$(7,349)$(9,410)$(23,376)$(15,837)
Redeemable noncontrolling interests$— $(1,492)$(3,350)$(5,257)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Group A Units$9,500
 $16,313
 $41,145
 $(187,338)
Consolidated funds—
 —
 —
 262
Other260
 257
 535
 209
Total$9,760
 $16,570
 $41,680
 $(186,867)
        
Redeemable noncontrolling interests$432
 $678
 $1,238
 $1,801


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Net loss attributable to noncontrolling interests for the quarter-to-date period was $7.3 million, increasing by $2.1 million compared to the prior year period. Net loss attributable to noncontrolling interests was $23.4 million for the year-to-date period, increasing by $7.5 million compared to the prior year period. The increase in loss was driven by higher losses generated by Sculptor Capital Advisors LP and Sculptor Capital Advisors II LP in the third quarter of 2023 as compared to the third quarter of 2022. There was no income allocated to the noncontrolling interests decreasedfrom Sculptor Capital LP in those periods. During the Distribution Holiday, net income earned by $6.8any Sculptor Operating Partnership is allocated 100% to Sculptor Capital Management, Inc., while losses are allocated on a pro rata basis among the Group A Units (noncontrolling interests) and Sculptor Capital Management, Inc. as described in Note 3 to the financial statements included in this report.
Net income attributable to redeemable noncontrolling interests relates to the SPAC that was liquidated during the second quarter of 2023. As a result, there was no gain or loss attributed to the redeemable noncontrolling interests in the third quarter of 2023. The $1.9 million decrease for the quarter-to-date period. The decreaseyear-to-date period was primarily due to decreased earningsa gain related to change in fair value of Oz Operating Group,the SPAC’s warrant liabilities, which expired worthless in the second quarter of 2023 and higher interest income earned on the SPAC’s trust assets before they were liquidated.
Change in Redemption Value of Redeemable Noncontrolling Interests
The following table presents the change in redemption value of redeemable noncontrolling interests:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Change in redemption value of redeemable noncontrolling interests$— $174 $6,826 $3,939 
The change in redemption value of redeemable noncontrolling interest for year-to-date period was a portiongain of which was allocable$6.8 million, increasing by $2.9 million compared to the Group A Units. The quarter-to-date decrease was primarily dueprior year period. These amounts represent the accretion to lower management fees, partially offset by higher incentive income, lower taxes and lower general, administrative and other expenses.
Net income (loss) allocated to noncontrolling interests increased by $228.5 million. The increase was primarily due to improved earningsredemption value of the Oz Operating Group, a portion of which was allocable to the GroupSPAC’s Class A Units. The increase wasShares driven by the settlements expense takenfluctuations in 2016, as well as higher incentive income and lower income taxes year-over-year, partially offset by lower management fees. These improvements were also partially offset by higher bonus expense, which was driven by our decisionthe SPAC’s earnings allocated to provide a minimum annual discretionary cash bonus, as discussed above.
Net Income (Loss) Attributable tothe SPAC’s Class A Shareholdersshareholders and a
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 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Net income (loss) attributable to Class A Shareholders$5,726
 $14,285
 $11,660
 $(133,642)
Net income attributablereversal of deferred underwriting fee originally allocated to the SPAC issued Class A Shareholders decreased by $8.6 millionShares due to SPAC liquidation. No change in redemption value was recorded for the quarter-to-date period. The quarter-to-date decreaseperiod since the SPAC was primarily due to lower management fees, partially offset by higher incentive income, lower taxes and lower general, administrative and other expenses.liquidated during the second quarter of 2023.
Net income (loss) attributable to Class A Shareholders increased by $145.3 million for the year-to-date period. The year-to-date improvement was driven primarily by the settlements expense taken in 2016, as well as higher incentive income and lower income taxes year-over-year, partially offset by lower management fees. These improvements were also partially offset by higher bonus expense, which was driven by our decision to provide a minimum annual discretionary cash bonus, as discussed above.
Economic Income Analysis
In addition to analyzing our results on a GAAP basis, management also reviews our results on an “Economic Income” basis. Economic Income excludes the adjustments described below that are required for presentation of our results on a GAAP basis, but that management does not consider when evaluating operating performance in any given period. Management uses Economic Income as the basis on which it evaluates our financial performance and makes resource allocation and other operating decisions. Management considers it important that investors review the same operating information that it uses.
Economic Income is a measure of pre-tax operating performance that excludes the following from our results on a GAAP basis:
•Equity-based compensation expenses, net of cash settled RSUs. When the number of RSUs to be settled in cash is discretionary at the time of the grant, then the fair value of RSUs that are settled in cash is included as an expense at the time of settlement. When the number of RSUs to be settled in cash is certain on the grant date, then the expense is recognized during the performance period to which the award relates.
•Amounts related to non-cash interest expense accretion on term debt. The 2020 Term Loan and Debt Securities, which were issued in connection with the Recapitalization, were each recognized at a significant discount, as proceeds from each borrowing were allocated to warrant liabilities and the 2019 Preferred Units, respectively, resulting in non-cash accretion to par over time through interest expense for GAAP. The Debt Securities and the 2019 Preferred Units were fully redeemed in 2020. Management excludes this non-cash expense from Economic Income, as it does not consider it to be reflective of our economic borrowing costs.
•Depreciation and amortization expenses, changes in fair value of warrant liabilities, changes in the tax receivable agreement liability, net losses on retirement of debt, gains and losses on fixed assets, gains and losses on investments in funds, and changes in fair value of derivatives as management does not consider these items to be reflective of operating performance.
•Impairment of right-of-use lease assets is excluded from Economic Income at the time the impairment is recognized for GAAP and the impact is then amortized over the lease term for Economic Income, as management evaluates impairment expenses over the life of the related lease asset and considers the impairment charge to be nonrecurring in nature. Additionally, rent expense is offset by subrental income as management evaluates rent expenses on a net basis.
•Income allocations to our executive managing directors on their direct interests in the OzSculptor Operating Group. Management reviews operating performance at the OzSculptor Operating Group level, where our operations are performed, prior to making any income allocations.
Equity-based compensation expenses, depreciation and amortization expenses, and gains and losses on fixed assets,•Net income (loss) attributable to redeemable noncontrolling interests, which relates to our consolidated SPAC that was liquidated during the second quarter of 2023, is also eliminated as management does not consider this to be reflective of operating performance.
•Amounts related to the consolidated entities, as management does not consider these itemsamounts to be reflectiverepresentative of our core operating performance. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement.
Changes in the tax receivable agreement liability and gains and losses on investments in funds, as management does not consider these items to be reflective of operating performance.
Amounts related to the consolidated funds, includingWe also exclude the related eliminations of management fees and incentive income, as management reviews the total amount of management fees and incentive income earned in relation to total assets under managementAUM and fund performance.

Additionally, management fees are presented net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense.

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In addition, expensesExpenses related to compensation andincentive income profit-sharing arrangements based on fund investment performance are generally recognized at the same time the related incentive income revenue is recognized, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned byfrom the relevant fund.
Further, for Economic Income deferred cash compensation is expensed in full induring the year granted for Economic Income,performance period to which the award relates, rather than over the service period for GAAP.GAAP, as management views the compensation expense impact in relation to the performance period.
As a result of the adjustments described above, as well as an adjustment to present management fees net of recurring placement and related service fees (rather than considering these fees an expense), management fees, incentive income, other revenues, compensation and benefits, non-compensationinterest expense, general, administrative and other expenses, net income (loss) attributable to noncontrolling interests and net income (loss) allocatedattributable to redeemable noncontrolling interests as presented on an Economic Income basis are also non-GAAP measures.
For reconciliations of our non-GAAP measures to the respective GAAP measures, please see “—Economic Income Reconciliations” at the endsection of this MD&A.
Our non-GAAP financial measures should not be considered as alternatives to our GAAP net income allocated to Class A Shareholders or cash flow from operations, or as indicative of liquidity or the cash available to fund operations. Our non-GAAP measures may not be comparable to similarly titled measures used by other companies.
We currently have two operating segments:Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022
Economic Income (Non-GAAP)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(dollars in thousands)
Economic Income$(2,994)$5,747 $18,738 $67,513 
Refer below for the Oz Funds segment and our real estate business. The Oz Funds segment, which provides asset management servicesdiscussion of the contributing factors to our multi-strategy funds, dedicated credit funds and other alternative investment vehicles, is currently our only reportable operating segment under GAAP. Our real estate business, which provides asset management services to our real estate funds, is included within Other Operations as it does not meetchanges in Economic Income from the threshold of a reportable operating segment under GAAP.prior year.
Economic Income Revenues (Non-GAAP)
Three Months Ended September 30,Nine Months Ended September 30,
Three Months Ended September 30, 2017 Three Months Ended September 30, 20162023202220232022
Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
(dollars in thousands)(dollars in thousands)
Economic Income Basis           Economic Income Basis
Management fees$67,287
 $5,057
 $72,344
 $114,521
 $5,184
 $119,705
Management fees$56,138 $61,225 $174,167 $195,295 
Incentive income50,476
 773
 51,249
 16,202
 2,552
 18,754
Incentive income17,801 7,566 62,431 73,715 
Other revenues1,627
 38
 1,665
 378
 2
 380
Other revenues6,537 2,659 17,818 5,703 
Total Economic Income Revenues$119,390
 $5,868
 $125,258
 $131,101
 $7,738
 $138,839
Total Economic Income Revenues$80,476 $71,450 $254,416 $274,713 
Economic Income revenues for the quarter-to-date period decreased by $13.6were $80.5 million, increasing $9.0 million, and Economic Income revenues for the year-to-date period were $254.4 million, decreasing $20.3 million from the prior year period. These changes were primarily due to the following:
A $47.4
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Management Fees
Management fees decreased by $5.1 milliondecreasein management fees, for the quarter-to-date period and $21.1 million for the year-to-date period, driven primarily by lower average assets under management in our multi-strategy funds, as a result of net outflows as well as lower average management fee rates. See “Assets Under Managementcertain distributions in our credit and real estate funds. Please see “—Managing Business Performance—Multi-Strategy Funds” for additional information regarding the performance of the Sculptor Master Fund and “—Managing Business Performance—Weighted-Average Assets Under ManagementFP AUM and Average Management Fee Rate”Rates” and “—Managing Business Performance—Summary of Changes in FP AUM” above for information regarding our average management fee rate.
rates and further detail on changes in FP AUM, respectively.
Incentive Income
A $32.5 millionincrease in incentiveIncentive income primarily due toincreased by $10.2 million for the following:
•Multi-strategy funds. A $38.5quarter-to-date period and decreased $11.3 million increase in incentive income from our multi-strategy funds, primarily due to: (i) a $24.5 million increase due to crystallization of incentive related to fund investor redemptions; (ii) a $13.0 million increase related to fund investors with annual commitment periods that matured during the quarter; and (iii) a $1.0 million increase related to longer-term assets under management.
•Opportunistic credit funds. A $2.7 million increase in incentive income from our opportunistic credit funds, primarily due to increases in incentive income related to fund investors with annual commitment periods that matured during the quarter and incentive income related to longer-term assets under management.
•Real estate funds. A $9.2 million decrease in incentive income from our real estate funds, primarily due to lower realizations in one of our real estate co-investment vehicles as compared to the prior year period.


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 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
 (dollars in thousands)
Economic Income Basis           
Management fees$212,420
 $15,600
 $228,020
 $381,904
 $15,556
 $397,460
Incentive income165,719
 3,271
 168,990
 50,105
 7,372
 57,477
Other revenues2,860
 104
 2,964
 1,533
 11
 1,544
Total Economic Income Revenues$380,999
 $18,975
 $399,974
 $433,542
 $22,939
 $456,481
Total revenues for the year-to-date period, decreased by $56.5 million, primarily due to the following:
•Opportunistic credit funds. We recognized $6.3 million of incentive in the quarter and $20.4 million year-to-date primarily from distributions in the Customized Credit Focused Platform. A $169.4$5.6 milliondecreasein management fees, driven primarily by lower assets under management in our multi-strategy funds, as well as lower average management fee rates. See “Assets Under Management and Fund Performance—Weighted-Average Assets Under Management and Average Management Fee Rate” above increase for information regarding our average management fee rate.
A $111.5 millionincrease inthe quarter-to-date period was due to incentive income primarily due to the following:
•Multi-strategy funds. A $109.6 million increase inrecognized on distributions, whereas incentive income from our multi-strategy funds, primarily due to: (i) a $46.6 million increase due to crystallization of incentive related to fund investor redemptions; (ii) a $37.3 million increase related to longer-term assets under management; (iii) a $23.2 million increase related to fund investors with annual commitment periods that matured during the period; and (iv) a $2.5 million increase related to tax distributions taken to cover tax liabilities on incentive income that has been accrued on certain longer-term assets under management, but that will not be realized untilis generally recognized at the end of a multi-year investment period, the relevant commitmenttiming of which will vary by fund and individual investor. Incentive income was flat year-over-year for the year-to-date period.
•Opportunistic credit funds. A $10.9 million increase in incentive income from our opportunistic credit funds, primarily due to: (i) a $4.6 million increase from tax distributions; (ii) a $2.7 million increase related to fund investors with annual commitment periods that matured during the period; (iii) a $2.5 million increase related to longer-term assets under management; and (iv) a $1.1 million increase due to crystallization of incentive related to fund investor redemptions.
•Real estate funds. We recognized $10.7 million of incentive in the quarter and $40.5 million year-to-date driven by crystallizations in Sculptor Real Estate Fund III, as the fund is realizing investments during its harvest period. A $12.5$4.1 million increase for the quarter-to-date and $12.4 million decrease for the year-to-date period was driven by timing of realizations in incentive income from our real estate funds which will vary from period to period based on exit opportunities.
Other Revenues
Other revenues increased by $3.9 million for the quarter-to-date period and increased $12.1 million for the year-to-date period primarily due to lower realizationsas a result of higher interest income on our cash and cash equivalents, longer-term treasury bills and our risk retention investments in one of our real estate co-investment vehicles and Och-Ziff Real Estate Fund I, as compared to the prior year period.CLOs driven by higher interest rates.
Economic Income Expenses (Non-GAAP)
Three Months Ended September 30,Nine Months Ended September 30,
Three Months Ended September 30, 2017 Three Months Ended September 30, 20162023202220232022
Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
(dollars in thousands)(dollars in thousands)
Economic Income Basis           Economic Income Basis
Compensation and benefits$38,500
 $5,090
 $43,590
 $33,506
 $2,438
 $35,944
Compensation and benefits$40,984 $40,935 $130,144 $138,143 
Non-compensation expenses31,124
 557
 31,681
 44,877
 605
 45,482
Interest expenseInterest expense6,446 3,613 17,693 9,825 
General, administrative and other expensesGeneral, administrative and other expenses36,041 21,247 87,841 59,232 
Total Economic Income Expenses$69,624
 $5,647
 $75,271
 $78,383
 $3,043
 $81,426
Total Economic Income Expenses$83,471 $65,795 $235,678 $207,200 

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Economic Income expenses for the quarter-to-date period decreased by $6.2were $83.5 million, increasing $17.7 million year-over-year, and for the year-to-date period were $235.7 million, increasing $28.5 million year-over-year, primarily due to the following:
Compensation and Benefits
A $13.8Compensation and benefits remained flat for the quarter-to-date period and decreased $8.0 million for the year-to-date period primarily driven by a decrease of $9.9 million in non-compensation expenses bonus expense. This was primarily due to changes in real estate profit sharing expense linked to incentive income generated by Sculptor Real Estate Fund III.
Interest Expense
$2.8 million and $7.9 million increases in interest expense for the quarter-to-date and year-to date periods, respectively, primarily due to higher interest rates.
General, Administrative and Other Expenses
$14.8 million and $28.6 million increases in general, administrative and other expenses for the quarter-to-date and year-to-date periods, respectively, primarily due to an $8.8 million decreaseincrease in professional services which was driven by lower legal fees, as wellexpenses, largely as a $2.2 million decrease in insurance expense. The remainderresult of elevated legal costs for the activities of the decrease was due to reductions across various other expenses.
Special Committee of our Board of Directors.
A $7.6 millionincrease in compensation and benefit expenses primarily due to a $10.5 million increase in bonus expense, which was driven by the decision to provide and accrue for minimum discretionary bonuses, partially offset by a $2.8 million decrease in salaries and benefits expense, which was driven by lower headcount.
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
 (dollars in thousands)
Economic Income Basis           
Compensation and benefits$118,168
 $14,887
 $133,055
 $98,604
 $7,092
 $105,696
Non-compensation expenses104,942
 1,841
 106,783
 564,750
 2,715
 567,465
Total Economic Income Expenses$223,110
 $16,728
 $239,838
 $663,354
 $9,807
 $673,161
Economic Income expenses for the year-to-date period decreased by $433.3 million, primarily due to the following:
A $460.7 milliondecrease in non-compensation expenses, driven primarily by $412.1 million of settlements expense accrued in 2016, as well as a $30.2 million decrease in professional services, which was driven primarily by lower legal fees, as well as reductions across various other expenses.
A $27.4 millionincrease in compensation expenses primarily due to a $39.3 million increase in bonus expense, which was driven by the decision to provide and accrue for minimum discretionary bonuses, partially offset by a $12.0 million decrease in salaries and benefits expense, which was driven by lower headcount.
Economic Income (Non-GAAP)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (dollars in thousands)
Economic Income:       
Oz Funds Segment$49,768
 $52,725
 $157,891
 $(229,800)
Other Operations221
 4,695
 2,247
 13,132
Total Company$49,989
 $57,420
 $160,138
 $(216,668)
Economic Income decreased by $7.4 million for the quarter-to-date period. The quarter-to-date decrease was driven primarily by lower management fees and higher bonus expense, partially offset by higher incentive income and lower non-compensation expenses.
Economic Income increased by $376.8 million for the year-to-date period. The year-to-date period improvement was driven primarily by the settlements expense taken in 2016, as well as higher incentive income. These increases were partially offset by lower management fees and higher bonus expense.
Liquidity and Capital Resources
In September 2016, we entered into the Purchase Agreement with the EMD Purchasers, including Daniel S. Och, to issue up to $400.0 million of Preferred Units. Pursuant to the agreement, in October 2016, we completed a $250.0 million issuance and sale of Preferred Units to the EMD Purchasers and completed an additional $150.0 million issuance and sale of Preferred Units to EMD Purchasers in January 2017. We used the proceeds from the Preferred Units issued in October 2016, as


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well as cash on hand, to pay the $412.1 million in penalties and disgorgement related to the settlements with the SEC and the DOJ discussed above. We used the proceeds from the second sale of the Preferred Units in January 2017 to pay the outstanding balance under our Revolving Credit Facility. See Note 10 to our consolidated financial statements included in this report for details regarding the terms of the Preferred Units.Overview
The working capital needs of our business have historically been met, and we anticipate will continue to be met, through cash generated from management fees and incentive income earned by the Oz Operating Group from our funds.
We ended the quarter with $159.4 million of unrestricted cash and cash equivalents, and $26.6 million of management fees and incentive income receivable the majority of which will be collected in the fourth quarter of 2023 and $79.4 million of investments in U.S. government obligations that we can liquidate as needed. We also have access to an additional $25.0 million through our undrawn 2020 Revolving Credit Facility.
Based on management’s experience and our current level of AUM, we believe that our current liquidity position, together with the cash generated from management fees will be sufficient to meet our anticipated fixed operating expenses (as defined below) and other working capital needs for at least the next 12 months. For our longer-term liquidity needs, we expect to continue to fund our fixed operating expenses through management fees and to fund discretionary cash bonuses and the repayment of our financing arrangements through a combination of management fees and incentive income. We may also decide to meet these requirements by issuing additional debt, equity or other securities.
Over the long term, we believe our AUM will grow, including longer-term fee generating capital, and sustain positive investment performance in our funds, which will reflect positively on our revenue streams strengthening the balance sheet and providing the firm with stability to cover our long-term liquidity requirements.
To maintain maximum flexibility to meet demands and opportunities both in the short and long term, and subject to existing contractual arrangements, including the terms of the Merger Agreement with Rithm, we may want to use cash on hand, issue additional equity or borrow additional funds to:
•Support the future growth in our business.
•Create new or enhance existing products and investment platforms.
•Repay amounts due under our debt obligations and repurchase agreements.
•Repay amounts due under the tax receivable agreement.
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•Pursue new investment opportunities.
•Develop new distribution channels.
On July 23, 2023, we entered into the Merger Agreement with Rithm, which was amended on October 12, 2023 and October 26, 2023. The Merger Agreement contains limitations on actions that we may take between signing and closing without the consent of Rithm, including the declaration or payment of dividends, the repurchase of shares of our capital stock and entry into new lines of business. See Note 17 to the unaudited consolidated financial statements for more information regarding the Merger Agreement.
Share Repurchase Program
In February 2022, the Board of Directors authorized us to repurchase up to $100.0 million of our outstanding common stock. As of September 30, 2023, we repurchased 3,022,380 Class A Shares at the average price of $10.75 per share. No shares were repurchased in the three months ended September 30, 2023. The repurchase program has no expiration date. On July 23, 2023, we entered into the Merger Agreement, as wellamended on October 12, 2023 by Amendment No. 1 to Agreement and Plan of Merger, as other sourcesfurther amended on October 26, 2023 by Amendment No. 2 to Agreement and Plan of liquidity noted above and below.Merger, with entities affiliated with Rithm. We do not intend to repurchase any shares while the Merger Agreement remains in effect. See Note 17 to the unaudited consolidated financial statements for more information regarding the Merger Agreement.
Liquidity Needs
Over the next 12 months, we expect that our primary liquidity needs will be to:
•Pay our operating expenses, primarily consisting of compensation and benefits and non-compensation expenses.
•Pay interest and principal on our debt obligations.financing arrangements.
•Provide capital to facilitate the growth of our business, including making risk retention investments in CLOs managed by us.us that are subject to EU and UK risk retention rules, investments in our funds and fund capital commitments to our funds.
•Pay income taxes, as well as compensation-relatedRSU tax withholding obligations.obligations and amounts due under the tax receivable agreement.
•Make cashtax distributions in accordance with our distribution policyrequired to be made pursuant to the Sculptor Operating Partnership agreements and distributions necessary to allow us to make payments as discussed below under “—Dividends and Distributions.”required pursuant to the tax receivable agreement.
Historically,Operating Expenses
We generally rely on management fees have been sufficient to cover all of our “fixed” operating expenses, which we define as salaries, benefits, a minimum discretionary bonus and general, administrative and other expenses, including upcoming lease payments as presented in Note 6 to our non-compensation costsconsolidated financial statements, incurred in the ordinary course of business. We recently reduced our management fee rates for existing investors in virtually all of our multi-strategy assets under management. These rate reductions combined with year-over-year net capital outflows have resulted in lower management fees, and while we are making every effort to scale our operations so that management fees are sufficient to cover our fixed operating expenses, our current management fees do not cover our current fixed operating expenses. No assurances can be given that our management fees ultimately will be sufficient for these purposesto cover our fixed operating expenses in future periods.
In To the event thatextent our management fees do not cover our fixed operating expenses, as well as to fund any other liabilities, we would rely on cash on hand and incentive income to cover any shortfall, as well as to fund any other liabilities.shortfall. We cannot predict the amount of incentive income, if any, that we may earn in any given year. Total annual revenues, which are heavily influenced by the amount of incentive income we earn, historically have been sufficient to fund both our fixed operating expenses and all of our other working capital needs, including annual discretionary cash bonuses. These cash bonuses, which historically have comprised our largest cash operating expense, are variable such that in any year where total annual revenues are greater or less than the prior year, cash bonuses may be adjusted accordingly. Our ability to scale our largest cash operating expense to our total annual revenues helps us manage our cash flow and liquidity position from year to year.
Based on our past results, management’s experience and our current level of assets under management, we believe that our existing cash resources, together with the cash generated from management fees will be sufficient to meet our anticipated fixed operating expenses and other working capital needs for at least the next 12 months.
Historically, we have determined the amount of discretionary cash bonuses including discretionary annual cash awards under the PIP, during the fourth quarter of each year, based on our total annual revenues.revenues and fund performance. We have historically funded these amounts through fourth quarter management fees and incentive income crystallized on December 31, which represents the majority of the incentive income we
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typically earn each year. Starting in the first quarter of 2017,Related to performance on longer-term AUM, we began to accrue a minimum amount of discretionary cash bonusesbonus expense on a pro rata basis throughout the year. To the extent our funds generateABURI which will not be recognized as incentive income in the fourth quarter,current year, but will have associated bonus expense in the current year period. This ABURI could crystallize into incentive income in future periods without the associated bonus expense, which would shift attributable earnings into future periods. In addition, we may elect to increase the amount of cash bonuses paid to employees over the amount already accrued throughout the year, with any incremental amounts recognized as expense in the fourth quarter. Although we cannot predict the amount, if any, of incentive income we may earn, we are able to regularly monitor expected management fees and we believe that we willmay be able to adjust our expense infrastructure, including discretionary cash bonuses, as needed to meet the requirements of our business and in order to maintain positive operating cash flows. Nevertheless, if we generate insufficient cash flows from operations to meet our short-term liquidity needs, we may have to borrow funds or sell assets, subject to existing contractual arrangements.


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Financing Arrangements
We may use cash on hand to repay all or a portion ofpay interest and principal due on our outstanding indebtedness or any other liabilitiesfinancing arrangements, including debt obligations and repurchase agreements, prior to their respective maturity or due dates, which would reduce amounts available to distribute to our Class A Shareholders. We may also refinance all or a portion of any borrowings outstanding on or prior to their respective maturity dates. For any amounts unpaid as of a maturity or due date, we will be required to repay the remaining balance by using cash on hand, refinancing the remaining balance by issuingincurring new notes or entering into new credit facilities,debt, which could result in higher borrowing costs, or by issuing equity or other securities, which would dilute existing shareholders. No assurance can be given that we will be ableSee Notes 7 and 8 to issue new notes, enter into new credit facilities or issue equity or other securities in the futureour consolidated financial statements for details on attractive terms or at all. Any new notes or new credit facilities that we may be able to issue or enter into may have covenants that impose additional limitations on us, including with respect to making distributions, entering into business transactions or other matters, and may result in increased interest expense. If we are unable to meet our debt obligations on terms that are favorableand repurchase agreements.
CLO Risk Retention Investments
In order to us, our business may be adversely impacted. See “—Debt Obligations” for more information.
Since the CLOmeet risk retention requirements went into effect,for certain of the CLOs we have usedmanage, we use a combination of cash on hand, andas well as financing under the CLO Investments Loans and repurchase agreements to fund our 5% risk retention investments in newly launched and recently refinanced CLOs. Currently, weinvestments. We expect to continue relying on a combination of cash on hand and CLO Investments Loansfinancing to fund future CLO risk retention investments.
For our other longer-term liquidity requirements, we expect to continue to fund our fixed operating expenses through management fees and to fund discretionary cash bonuses and the repayment Payments of our debt obligations through a combination of management fees and incentive income. We may also decide to meet these requirements by borrowing funds under our Revolving Credit Facility or by issuing additional debt, equity or other securities.
Over the long term, we believe we will be able to grow our assets under management and generate positive investment performance in our funds, which we expect will allow us to grow our management fees and incentive income in amounts sufficient to cover our long-term liquidity requirements.
To maintain maximum flexibility to meet demands and opportunities both in the short and long term, and subject to existing contractual arrangements, we may want to retain cash, issue additional equity or borrow additional funds to:
Support the future growth in our business.
Create new or enhance existing products and investment platforms.
Repay borrowings.
Pursue new investment opportunities.
Develop new distribution channels.
Cover potential costs incurred in connection with the legal and regulatory matters described in the notes to our consolidated financial statements included in this report.
Market conditions and other factors may make it more difficult or costly to raise or borrow additional funds. Excessive costs or other significant market barriers may limit or prevent us from maximizing our growth potential and flexibility.
Debt Obligations
Senior Notes
On November 20, 2014, we issued $400.0 million of 4.50% Senior Notes due November 20, 2019, unless earlier redeemed or repurchased. Please see Note 9 to our consolidated financial statements included in this report for additional details on the Senior Notes.
Revolving Credit Facility
On November 20, 2014, we entered into the $150.0 million, five-year unsecured Revolving Credit Facility, which was subsequently amended on December 29, 2015 and on June 13, 2017, the proceeds of which may be used for working capital, general corporate purposes or other liquidity needs. The facility matures on November 20, 2019. In March 2017, we repaid our


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outstanding obligation under the Revolving Credit Facility, and as a result we currently have $150.0 million available to us under the facility as of September 30, 2017. Please see Note 9 to our consolidated financial statements included in this report for additional details on the Revolving Credit Facility, including financial maintenance covenants we are subject to under the Revolving Credit Facility. As of September 30, 2017, we were in compliance with the financial maintenance covenants.
Aircraft Loan
In February 2014, we entered into a loan to finance installment payments towards the purchase of a corporate aircraft (“Aircraft Loan”). In March 2017, we sold the aircraft and repaid the outstanding balance of the loan in the amount of $46.4 million.
CLO Investments Loans
We enter into loans to finance portions of our investments in CLOs (collectively “the CLO Investments Loans”). In general, we will make interest and principal payments on the loansthese borrowings are generally due at such time interest and principal payments are received on our risk retention investments in the CLOs,related CLOs; therefore, our CLO risk retention investments and will make principal payments on the loans to the extent principal payments are received on its investments in the CLOs. See Note 9 to our consolidated financial statements included in this report for additional detailsrelated financings generally have a net positive impact on our liquidity at each CLO Investments Loans.interest and principal payment date.
Tax Receivable Agreement
We have made, and may in the future be required to make, payments under the tax receivable agreement that we entered into with our executive managing directors and Ziff Investors Partnership, L.P. II and certain of its affiliates and control persons (the “Ziffs”). As of September 30, 2023, assuming no material changes in the Ziffs. The purchase byrelevant tax law and that we generate sufficient taxable income to realize the Oz Operating Partnershipsfull tax benefit of Group A Units from our executive managing directors and the Ziffs with proceedsincreased amortization resulting from the IPO and concurrent private Class A Share offering in 2007 (collectively, the “2007 Offerings”), and subsequent taxable exchanges by them of Group A Units for our Class A Shares on a one-for-one basis (or, at our option, a cash equivalent), resulted, and, in the case of future exchanges, are anticipated to result, in an increase in the tax basis of thecertain Sculptor Operating Group assets, of the Oz Operating Partnerships that would not otherwise have been available. We anticipate that any such tax basis adjustment resulting from an exchange will be allocated principally to certain intangible assets of the Oz Operating Partnerships, and we will derive our tax benefits principally through amortization of these intangibles over a 15-year period from the date of the 2007 Offerings or the date of any subsequent exchange. Consequently, these tax basis adjustments will increase, for tax purposes, our depreciation and amortization expenses and will therefore reduce the amount of tax that Oz Corp and any other corporate taxpaying entities that hold Group B Units in connection with an exchange, if any, would otherwise be required to pay in the future. Accordingly, pursuant to the tax receivable agreement, such corporate taxpaying entities (including Och-Ziff Capital Management Group LLC if it is treated as a corporate taxpayer) have agreedexpected to pay our executive managing directors and the Ziffs 85% of the amount ofapproximately $173.1 million. Future cash savings if any, in federal, state and local income taxes in the United States that these entities actually realize related payments to their units as a result of such increases in tax basis.
In connection with the departure of certain formerour executive managing directors since the IPO, the right to receive payments under the tax receivable agreement by those former executive managing directors was contributedin respect of subsequent exchanges would be in addition to the Oz Operating Partnerships. As a result, we expectthese amounts. See Note 16 to pay to the other executive managing directors and the Ziffs approximately 78% (from 85% at the time of the IPO) of the amount of cash savings, if any, in federal, state and local income taxes in the United States that we actually realize as a result of such increases in tax basis. To the extent that we do not realize any cash savings, we would not be required to make corresponding payments under the tax receivable agreement.our consolidated financial statements for additional details.
Payments under the tax receivable agreement are anticipated to increase the tax basis adjustment of intangible assets resulting from a prior exchange, with such increase being amortized over the remainder of the amortization period applicable to the original basis adjustment of such intangible assets resulting from such prior exchange. It is anticipated that this willand, consequently, result in increasing annual amortization deductions in the taxable years of and after such increases to the original basis adjustments, and potentially will give rise to increasing tax savings with respect to such years and correspondingly increasing payments under the tax receivable agreement.
As of September 30, 2017, assuming no material changes in the relevant tax law and that we generate sufficient taxable income to realize the full tax benefit of the increased amortization resulting from the increase in tax basis of our assets, we expect to pay our executive managing directors and the Ziffs approximately $520.8 million as a result of the cash savings to our


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intermediate holding companies from the purchase of Group A Units from our executive managing directors and the Ziffs with proceeds from the 2007 Offerings and the exchange of Group A Units for Class A Shares. Future cash savings and related payments to our executive managing directors under the tax receivable agreement in respect of subsequent exchanges would be in addition to these amounts. The obligation to make payments under the tax receivable agreement is an obligation of OzSculptor Corp, and any other corporate taxpaying entities that hold Group B Units, and not of the OzSculptor Operating Group. We may need to incur debt to finance payments under the tax receivable agreement to the extent the OzSculptor Operating Partnerships doGroup does not distribute cash to our intermediate corporate tax paying entitiesSculptor Corp in an amount sufficient to meet our obligations under the tax receivable agreement.
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The actual increase in tax basis of the OzSculptor Operating PartnershipsGroup assets resulting from an exchange or from payments under the tax receivable agreement, as well as the amortization thereof and the timing and amount of payments under the tax receivable agreement, will vary based upon a number of factors, including the following:
•The amount and timing of theour income of Oz Corp will impact the payments to be made under the tax receivable agreement. To the extent that Oz Corp doeswe do not have sufficient taxable income to utilize the amortization deductions available as a result of the increased tax basis in the OzSculptor Operating Partnerships’ assets, payments required under the tax receivable agreement would be reduced.
•The price of our Class A Shares at the time of any exchange will determine the actual increase in tax basis of the OzSculptor Operating Partnerships’ assets resulting from such exchange; payments under the tax receivable agreement resulting from future exchanges, if any, will be dependent in part upon such actual increase in tax basis.
•The composition of the OzSculptor Operating Partnerships’Group assets at the time of any exchange will determine the extent to which Oz Corpwe may benefit from amortizing itsthe increased tax basis in such assets and thus will impact the amount of future payments under the tax receivable agreement resulting from any future exchanges.
•The extent to which future exchanges are taxable will impact the extent to which Oz Corpwe will receive an increase in tax basis of the OzSculptor Operating Partnerships’Group assets as a result of such exchanges, and thus will impact the benefit derived by Oz Corpus and the resulting payments, if any, to be made under the tax receivable agreement.
•The tax rates in effect at the time any potential tax savings are realized, which would affect the amount of any future payments under the tax receivable agreement.
Depending upon the outcome of these factors, payments that we may be obligated to make to our current and former executive managing directors and the Ziffs under the tax receivable agreement in respect of exchanges could be substantial. In light of the numerous factors affecting our obligation to make payments under the tax receivable agreement, the timing and amounts of any such actual payments are not reasonably ascertainable.
Dividends and Distributions
The table below presents the cash dividends paid on our Class A Shares in 2017,2023 and 2022. Dividends are generally declared and paid in the quarter following the quarter to which they relate. For example, the dividend paid on May 23, 2023, was in respect of earnings for the first quarter of 2023. We paid no related cash distributions to our executive managing directors on their Sculptor Operating Group Units in the respective periods as a result of the Distribution Holiday.
Class A Shares
Payment DateRecord DateDividend per Share
May 23, 2023May 16, 2023$0.06 
March 21, 2023March 14, 2023$0.20 
November 28, 2022November 21, 2022$0.01 
August 22, 2022August 15, 2022$0.13 
May 25, 2022May 18, 2022$0.11 
As discussed in Note 3 in our Annual Report, in connection with the Recapitalization, we and our executive managing directors agreed to a “Distribution Holiday” on the Group A Units, Group E Units, Group P Units, PSUs and Group D Units.
  Class A Shares  
Payment Date Record Date Dividend
per Share		 Related Distributions
to Executive Managing
Directors
(dollars in thousands)
August 21, 2017 August 14, 2017 $0.02
 $6,904
May 19, 2017 May 12, 2017 $0.02
 $6,904
March 6, 2017 February 27, 2017 $0.01
 $3,228
We intendcertain RSUs and RSAs that will terminate on the earlier of (x) 45 days after the last day of the first calendar quarter as of which the achievement of $600.0 million of Distribution Holiday Economic Income is realized and (y) April 1, 2026. During the Distribution Holiday, dividends may continue to distribute tobe paid on our Class A Shareholders substantially allShares. As of their pro rata shareSeptember 30, 2023, we have generated a total of our annual$545.6 million of Distribution Holiday Economic Income, (as described above under “—compared to the target of $600.0 million.
Distribution Holiday Economic Income Analysis”) in excessis the cumulative amount of amounts determined by usEconomic Income earned since October 1, 2018, less any dividends paid to be necessary or appropriate to provide for the conduct of our business, to pay income taxes, to pay any amounts owed under the tax receivable agreement, to make appropriate investments in our business and our funds, to make payments on any of our other obligations, to fund the repurchase of Class A Shares or interests in the Oz Operating Group, as well as to fund distributionsShareholders and on the now-retired Preferred Units starting in 2020. Subject to certain exceptions, unless distributions on the Preferred Units are declared and paid in cash for

Units. Distribution Holiday Economic Income

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is a non-GAAP measure that is defined in the then current distribution period and all preceding periods after the initial closingagreements of limited partnership of the Preferred Units, the OzSculptor Operating Partnerships may not declare or pay distributionsand is being presented to provide an update on or repurchase anythe progress made toward the $600.0 million target required to exit the Distribution Holiday. Please see “—Distribution Holiday Economic Income Reconciliation” for a reconciliation of their equity securities that rank equal with or juniorDistribution Holiday Economic Income to net income attributable to Class A Shareholders.
During the Preferred Units. See Note 10Distribution Holiday, we expect to our consolidated financial statements included in this report for additional information regarding the terms of the Preferred Units.
When we pay dividends on our Class A Shares we also intendannually in an aggregate amount equal to make distributions to our executive managing directors on their interests in the Oz Operating Group, subject to the terms of the limited partnership agreements of the Oz Operating Partnerships.
The declaration and payment of future distributions will be at the sole discretionnot less than 20% or greater than 30% of our Boardannual Economic Income less an estimate of Directors, which may change our distribution policy or reduce or eliminate our distributions at any time in its discretion. Our Board of Directors will take into account such factors as it may deem relevant, including general economic and business conditions; our strategic plans and prospects; our business and investment opportunities; our financial condition and operating results; working capital requirements and anticipated cash needs; contractual restrictions and obligations, including payment obligations pursuant topayments under the tax receivable agreement, and restrictions pursuantincome taxes related to our term loan; legal, taxthe earnings for the periods; provided, that, if the minimum amount of dividends eligible to be made hereunder would be $1.00 or less per Class A Share, then we expect to pay up to $1.00 per Class A Share (subject to appropriate adjustment in the event of any equity dividend, equity split, combination or other similar recapitalization with respect to the Class A Shares). During the Distribution Holiday, (i) we will only make distributions with respect to Group B Units, (ii) the performance thresholds of Group P Units and regulatory restrictions; other restrictionsPSUs shall be adjusted to take into account performance and limitationsdistributions during such period, and (iii) RSUs and certain RSAs will continue to receive dividend equivalents in respect of dividends or distributions paid on the payment of distributions by us to our Class A ShareholdersShares. For certain executive managing directors, distributions on RSUs, as well as distributions counted in determining whether market performance conditions of Group P Units and PSUs are met, are limited to an aggregate amount not to exceed $4.00 per Group P Unit, PSU, RSU, or byRSA, as applicable, cumulatively during the Distribution Holiday. Following the termination of the Distribution Holiday, Group A Units and Group E Units (whether vested or unvested) shall receive distributions even if such units have not been booked-up. See Note 13 in our subsidiaries to us; and such other factors as our Board of Directors may deem relevant.Annual Report for additional information.
The declaration and payment of any distribution may be subject to legal, contractual or other restrictions. For example, as a Delaware limited liability company, Och-Ziff Capital Management Group LLC is not permitted to make distributions ifcorporation, the Registrant’s Board may only declare and to the extent that after giving effect to such distributions, its liabilities would exceed the fair valuepay dividends either out of its assets.surplus (as defined in Delaware General Corporation Law) or in case there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Our cash needs and payment obligations may fluctuate significantly from quarter to quarter, and we may have material unexpected expenses in any period. This may cause amounts available for distribution to significantly fluctuate from quarter to quarter or may reduce or eliminate such amounts.
Additionally, RSUs and certain RSAs outstanding accrue dividend equivalents equal to the dividend amounts paid on our Class A Shares. To date, these dividend equivalents have been awarded in the form of additional RSUs or RSAs, as applicable, which accrue additional dividend equivalents. The dividend equivalents will only be paid if the related RSUsRSUs/RSAs vest and will be settled at the same time as the underlying RSUs.RSUs/RSAs. Our Board of Directors has the right to determine whether the RSUs and any related dividend equivalents will be settled in Class A Shares or in cash. We currently withhold shares to satisfy the tax withholding obligations related to vested RSUsRSUs/RSAs and dividend equivalents held by our employees, which results in the use of cash from operations or borrowings to satisfy these tax-withholding payments. In addition, certain RSAs and Class P Units may receive dividend equivalents in the form of additional RSAs or Class P Units, as applicable, upon satisfaction of certain market performance-based vesting requirements.
In accordance with the Oz Operating Partnerships’ limited partnership agreements,Historically, when we may cause the applicable Oz Operating Partnershipshave paid dividends on our Class A Shares, we also made distributions to distribute cash to the intermediate holding companies and our executive managing directors in an amount at least equal to the presumed maximum tax liabilities arising from their direct ownership in these entities. The presumed maximum tax liabilities are based upon the presumed maximum income allocable to any such unit holder at the maximum combined U.S. federal, New York State and New York City tax rates. Holders of our Class A Shares may not always receive distributions at a time when our intermediate holding companies and our executive managing directors are receiving distributions on their interests as distributions to our intermediate holding companies may be used to settle tax liabilities, if any, or other obligations. Such tax distributions will take into accountin the disproportionate income allocation (but not a disproportionate cash allocation)Sculptor Operating Group, subject to the unit holders with respect to “built-in gain assets,” if any, at the timeterms of the IPO. Consequently, Oz Operating Partnership tax distributions may be greater than if such assets had a tax basis equal to their value at the timelimited partnership agreements of the IPO.Sculptor Operating Partnerships; however, as part of the Recapitalization, the Sculptor Operating Partnerships initiated the Distribution Holiday. See Note 3 in our Annual Report for additional information regarding the Distribution Holiday.
Our cash distribution policy has certain risks and limitations, particularly with respect to our liquidity. Although we expect to pay distributions according to our policy, we may not make distributions according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the distribution. Moreover, if the Oz Operating Group’s cash flows from operations are insufficient to enable it to make required minimum tax distributions discussed above, the Oz Operating Group may have to borrow funds or sell assets, and thus our liquidity and financial condition could be materially adversely affected. Furthermore, by paying cash distributions rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our obligations, operations, new investments or unanticipated capital expenditures, should the need arise. In such event, we may not be able to execute our business and growth strategy to the extent intended.


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On July 23, 2023, we entered into the Merger Agreement with entities affiliated with Rithm, which agreement was amended on October 12, 2023 and October 26, 2023. Pursuant to the Merger Agreement, we will not pay dividends with respect to periods ending June 30, 2023 or thereafter, while the Merger Agreement remains in effect. See Note 17 to the unaudited consolidated financial statements for more information regarding the Merger Agreement.
Risks to Our Liquidity
In the normal course of our funds’ life cycles, investors in our multi-strategy and certain open-end opportunistic credit funds have the right to redeem their interests following an initial lock up period, as discussed in the “Managing Business Performance” section, which could impact our liquidity and management fees. While we continuously make every effort to scale our operations so that management fees are sufficient to cover our fixed operating expenses, our management fees may not always cover these expenses. Additionally, in the event that a future contingent liability were to arise that exceeded our liquidity resources, we would need to rely on new sources of liquidity such as issuing additional equity or borrowing additional funds.
Any new borrowing arrangement that we may enter into may have covenants that impose additional limitations on us, including with respect to making distributions, entering into business transactions or other matters, and may result in increased interest expense. If we are unable to meet our debt obligations on terms that are favorable to us, our business may be adversely impacted. No assurance can be given that we will be able to issue new notes, enter into new credit facilities or issue equity or other securities in the future on attractive terms or at all.
Adverse market conditions, increase the risk that our management fees and incentive income may decline if net outflows increase or as a result of performance-related depreciation in our funds. Lower revenues and other factors may make it more difficult or costly to raise or borrow additional funds, and excessive borrowing costs or other significant market barriers may limit or prevent us from maximizing our growth potential and flexibility. We have also evaluated our financing arrangements to ensure compliance with debt covenants. Through the date of this filing, we remain in compliance with our debt covenants and expect to continue to be in compliance in the near term.
Our CLO risk retention financing arrangements are not subject to any financial maintenance covenants, but are subject to customary events of default and covenants included in financing arrangements of this type and also include terms that require our continued involvement with the CLOs. In addition to customary events of default included in financing arrangements of this type, the CLO Investments Loans may be accelerated to the extent there is an event of default (“EOD”) at the CLO level. Prior to the relevant CLO’s maturity date, this would include certain material covenant breaches, regulatory and insolvency events for the relevant CLO issuer, as well as a payment default where the relevant CLO is unable to make interest payments on the senior, non-deferrable interest notes issued by the CLO. For the repurchase agreements, in addition to customary events of default and covenants included in financing arrangements of this type, there are margin requirements that may cause us to post additional cash collateral; however, this is only triggered in the event of an EOD at the CLO level. Currently, we do not view any of the customary or CLO level EODs for these types of financing arrangements as a material risk. In particular, an EOD related to an interest payment default on the senior, non-deferrable interest notes of the type of cash flow CLOs that we manage has been unprecedented even during the credit crisis in 2008 and 2009.
On March 5, 2021, the UK Financial Conduct Authority announced that it would phase out LIBOR as a benchmark immediately after December 31, 2021, for sterling, euro, Japanese yen, Swiss franc and 1-week and 2-month U.S. Dollar settings and immediately after June 30, 2023, for the remaining U.S. Dollar settings. Since the initial announcement, we have taken the necessary steps to prepare for and mitigate the impacts of this transition, and will continue to monitor any regulatory changes in the interest rate benchmark landscape. See “Part I, Item 1A. Risk Factors—Risks Related to Our Business—The replacement of LIBOR with an alternative reference rate, may adversely affect our collateralized loan obligation transactions” in our Annual Report for additional information.
Our Funds’ Liquidity and Capital Resources
Our funds have access to liquidity from our prime brokers and other counterparties. Additionally, our funds may have committed facilities in addition to regular financing from our counterparties. These sources of liquidity provide our funds with additional financing resources, allowing them to take advantage of opportunities in the global marketplace.
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Our funds’ current liquidity position could be adversely impacted by any substantial, unanticipated investor redemptions from our funds that are made within a short time period. As discussed above in “—Assets Under Management and Fund Performance,”the “Managing Business Performance” section, capital contributions from investors in our multi-strategy and open-end opportunistic credit funds generally are subject to initial lock-up periods of one to three years.four years, except for certain multi-strategy fund investors who have the right to redeem their interests on a quarterly basis. Following the expiration of these lock-up periods, subject to certain limitations, investors may redeem capital generally on a quarterly, annual, or annualthree-year basis upon giving 30 to 90 days’ prior written notice. These lock-ups and redemption notice periods help us to manage our liquidity position. However, upon the payment of a redemption fee to the applicable fund and upon giving 30 days’ prior written notice, certain investors may redeem capital during the lock-up period. Investors in our other funds are generally not allowed to redeem until the end of the life of the fund.
We also follow a rigorous risk management process and regularly monitor the liquidity of our funds’ portfolios in relation to economic and market factors and the timing of potential investor redemptions. As a result of this process, we may determine to reduce exposure or increase the liquidity of our funds’ portfolios at any time, whether in response to global economic and market conditions, redemption requests or otherwise. For these reasons, we believe we will be well prepared to address market conditions and redemption requests, as well as any other events, with limited impact on our funds’ liquidity position. Nevertheless, significant redemptions made during a single quarter, or in successive quarters, could adversely affect our funds’ liquidity position, as we may meet redemptions by using our funds’ available cash or selling assets (possibly at a loss). Such actions would result in lower assets under management,AUM, which would reduce the amount of management fees and incentive income we may earn. Our funds could also meet redemption requests by increasing leverage, provided we are able to obtain financing on reasonable terms, if at all. We believe our funds have sufficient liquidity to meet any anticipated redemptions for the foreseeable future.
Liquidity of Consolidated SPAC
During second quarter of 2023, our consolidated SPAC was liquidated and its investments that were held in a trust account were liquidated to redeem the SPAC Class A shareholders.
Cash Flows Analysis
Operating Activities. Net cash from operating activities for the nine months ended September 30, 20172023 and 20162022 was $(356.8)$(54.2) million and $89.2$(324.5) million, respectively. Excluding the activity of our consolidated entities, our net cash from operating activities was $(52.4) million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively. Our net cash flows from operating activities are generally comprised of current-year management fees, the collection of incentive income earned during the fourth quarter of the previous year, interest income collected on our investments and bank deposits, less cash used for operating expenses. Additionally, netexpenses, including interest paid on our debt obligations. Also contributing to cash from operating activities also includes the investment activities of the funds we consolidate.

The increase in net cash outflows from operating activities for the nine months ended September 30, 2017 as compared to2022 were the investing activities of the structured alternative investment solution we consolidate.
Investing Activities. Net cash from investing activities for the nine months ended September 30, 20162023 and 2022 was $200.0 million, and $(95.3) million, respectively. Excluding the activity of our consolidated entities, our net cash from investing activities was $(42.3) million and $139.8 million for nine months ended September 30, 2023 and 2022, respectively. Investing cash inflows in 2023 was primarily duedriven by the sale of the U.S. government obligations by our consolidated SPAC that was liquidated during the second quarter of 2023. Investing cash outflows in 2022 primarily related to lower management fees,purchases of U.S. Government obligations by us and our consolidated SPAC and investments made by us in our funds, partially offset by lower operating expenses. Additionally, contributing tomaturities and sales of U.S. government obligations and return of investments in our funds.
Financing Activities. Net cash from financing activities for the increase innine months ended September 30, 2023 and 2022 was $(242.3) million, and $200.0 million, respectively. Excluding the activity of our consolidated entities, our net cash outflows werefrom financing activities was $(0.1) million and $(15.7) million for the nine months ended September 30, 2023 and 2022, respectively. Net cash from financing activities is generally comprised of dividends paid to our Class A Shareholders, borrowings and repayments related to our debt obligations and those of our consolidated entities, repurchases of treasury shares, and proceeds from repurchase agreements used to finance risk retention investments in our CLOs. During the second quarter of 2023, our consolidated SPAC was liquidated, and as a result, it redeemed its Class A Shares. Additionally, our consolidated structured alternative investment activitiessolution issued $215.7 million of the funds we consolidate.notes payable in 2022. These investment-relatedfinancing-related cash flows are of the consolidated fundsentities and do not directly impact the cash flows related to our Class A Shareholders.
Investing Activities. Net cash from investing activities for
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In the nine months ended September 30, 20172023 and 2016 was $(186.5)September 30, 2022, we entered into repurchase agreements to finance a risk retention investment in our European CLOs of $13.3 million and $(30.2)$20.4 million, respectively. Investing cash outflows in the first nine months of 2017 primarily related to purchases of investments in CLOs and in U.S. government obligations, partially offset by the proceeds from the sale of our corporate aircraft. Investment-related cash flows of the consolidated funds are classified within operating activities.
Financing Activities. Net cash from financing activities forIn the nine months ended September 30, 2017 and 2016 was $531.4 million and $117.4 million, respectively. Our net cash from financing activities is generally comprised of proceeds from Preferred Units offerings, dividends paid to our2023, we did not repurchase any Class A Shareholders and borrowings and repayments relatedshares, compared to our debt obligations,$28.2 million of repurchases of Class A shares in thenine months ended September 30, 2022, as well as borrowings and repayments of debt obligations of the CLO consolidated in the second quarter of 2017 and deconsolidated in the third quarter of 2017. Contributions from noncontrolling interests, which relate to fund investor contributions into the consolidated funds, and distributions to noncontrolling interests, which relate to fund investor redemptions and distributions to our executive managing directors on their Group A Units, are also included in net cash from financing activities.


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In April 2016, we borrowed and in March 2017, we repaid the balance of $120.0 million on our Revolving Credit Facility using proceeds from the second offering of Preferred Units. Additionally in March 2017, we repaid $46.4 million outstanding on our Aircraft Loan using proceeds from the sale of onea part of our corporate aircraft. share repurchase program.
We also paid dividends of $9.3$6.5 million and $6.0 million to our Class A Shareholders in the nine months ended September 30, 2023, and $13.7 million ofnine months ended September 30, 2022, respectively. No distributions were made to our executive managing directors on their Group A Units in the first nine months ended September 30, 2023 or September 30, 2022, as a result of 2017. We did not make dividend or distribution payments in 2016.the Distribution Holiday.
Contractual Obligations
During the first nine months of 2017, we entered into six CLO Investments Loans. During the first quarter of 2017, we repaid the $120.0 million outstanding on our Revolving Credit Facility and $46.4 million outstanding on our Aircraft Loan. There were no other significant changes in contractual obligations from what was reported in our Annual Report.
Off-Balance Sheet Arrangements
In the normal course of business, we enter into various off-balance sheet arrangements including sponsoring and owning general partner interests in our funds and retained interests in a CLO we manage. We also have ongoing capital commitment arrangements with certain of our funds. None of our off-balance sheet arrangements require us to fund losses or guarantee target returns to investors in any of our other investment funds. See Notes 5 and 6 of our consolidated financial statements included in this report for information on our retained and variable interests in our funds and CLOs.
Critical Accounting Policies and Estimates
Critical accounting policiesestimates are those that require us to make significant judgments, estimates or assumptions that affect amounts reported in our financial statements or the notes thereto. We base our judgments, estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable and prudent. Actual results may differ materially from these estimates. See Note 2 to our consolidated financial statements included in this reportour Annual Report for a description of our accounting policies. Set forth below is a summary of what we believe to be our most critical accounting policies and estimates.
Fair Value of Investments
The valuation of investments held by our funds is the most critical estimate made by management impacting our results. Pursuant to specialized accounting for investment companies under GAAP, investments held by the funds are carried at their estimated fair values. The valuation of investments held by our funds has a significant impact on our results, as our management fees and incentive income are generally determined based on the fair value of these investments.
GAAP prioritizes the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of assets and liabilities and the specific characteristics of the assets and liabilities. Assets and liabilities with readily available, actively quoted prices (Level I) or for which fair value can be measured from actively quoted prices (Level II) generally will have a higher degree of market price observability and lesser degree of judgment used in measuring fair value than those measured using pricing inputs that are unobservable in the market (Level III). See Note 4 to our consolidated financial statements included in this report for additional information regarding fair value measurements.
As of September 30, 2017,2023, the absolute values of our funds’ invested assets and liabilities (excluding the notes and loans payable of our CLOs)securitization vehicles) were classified within the fair value hierarchy as follows: approximately 45%23% within Level I; approximately 32%49% within Level II; and approximately 23%28% within Level III. As of December 31, 2016,2022, the absolute values of our funds’ invested assets and liabilities (excluding the notes and loans payable of our CLOs)securitization vehicles) were classified within the fair value hierarchy as follows: approximately 46%31% within Level I; approximately 32%44% within Level II; and approximately 22%25% within Level III. The percentage of our funds’ assets and liabilities within the fair value hierarchy will fluctuate based on the investments made at any given time and such fluctuations could be significant. A portion of our funds’ Level III assets relate to Special Investments or other investments on which we do not earn any incentive income until such investments are sold or otherwise realized. Upon the sale or realization event of these assets, any realized profits are included in the calculation of incentive income for such year. Accordingly, the estimated fair value of our funds’ Level III assets may not have any relation to the amount of incentive income actually earned with respect to such assets.


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Valuation of Investments. Fair value represents the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants as of the measurement date. The fair value of our funds’ investments is based on observable market prices when available. We, as the investment manager of our funds, determine the fair value of investments that are not actively traded on a recognized securities exchange or otherwise lack a readily ascertainable market value. The methods and procedures to value these investments may include the following: performing comparisons with prices of comparable or similar securities; obtaining valuation-related information from the issuers; calculating the present value of future cash flows; assessing other analytical data and information relating to the investment that is an indication of value; obtaining information provided by third parties; and evaluating financial information provided by the management of these investments.
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Significant judgment and estimation goesgo into the assumptions that drive our valuation methodologies and procedures for assets that are not actively traded on a recognized securities exchange or otherwise lack a readily ascertainable market value. The valuation of investments can be more difficult when severe economic and market shocks occur. The COVID-19 pandemic is an example of such a shock. The actual amounts ultimately realized could differ materially from the values estimated based on the use of these methodologies. Realizations at values significantly lower than the values at which investments have been reflected could result in losses at the fund level and a decline in future management fees and incentive income. Such situations may also negatively impact fund investor perception of our valuation policies and procedures, which could result in redemptions and difficulties in raising additional capital.
We have established an internal control infrastructure over the valuation of financial instruments that includes ongoing oversight by our ValuationsValuation Controls Group and Valuation Committee, as well as periodic audits by our Internal Audit Group.function. These management control functions are segregated from the trading and investing functions.
The Valuation Committee is responsible for establishing the valuation policy and monitors compliance with the policy, ensuring that all of the funds’ investments reflect fair value, as well as providing oversight of the valuation process. The valuation policy includes, but is not limited to the following: determining the pricing sources used to value specific investment classes; the selection of independent pricing services; performing due diligence of independent pricing services; and the classification of investments within the fair value hierarchy. The Valuation Committee reviews a variety of reports on a monthly basis, which include the following: summaries of the sources used to determine the value of the funds’ investments; summaries of the fair value hierarchy of the funds’ investments; methodology changes and variance reports that compare the values of investments to independent pricing services. The Valuation Committee is independent from the investment professionals and may obtain input from investment professionals for consideration in carrying out its responsibilities.
The Valuation Committee has assigned the responsibility of performing price verification and related quality controls in accordance with the valuation policy to the Valuation Controls Group. The Valuation Controls Group’s other responsibilities include the following: overseeing the collection and evaluation of counterparty prices, broker-dealer quotations, exchange prices and pricing information provided by independent pricing services. Additionally, the Valuation ControlControls Group is responsible for performing back testing by comparing prices observed in executed transactions to valuations and valuations provided by independent pricing service providers on a bi-weekly and monthly basis; performing stale pricing analysis on a monthly basis; performing due diligence reviews on independent pricing services on an annual basis; and recommending changes in valuation policies to the Valuation Committee. The Valuation Controls Group also verifies that indicative broker quotations used to value certain investments are representative of fair value through procedures such as comparison to independent pricing services, back testing procedures, review of stale pricing reports and performance of other due diligence procedures as may be deemed necessary.
Investment professionals and members of the Valuation Controls Group review a daily profit and loss report, as well as other periodic reports that analyze the profit and loss and related asset class exposure of the funds’ investments.
The Internal Audit Groupfunction employs a risk-based program of audit coverage that is designed to provide an assessment of the design and effectiveness of controls over the Company’sour operations, regulatory compliance, valuation of financial instruments and reporting. Additionally, the Internal Audit Groupfunction meets periodically with management and the Audit Committee of the Company’sour Board of Directors to evaluate and provide guidance on the existing risk framework and control environment assessments.


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For information regarding the impact that the fair value measurement of assets under managementAUM has on our results, please see “Part I—Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk.”
Recognition of Incentive Income
The determination of whether to recognize incentive income under GAAP requires a significant amount of judgment regarding whether it is probable that a significant revenue reversal of incentive income that we are potentially entitled to as of a point in time will not occur in future periods, which would preclude the recognition of such amounts as incentive income. Management considers a variety of factors when evaluating whether the recognition of incentive income is appropriate, including: the performance of the fund, whether we have received or are entitled to receive incentive income distributions and whether such amounts are restricted, the investment period and expected term of the fund, where the fund is in its life-cycle, the volatility and liquidity of investments held by the fund, our team’s experience with similar investments and potential sales of investments within
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the fund. Management continuously evaluates whether there are additional considerations that could potentially impact the recognition of incentive income and notes that the recognition, and potential reversal, of incentive income is subject to potentially significant variability due to changes to the aforementioned considerations. See Note 11 for details on amounts recognized and deferred for incentive income.
Variable Interest Entities
The determination of whether or not to consolidate a variable interest entity under GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interests. To make these judgments, management has conductedconducts an analysis, on a case-by-case basis, of whether we are the primary beneficiary and are therefore required to consolidate the entity. Management continually reconsiders whether we should consolidate a variable interest entity. Upon the occurrence of certain events, such as investor redemptions or modifications to fund organizational documents and investment management agreements, management will reconsider its conclusion regarding the status of an entity as a variable interest entity.
Income Taxes
We use the asset and liability method of accounting for deferred income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established when management believes it is more likely than not that a deferred income tax asset will not be realized.
Substantially allThe majority of our deferred income tax assets relate to the goodwill and other intangible assets deductible for tax purposes by OzSculptor Corp that arose in connection with the purchase of Group A Units from our executive managing directors and the Ziffs with proceeds from the 2007 Offerings, subsequent exchanges of Group A Units for Class A Shares and subsequent payments to our executive managing directors and the Ziffs made under the tax receivable agreement, in addition to any related net operating loss carryforward. In accordance with relevant provisions of the Internal Revenue Code, we expect to take these goodwill and other intangible deductions over the 15-year period following the 2007 Offerings and subsequent exchanges, as well as an additional 20-year loss carryforward period available to us in any year afor net operating loss islosses generated as a result.prior to 2018 and indefinite carryforward period for net operating losses generated beginning in 2018, in order to fully realize the deferred income tax assets. Our analysis of whether we expect to have sufficient future taxable income to realize these deductions is based solely on estimates over this period.
OzSculptor Corp generated taxable income of $33.8$34.7 million for the nine months ended September 30, 2017,2023, before taking into account deductions related to the amortization of the goodwill and other intangible assets. We determined that we would need to generate taxable income of at least $1.7 billion$778.7 million over the remaining six-yearone-year weighted-average amortization period, as well as an additional 20-year loss carryforward period available to us if a net operating loss is generated,for expiring losses, in order to fully realize the deferred income tax assets. Using the estimates and assumptions discussed below, we expect to generate sufficient taxable income over the remaining amortization and loss carryforward periods available to us in order to fully realize thesethe deferred income tax assets.
To generate $1.7 billion$778.7 million in taxable income over the remaining amortization and loss carryforward periods available to us, we estimated that, based on estimated assets under managementAUM of $31.8$33.6 billion as of October 1, 2017,2023, we would need to generate a minimum compound annual growth rate in assets under managementAUM of less than 1%,3% over the period for which the taxable income estimate relates to fully realize the deferred income tax assets, assuming no performance-related growth, and therefore no incentive income. The assumed nature and amount of this estimated growth rate are not based on historical results or current expectations of future growth; however, the other assumptions underlying the taxable income estimate, such as general maintenance of current expense ratios and cost allocation percentages among the Oz Operating Partnerships, which impact the amount of taxable income flowing through our legal structure,estimates, are based on our near-term operating budget. If our actual growth rate in assets under managementAUM falls below this minimum threshold for any extended time during the period for which these estimates relate and we do not otherwise experience offsetting growth rates in other periods, we may not generate taxable income sufficient to realize the deferred income tax assets and may need to record a valuation allowance.
Management regularly reviews the model used to generate the estimates, including the underlying assumptions. If it determines that a valuation allowance is required for any reason, the amount would be determined based on the relevant circumstances at that time. To the extent we record a valuation allowance against our deferred income tax assets related to the goodwill and other intangible assets, we would record a corresponding decrease in the liability to our executive managing directors and the Ziffs under the tax receivable agreement equal to approximately 78%69% of such amount; therefore, our consolidated net income (loss)


63


allocated to Class A Shareholders would only be impacted by 22%31% of any valuation allowance recorded against the deferred income tax assets.
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Actual taxable income may differ from the estimate described above, which was prepared solely for determining whether we currently expect to have sufficient future taxable income to realize the deferred income tax assets. Furthermore, actual or estimated future taxable income may be materially impacted by significant changes in assets under management,AUM, whether as a result of fund investment performance or fund investor contributions or redemptions, significant changes to the assumptions underlying our estimates, future changes in income tax law, state income tax apportionment or other factors.
As of September 30, 2017,2023, we had $280.6$243.0 million of net operating losses available to offset future taxable income for federal income tax purposes that will expire between 2030 and 2037, and $130.8$252.4 million of net operating losses available to be carried forward without expiration. Additionally, $217.6 million of net operating losses are available to offset future taxable income for state income tax purposes and $124.3$213.8 million for local income tax purposes that will expire between 2035 and 2036. 2042.
Based on the analysis set forth above, as of September 30, 2017,2023, we have determined that it is not necessary to record a valuation allowance with respect to our deferred income tax assets related to the goodwill and other intangible assets deductible for tax purposes, and any related net operating loss carryforward. However, we have determined that we may not realize certain foreign income tax credits and certain foreign net operating losses. Accordingly,accordingly, a valuation allowance of $12.8$4.7 million has been established for these items.
Impact of Recently Adopted Accounting Pronouncements on Recent and Future Trends
The Financial Accounting Standards Board (the “FASB”) has issued various Accounting Standards Updates (“ASUs”) that could impact our future trends. For additional details regarding these ASUs, including methods of adoption, see Note 2 to our consolidated financial statements included in this report for additional information.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09. The requirements of ASU 2016-09 were effective for us beginning in the first quarter of 2017. As a result of adopting ASU 2016-09 we elected not to estimate forfeiture rates when calculating its equity-based compensation expense and will account for forfeitures as they occur. Additionally, we no longer maintain and track our APIC pool account, and recognize all excess tax benefits and tax deficiencies as income tax expenses or benefits in the statement of operations. This guidance was adopted on a prospective basis and we do not expect this to have a material impact on our future trends.
None of the otherNo changes to GAAP that went into effect during the nine months ended September 30, 20172023, are expected to substantively impact our future trends.
Expected Impact of Future Adoption of New Accounting Pronouncements on Future Trends
Listed below are ASUs that have been issued but that we have not yet adopted that may impact our future trends. For additional details regarding these ASUs, including methods of adoption, see Note 2 to our consolidated financial statements included in this report.
ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes the revenue recognition requirements in ASC 605—Revenue Recognition and most industry-specific revenue recognition guidance throughout the ASC. The requirements of ASU 2014-09 are effective for us beginning in the first quarter of 2018. We are still in the process of evaluating the effect that ASU 2014-09 may have on our revenue trends. We expect to adopt ASU 2014-09 using a modified retrospective application approach.
ASU 2016-02, Leases. ASU 2016-02 significantly changes accounting for lease arrangements, in particular from the perspective of the lessee. Upon adoption of the ASU, where we are the lessee, we will likely be required to recognize certain lease arrangements on our balance sheet for the first time, but will continue to recognize associated expenses on our statement of comprehensive income in a manner similar to existing accounting principles. The requirements of ASU 2016-02 are effective for us beginning in the first quarter of 2019. We have determined that most of our operating leases will be reported on our consolidated balance sheet at their present value. We do not expect the adoption of ASU 2016-02 to have a material effect on our future expense trends. See Note 15 to our consolidated financial statements included in this report for details related to our existing operating lease obligations as of September 30, 2017.


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None of the other changes to GAAP that have been issued but that we have not yet adopted are expected to substantively impact our future trends.
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Economic Income Reconciliations
The tables below present the reconciliations of total Economic Income and its components to the respective GAAP measures for the periods presented in this MD&A.&A:
Economic Income
 Three Months Ended September 30, 2017
 Oz Funds Segment Other
Operations		 Total
Company
      
 (dollars in thousands)
Net Income (Loss) Attributable to Class A Shareholders—GAAP$13,530
 $(7,804) $5,726
Change in redemption value of Preferred Units—
 —
 —
Net Income (Loss) Allocated to Och-Ziff Capital Management Group LLC—GAAP13,530
 (7,804) 5,726
Net income allocated to Group A Units9,500
 —
 9,500
Equity-based compensation, net of RSUs settled in cash21,448
 680
 22,128
Income taxes1,766
 176
 1,942
Allocations to Group D Units1,529
 25
 1,554
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance310
 7,160
 7,470
Changes in tax receivable agreement liability—
 —
 —
Depreciation, amortization and net gains and losses on fixed assets2,237
 —
 2,237
Other adjustments(552) (16) (568)
Economic Income—Non-GAAP$49,768
 $221
 $49,989
 Three Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company
      
 (dollars in thousands)
Net Income Attributable to Class A Shareholders—GAAP$13,160
 $1,125
 $14,285
Change in redemption value of Preferred Units—
 —
 —
Net Income Allocated to Och-Ziff Capital Management Group LLC—GAAP$13,160
 $1,125
 $14,285
Net income allocated to Group A Units16,313
 —
 16,313
Equity-based compensation, net of RSUs settled in cash17,709
 589
 18,298
Income taxes9,887
 99
 9,986
Allocations to Group D Units950
 —
 950
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance—
 2,741
 2,741
Changes in tax receivable agreement liability(11,819) —
 (11,819)
Depreciation and amortization7,776
 189
 7,965
Other adjustments(1,251) (48) (1,299)
Economic Income—Non-GAAP$52,725
 $4,695
 $57,420


 Three Months Ended September 30,
 20232022

(dollars in thousands)
Net Loss Attributable to Class A Shareholders—GAAP$(31,113)$(22,518)
Change in redemption value of redeemable noncontrolling interests— (174)
Net Loss Allocated to Sculptor Capital Management, Inc.—GAAP(31,113)(22,692)
Equity-based compensation, net of RSUs settled in cash16,175 21,017 
Deferred cash compensation5,921 5,240 
Incentive income profit sharing(999)(62)
2020 Term Loan and Debt Securities non-cash interest expense accretion266 263 
Depreciation, amortization and net gains and losses on fixed assets1,007 1,117 
Changes in fair value of warrant liabilities9,717 2,386 
Changes in tax receivable agreement liability(225)14 
Net (gains) losses on investments(7,051)2,989 
Other adjustments1,245 90 
Income taxes(280)227 
Net loss allocated to noncontrolling interests(7,349)(9,410)
Net income attributable to redeemable noncontrolling interests— 1,492 
Consolidated entities related items:
Income of consolidated entities23 (1,453)
Expenses of consolidated entities229 1,031 
Net losses of consolidated entities9,440 3,498 
Economic Income—Non-GAAP$(2,994)$5,747 

84
65



 Nine Months Ended September 30,
 20232022

(dollars in thousands)
Net Loss Attributable to Class A Shareholders—GAAP$(18,967)$(13,688)
Change in redemption value of redeemable noncontrolling interests(6,826)(3,939)
Net Loss Allocated to Sculptor Capital Management, Inc.—GAAP(25,793)(17,627)
Equity-based compensation, net of RSUs settled in cash43,651 64,558 
Deferred cash compensation19,207 21,550 
Incentive income profit sharing(4,815)407 
2020 Term Loan non-cash discount accretion769 763 
Depreciation, amortization and net gains and losses on fixed assets3,085 3,815 
Changes in fair value of warrant liabilities9,977 (40,690)
Changes in tax receivable agreement liability302 (206)
Net (gains) losses on investments(17,187)39,171 
Other adjustments1,049 (60)
Income taxes11,277 (720)
Net loss allocated to noncontrolling interests(23,376)(15,837)
Net income attributable to redeemable noncontrolling interests3,350 5,257 
Consolidated entities related items:
Income of consolidated entities(4,535)(1,603)
Expenses of consolidated entities2,080 2,943 
Net (gains) losses of consolidated entities(303)5,792 
Economic Income—Non-GAAP$18,738 $67,513 
Economic Income Revenues
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 (dollars in thousands)
Management fees—GAAP$60,194 $66,236 $186,344 $211,443 
Adjustment to management fees(1)(2)
(4,056)(5,011)(12,177)(16,148)
Management Fees—Economic Income Basis—Non-GAAP56,138 61,225 174,167 195,295 
Incentive income—GAAP17,801 7,566 62,383 73,788 
Adjustment to incentive income(2)
— — 48 (73)
Incentive Income—Economic Income Basis— Non-GAAP17,801 7,566 62,431 73,715 
Other revenues—GAAP7,683 3,576 20,931 8,526 
Adjustment to other revenues(3)
(1,146)(917)(3,113)(2,823)
Other Revenues—Economic Income Basis—Non-GAAP6,537 2,659 17,818 5,703 
Total Revenues—Economic Income Basis—Non-GAAP$80,476 $71,450 $254,416 $274,713 
_______________
(1)Adjustment to present management fees net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense.
(2)Adjustment to exclude the related eliminations of management fees and incentive income, as management reviews the total amount of management fees and incentive income earned in relation to total AUM and fund performance.
(3)Adjustment to offset rent expense by subrental income as management evaluates rent expense on a net basis.
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 Nine Months Ended September 30, 2017
 Oz Funds Segment Other
Operations		 Total
Company
      
 (dollars in thousands)
Net Income (Loss) Attributable to Class A Shareholders—GAAP$24,504
 $(12,844) $11,660
Change in redemption value of Preferred Units2,853
 —
 2,853
Net Income (Loss) Allocated to Och-Ziff Capital Management Group LLC—GAAP27,357
 (12,844) 14,513
Net income allocated to Group A Units41,145
 —
 41,145
Equity-based compensation, net of RSUs settled in cash61,433
 2,133
 63,566
Income taxes17,062
 180
 17,242
Allocations to Group D Units4,839
 75
 4,914
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance310
 12,932
 13,242
Changes in tax receivable agreement liability—
 —
 —
Depreciation, amortization and net gains and losses on fixed assets7,693
 —
 7,693
Other adjustments(1,948) (229) (2,177)
Economic Income—Non-GAAP$157,891
 $2,247
 $160,138
 Nine Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company
      
 (dollars in thousands)
Net (Loss) Income Attributable to Class A Shareholders—GAAP$(138,649) $5,007
 $(133,642)
Change in redemption value of Preferred Units—
 —
 —
Net (Loss) Income Allocated to Och-Ziff Capital Management Group LLC—GAAP(138,649) 5,007
 (133,642)
Net loss allocated to Group A Units(187,338) —
 (187,338)
Equity-based compensation, net of RSUs settled in cash54,364
 1,947
 56,311
Income taxes39,337
 99
 39,436
Allocations to Group D Units2,850
 —
 2,850
Adjustment for expenses related to compensation and profit-sharing arrangements based on fund investment performance—
 5,430
 5,430
Changes in tax receivable agreement liability(11,990) —
 (11,990)
Depreciation and amortization14,385
 562
 14,947
Other adjustments(2,759) 87
 (2,672)
Economic Income—Non-GAAP$(229,800) $13,132
 $(216,668)


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Economic Income Revenues
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
            
 (dollars in thousands)
Management fees—GAAP$72,114
 $5,057
 $77,171
 $123,329
 $5,184
 $128,513
Adjustment to management fees(1)
(4,827) —
 (4,827) (8,808) —
 (8,808)
Management Fees—Economic Income Basis—Non-GAAP67,287
 5,057
 72,344
 114,521
 5,184
 119,705
            
Incentive income—GAAP50,476
 773
 51,249
 16,202
 2,552
 18,754
Adjustment to incentive income(2)
—
 —
 —
 —
 —
 —
Incentive Income—Economic Income Basis—Non-GAAP50,476
 773
 51,249
 16,202
 2,552
 18,754
            
Other revenues—GAAP1,486
 38
 1,524
 378
 2
 380
Adjustment to other revenues(3)
141
 —
 141
 —
 —
 —
Other Revenues—Economic Income Basis—Non-GAAP1,627
 38
 1,665
 378
 2
 380
Total Revenues—Economic Income Basis—Non-GAAP$119,390
 $5,868
 $125,258
 $131,101
 $7,738
 $138,839
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
            
 (dollars in thousands)
Management fees—GAAP$227,908
 $15,600
 $243,508
 $413,266
 $15,556
 $428,822
Adjustment to management fees(1)
(15,488) —
 (15,488) (31,362) —
 (31,362)
Management Fees—Economic Income Basis—Non-GAAP212,420
 15,600
 228,020
 381,904
 15,556
 397,460
            
Incentive income—GAAP165,719
 3,271
 168,990
 50,105
 7,372
 57,477
Adjustment to incentive income(2)
—
 —
 —
 —
 —
 —
Incentive Income—Economic Income Basis—Non-GAAP165,719
 3,271
 168,990
 50,105
 7,372
 57,477
            
Other revenues—GAAP3,977
 104
 4,081
 1,533
 11
 1,544
Adjustment to other revenues(3)
(1,117) —
 (1,117) —
 —
 —
Other Revenues—Economic Income Basis—Non-GAAP2,860
 104
 2,964
 1,533
 11
 1,544
Total Revenues—Economic Income Basis—Non-GAAP$380,999
 $18,975
 $399,974
 $433,542
 $22,939
 $456,481
_______________
(1)Adjustment to present management fees net of recurring placement and related service fees, as management considers these fees a reduction in management fees, not an expense. The impact of eliminations related to the consolidated funds is also removed.
(2)Adjustment to exclude the impact of eliminations related to the consolidated funds.
(3)Adjustment to exclude realized gains on sale of fixed assets.


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Economic Income Expenses
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
            
 (dollars in thousands)
Compensation and benefits—GAAP$61,534
 $12,956
 $74,490
 $51,990
 $5,768
 $57,758
Adjustment to compensation and benefits(1)
(23,034) (7,866) (30,900) (18,484) (3,330) (21,814)
Compensation and Benefits—Economic Income Basis—Non-GAAP$38,500
 $5,090
 $43,590
 $33,506
 $2,438
 $35,944
            
Interest expense and general, administrative and other expenses—GAAP$38,190
 $557
 $38,747
 $61,460
 $794
 $62,254
Adjustment to interest expense and general, administrative and other expenses(2)
(7,066) —
 (7,066) (16,583) (189) (16,772)
Non-Compensation Expenses—Economic Income Basis—Non-GAAP$31,124
 $557
 $31,681
 $44,877
 $605
 $45,482
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
            
 (dollars in thousands)
Compensation and benefits—GAAP$184,084
 $30,028
 $214,112
 $155,293
 $14,469
 $169,762
Adjustment to compensation and benefits(1)
(65,916) (15,141) (81,057) (56,689) (7,377) (64,066)
Compensation and Benefits—Economic Income Basis—Non-GAAP$118,168
 $14,887
 $133,055
 $98,604
 $7,092
 $105,696
            
Interest expense and general, administrative and other expenses—GAAP$129,431
 $1,841
 $131,272
 $610,496
 $3,277
 $613,773
Adjustment to interest expense and general, administrative and other expenses(2)
(24,489) —
 (24,489) (45,746) (562) (46,308)
Non-Compensation Expenses—Economic Income Basis—Non-GAAP$104,942
 $1,841
 $106,783
 $564,750
 $2,715
 $567,465
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(dollars in thousands)
 
Compensation and benefits—GAAP$62,081 $67,130 $188,187 $224,658 
Adjustment to compensation and benefits(1)
(21,097)(26,195)(58,043)(86,515)
Compensation and Benefits—Economic Income Basis—Non-GAAP$40,984 $40,935 $130,144 $138,143 
Interest expense—GAAP$6,712 $3,876 $18,462 $10,588 
Adjustment to interest expense(2)
(266)(263)(769)(763)
Interest Expense—Economic Income Basis—Non-GAAP$6,446 $3,613 $17,693 $9,825 
General, administrative and other expenses—GAAP$42,088 $28,290 $105,811 $82,031 
Adjustment to general, administrative and other expenses(3)
(6,047)(7,043)(17,970)(22,799)
General, Administrative and Other Expenses—Economic Income Basis—Non-GAAP$36,041 $21,247 $87,841 $59,232 
_______________
(1)Adjustment to exclude equity-based compensation, as management does not consider these non-cash expenses to be reflective of our operating performance. However, the fair value of RSUs that are settled in cash to employees or executive managing directors is included as an expense at the time of settlement. Further, expenses related to compensation and profit-sharing arrangements based on fund investment performance are generally recognized at the same time as the related incentive income revenue, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned by the relevant fund. Distributions to the Group D Units are also excluded, as management reviews operating performance at the Oz Operating Group level, where our operations are performed, prior to making any income allocations. Further, deferred cash compensation is expensed in full in the year granted for Economic Income, rather than over the service period for GAAP.
(2)
(1)Adjustment to exclude equity-based compensation, net of cash settled RSUs. When the number of RSUs to be settled in cash is discretionary at the time of the grant, then the fair value of RSUs that are settled in cash is included as an expense at the time of settlement. When the number of RSUs to be settled in cash is certain on the grant date, then the expense is recognized during the performance period to which the award relates. In addition, expenses related to incentive income profit-sharing arrangements are generally recognized at the same time the related incentive income revenue is recognized, as management reviews the total compensation expense related to these arrangements in relation to any incentive income earned from the relevant fund. For Economic income deferred cash compensation is expensed in full during the performance period to which the award relates to, rather than over the service period for GAAP as management views the compensation expense impact in relation to the performance period.
(2)Adjustment to exclude amounts related to non-cash interest expense accretion on debt. The 2020 Term Loan and the Debt Securities, which were issued in connection with the Recapitalization, were each recognized at a significant discount, as proceeds from each borrowing were allocated to warrant liabilities and the 2019 Preferred Units, respectively, resulting in non-cash accretion to par over time through interest expense for GAAP. The Debt Securities and the 2019 Preferred Units were fully redeemed in 2020. Management excludes this non-cash expense from Economic Income, as it does not consider it to be reflective of our economic borrowing costs.
(3)Adjustment to exclude depreciation, amortization, and losses on fixed assets, as management does not consider these items to be reflective of our operating performance. Impairment of right-of-use lease assets is excluded from Economic Income at the time the impairment is recognized for GAAP and the impact is then amortized over the lease term for Economic Income, as management evaluates impairment expenses over the life of the related lease asset and considers the impairment charge to be nonrecurring in nature. Additionally, rent expense is offset by subrental income as management evaluates rent expenses on a net basis. Further, recurring placement and related service fees are excluded, as management considers these fees a reduction in management fees, not an expense.
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Distribution Holiday Economic Income Reconciliation
The table below presents the reconciliation of Distribution Holiday Economic Income to net income (loss) attributable to Class A Shareholders from October 1, 2018, to September 30, 2023.
From October 1, 2018 to September 30, 2023
(dollars in thousands)
Net income attributable to Class A shareholders$181,539 
Change in redemption value of redeemable noncontrolling interests and Preferred Units(22,516)
Net Income Allocated to Sculptor Capital Management, Inc.—GAAP159,023
Equity-based compensation, net of RSUs settled in cash374,716 
Deferred cash compensation(356)
Incentive income profit sharing(13,440)
2020 Term Loan and Debt Securities non-cash discount accretion21,774 
Depreciation, amortization and net gains and losses on fixed assets as management does not consider these items to be reflective of our operating performance. Additionally, recurring placement and related service fees are excluded, as management considers these fees a reduction in management fees, not an expense.


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Other Economic Income Items
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
            
 (dollars in thousands)
Net income attributable to noncontrolling interests—GAAP$9,442
 $318
 $9,760
 $16,454
 $116
 $16,570
Adjustment to net income attributable to noncontrolling interests(1)
(9,444) (318) (9,762) (16,461) (116) (16,577)
Net Loss Attributable to Noncontrolling Interests—Economic Income Basis—Non-GAAP$(2) $—
 $(2) $(7) $—
 $(7)
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Oz Funds Segment Other
Operations		 Total
Company		 Oz Funds Segment Other
Operations		 Total
Company
            
 (dollars in thousands)
Net income (loss) attributable to noncontrolling interests—GAAP$41,021
 $659
 $41,680
 $(187,213) $346
 $(186,867)
Adjustment to net income (loss) attributable to noncontrolling interests(1)
(41,023) (659) (41,682) 187,201
 (346) 186,855
Net Loss Attributable to Noncontrolling Interests—Economic Income Basis—Non-GAAP$(2) $—
 $(2) $(12) $—
 $(12)
_______________
35,187 
(1)Changes in fair value of warrant liabilitiesAdjustment to exclude amounts3,861 
Changes in tax receivable agreement liability16,366 
Net losses on retirement of debt41,584 
Net gains on investments(7,721)
Impairment of right-of-use asset11,240 
Other adjustments4,878 
Income taxes140,270 
Net loss allocated to our executive managing directorsnoncontrolling interests(108,700)
Net income attributable to redeemable noncontrolling interests17,962 
Less: Dividends paid on their interests in the Oz Operating Group, as management reviews operating performance at the Oz Operating Group level. We conduct substantially all2019 Preferred Units(6,952)
Less: Dividends to Class A Shareholders declared with respect to such periods(128,117)
Consolidated entities related items:
Income of our activities through the Oz Operating Group. Additionally, the impactconsolidated entities(23,626)
Expenses of the consolidated funds, including the allocationentities8,659 
Net gains of earnings to investors in those funds, is also removed.consolidated entities(1,053)
Distribution Holiday Economic Income—Non-GAAP$545,555
Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk
Our predominant exposure to market risk is related to our role as general partner or investment manager for the funds, and the sensitivities to movements in the fair value of their investments that may adversely affect our management fees and incentive income. Our risk management committee is responsible for monitoring and providing oversight over various risks that may arise in the course of our business including market risks, counterparty, geopolitical and operational risks, in addition to traditional portfolio risk management.
The quantitative information provided in this section was prepared using estimates and assumptions that management believes are reasonable to provide an indication of the directional impact that a hypothetical adverse movement in certain risks would have on net income attributable to Class A Shareholders. The actual impact of a hypothetical adverse movement in these risks could be materially different from the amounts shown below.
Management of Market Risk
Risk management is highly integrated with our investment process and the operations of our business. Our approach to
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investing and managing risk is based on (i) proactive risk management, (ii) preservation of capital, (iii) dynamic capital allocation and (iv) expertise across strategies and geographies. We constantly monitor risk and have instituted a formal and consistent process to disseminate information, conduct informed debate, and take proactive or responsive action across our portfolios. In addition to our formalized process, we conduct custom studies and optimizations for various groups on an as-needed, ad hoc basis such as bespoke hedge solutions, pre-trade what-if analysis, and portfolio rebalance alternatives. Our goal is to preserve capital during periods of market decline and generate competitive investment performance in rising markets. We use sophisticated risk tools and active portfolio management to govern exposures to market and other risk factors. We adhere strictly to each fund’s mandate and provisions with respect to leverage. We are knowledgeable about the risks of fund leverage, respectful of its limits, and judicious in our application. We allocate to individual investments based on a thorough analysis of the risk/reward for each opportunity under consideration and the investment objectives for each of our funds. When managing our funds’ exposure to market risks, we may from time to time use hedging strategies and various forms of derivative instruments to limit the funds’ exposure to changes in the relative values of investments that may result from market developments, including changes in prevailing interest rates, currency exchange rates and commodity prices.
Changes in Fair Value
Fair value of the financial assets and liabilities of theour funds may fluctuate in response to changes in the value of investments, foreign currency exchange rates, commodity prices, and interest rates.rates, among other factors. The fair value changes in the financial assets and liabilities of theour funds may affect the amount of our AUM and may impact the amount of management fees and incentive income we may earn from the funds.
With regards toThe amount of our AUM in our multi-strategy and opportunistic credit funds is generally based on net asset value (plus unfunded commitments in certain cases). A 10% change in the consolidated funds,fair value of the net effectassets held by our funds as of September 30, 2023 and December 31, 2022, would have resulted in changes of approximately $1.3 billion and $1.5 billion, respectively, in AUM. AUM for our real estate funds and securitization vehicles is generally not based on net asset value.
Additionally, we carry the following financial instruments at fair value: risk retention investments in certain of our CLOs, investments in U.S. government obligations, investments of our consolidated entities, warrants issued by us and our consolidated entity, and notes payable of a consolidated entity. A hypothetical 10% change in the fair value of these instruments would have a corresponding impact on our earnings. Refer to Note 4 of our consolidated financial statements included in this quarterly report for additional details on how we report the changes in fair value changes primarily impacts the net gains of consolidated funds in our consolidated statements of comprehensive income (loss); however, a large portion of these fair value changes is absorbed by the investors of these funds (noncontrolling interests). We may also be entitled to a portion of these earnings through our incentive income allocation as general partner of these funds.instruments.
Impact on Management Fees
Management fees for our multi-strategy and opportunistic credit funds are generally based on the net asset value of those funds. Accordingly, management fees will generally change in proportion to changes in the fair value of investments held by these funds. Management fees for our real estate funds and certain other fundssecuritization vehicles are generallynot based on committed capital during the original investment period and invested capital thereafter;net asset value; therefore, management fees are not directly impacted by changes in the fair value of investments held by those funds.


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A hypothetical 10% decline in the fair value of the net assets held by our funds would have resulted in a reduction of management fees by approximately $12.4 million in the nine months ended September 30, 2023 and $14.7 million in the nine months ended September 30, 2022.
Impact on Incentive Income
Incentive income for our funds is generally based on a percentage of profits generated by our funds over a commitment period, which is impacted by global market conditions and other factors. Major factors that influence the degree of impact include how the investments held by our funds are impacted by changes in the market and the extent to which any hurdle rates or high-water marks impact our ability to earn incentive income. Consequently, incentive income cannot be readily predicted or estimated.
Market Risk
The amount of our assets under management is generally based on the net asset value of multi-strategy and opportunistic credit funds (plus unfunded commitments for certain closed-end opportunistic credit funds), and committed or invested capital for our real estate funds and certain other funds. A 10% change in the fair value of the net assets held by our funds as of September 30, 2017 and December 31, 2016, would have resulted in a change of approximately $2.0 billion and $2.6 billion, respectively, in our assets under management.
A 10% change in the fair value of the net assets held by our funds as of October 1, 2017 (the date management fees are calculated for the fourth quarter of 2017) would impact management fees charged on that day by approximately $4.2 million. A 10% change in the fair value of the net assets held by our funds as of January 1, 2017, would have impacted management fees charged on that day by approximately $5.6 million.
A 10% change in the fair value of the net assets held by our funds as of the end of any year (excluding unrealized gains and losses in Special Investments or other investments on which we do not earn any incentive income until such investments are sold or otherwise realized), could significantly affect our incentive income, as incentive income is generally based on a percentage of annual profits generated by our funds.income. We do not earn incentive income on unrealized gains attributable to Special Investments and certain other investments, and therefore a change in the fair value of those investments would have no effect on incentive income.income until such investments are sold or otherwise realized.
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Exchange Rate Risk
Our fundsChanges in currency rates will impact the carrying value of financial instruments denominated in currencies other than the U.S. dollar. We hold certain cash and risk retention investments in the European CLOs as well as related financing (CLO Investments Loans and repurchase agreements) denominated in non-U.S. dollar currencies, which may be affected by movements in the rate of exchange between the U.S. dollar and foreign currencies. Additionally, a portion of our operating expenses and management fees are denominated in non-U.S. dollar currencies. We manage our exposure to exchange rate risks through our regular operating activities, wherein we may align foreign currency payments and receipts, and when appropriate, through the use of derivative financial instruments to hedge certain foreign currency exposure, although the impact of these were not material in 2023 and 2022.
We estimate that as of September 30, 20172023 and December 31, 2016,2022, a hypothetical 10% weakening or strengthening of the U.S. dollar against all or any combination of currencies to which our funds have exposure to exchangeforeign currency rates would not have a material effectdirect impact on our revenues, net income attributable to Class A Shareholders or Economic Income. The impact on cash flows from financial instruments would be insignificant.
Our investment funds hold investments that are denominated in non-U.S. dollar currencies that may be affected by movement in the rate of exchange between the U.S. dollar and non-U.S. dollar currencies. The funds may seek to hedge resulting currency exposure through borrowings in foreign currencies or through the use of derivative financial instruments.
Interest Rate Risk
Our Senior Notes are fixed-rate borrowings. Any borrowingsBorrowings under the Revolving Credit Facility2020 Term Loan and CLO Investments Loans, as well as our investments in CLOs accrue interest at variable rates. Our funds also have financing arrangements and hold credit instruments that accrue interest at variable rates. Interest rate changes may therefore impactaffect the amount of our interest income and interest expense,payments, future earnings and cash flows.
We estimate that as of September 30, 20172023 and December 31, 2016,2022, a 100 basis pointhypothetical one percentage increase or decrease in variable interest rates would not have a material effectdirect impact on our annual interest income, interest expense, net income attributable to Class A Shareholders or Economic Income.
Our investment funds hold investments that may be affected by changes in interest rates. A tightening of credit and anmaterial increase in prevailing interest rates could make it more difficult for uswould be expected to raise capitalnegatively affect valuation of investments that accrue interest at fixed rates. The actual impact would be dependent upon the average duration of fixed income holdings at the time and sustainmay be partially offset by the growthuse of derivative financial instruments and higher interest income on variable rate securities, which would be expected to benefit as these securities would generate higher levels of the funds.current income. For funds that pay management fees based on net asset value, we estimate that our management fees would change proportionally with such increases or decreases in net asset value.
Credit Risk
Credit risk is the risk that counterparties or debt issuers may fail to fulfill their obligations or that the collateral value may become inadequate to cover our exposure. We manage credit risk by monitoring the credit exposure to and the creditworthiness of counterparties, requiring additional collateral where appropriate.


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Item 4. Controls and Procedures
Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as(as defined in Rule 13a-15(e) under the Exchange Act,Act) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of September 30, 2017,2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and
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operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level as of September 30, 2017.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, that occurred in the third quarter of 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.level.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, that occurred in the third quarter of 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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71



PART II –- OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any pending judicial, administrative or arbitration proceedings that we expect to have a material impact on our consolidated financial statements. We are from time to time involved in litigation and claims incidental to the conduct of our business. Like other businesses in our industry, we are subject to extensive scrutiny by regulatory agencies globally that have, or may in the future have, regulatory authority over us and our business activities. This has resulted in, or may in the future result in, regulatory agency investigations, litigation and subpoenas, and related sanctions and costs. See “Item 1A. Risk Factors” below and “Item“Part I, Item 1A. Risk Factors—Risks Related to Our Business—Recent regulatoryRegulatory changes in jurisdictions outside the United StatesU.S. could adversely affect our business” in our Annual Report. See Note 1516 to our consolidated financial statements included in this report for additional information.
Disclosure Complaints
As of November 6, 2023, the Company has received (i) four demand letters from purported stockholders of the Company claiming that the preliminary proxy statement filed on August 21, 2023 contained material misstatements and omissions with respect to the discussion of the Mergers and (ii) seven demand letters from purported stockholders of the Company claiming that the Original Proxy Statement or the Second Supplement contained material misstatements and omissions with respect to the discussion of the Mergers. In addition, lawsuits have been filed by purported stockholders of the Company making similar allegations with respect to the preliminary proxy: Yale David v. Sculptor Capital Management, Inc. et al., No. 23-cv-07921 (S.D.N.Y. September 7, 2023); Edward Edgerton v. Sculptor Capital Management, Inc., et al. No. 23-cv-07999 (S.D.N.Y. September 11, 2023) (together, the “Disclosure Complaints”).
Beauchemin Action
On September 11, 2023, stockholder Gilles Beauchemin filed a purported class action against the Company and each of the Company’s directors in the Court of Chancery of the State of Delaware, captioned Gilles Beauchemin v. Marcy Engel, et al., No. 2023-0921- (Del. Ch. September 11, 2023) (the “Beauchemin Action”). The Beauchemin Action alleges, among other things, that the Board and Special Committee violated their fiduciary duties in connection with the Mergers. The Beauchemin Action seeks, among other things, injunctive relief. Along with his September 11 complaint, the plaintiff in the Beauchemin Action filed a motion for a preliminary injunction, and a motion to expedite seeking expedited relief from the court. On September 25, 2023, plaintiff in the Beauchemin Action served requests for production on the defendants and issued subpoenas to certain advisors of the Company and the Special Committee and Saba Capital Management, LP. On September 26, 2023, the Court held argument on the motion to expedite, during which it denied the motion without prejudice on the grounds that it was premature given the ongoing nature of the Special Committee’s deliberations. The Court ordered the parties to negotiate a plan for expedited discovery in the event it ordered such discovery at a later date. On October 15, the plaintiff in the Beauchemin Action filed an amended complaint. A hearing in the matter is scheduled for November 14, 2023. The Company, Board and Special Committee believe that the allegations set forth in the Beauchemin Action are without merit and intend to oppose the request to enjoin the Special Meeting.
Former EMD Group Action
On October 17, 2023, stockholders and former Executive Managing Directors Daniel S. Och, Harold A. Kelly, Jr., Richard Lyon, James O’Connor, and Zoltan Varga (the “Former EMD Group’’) filed a purported class action complaint on behalf of themselves and purportedly all other similarly situated stockholders of the Company against Marcy Engel, Bharath Srikrishnan, Charmel Maynard, David Bonanno, James Levin, Wayne Cohen, Sculptor Capital Management, Inc., Sculptor Capital LP, Sculptor Capital Advisors LP, Sculptor Capital Advisors II LP, Calder Sub, Inc., Calder Sub I, LP, Calder Sub II, LP, Calder Sub III, LP, and Rithm Capital Corp. in the Court of Chancery of the State of Delaware, captioned Och, et al. v. Engel, et al., C.A. No. 2023-1043-SG (the “Former EMD Group Action”). The complaint in the Former EMD Group Action alleges, among other things, that the Board and Special Committee violated their fiduciary duties in connection with the Mergers. The Former EMD Group complaint sought, among other things, injunctive relief.
On October 20, 2023, the parties in the Beauchemin Action and the Former EMD Group Action jointly filed a proposed stipulation coordinating and consolidating the two proceedings in connection with discovery and a preliminary injunction hearing on November 9, 2023. The Court ordered the stipulation coordinating and consolidating the two proceedings on October 23, 2023.
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On October 27, 2023, Rithm filed a letter with the Court, providing an update regarding the Founder EMD Group’s agreement to vote their shares in favor of a revised merger agreement between Rithm and the Company and seeking the Court’s approval to enter a stipulation and proposed order withdrawing the claims in the Former EMD Group Action with prejudice as to the Former EMD Group. The stipulation provides that stockholder Gilles Beauchemin will continue to represent the putative class in the consolidated action, including with respect to the preliminary injunction hearing.
On October 29, 2023, the plaintiff in the Beauchemin Action filed a consolidated amended complaint, adding the Former EMD Group as defendants, alleging that they breached duties to the class in connection with their settlement, and Rithm as a defendant, alleging it aided and abetted the former EMD Group’s breach of duties. The Company, Board and Special Committee believe that the allegations set forth in the Beauchemin Action are without merit and intend to oppose the request to enjoin the Special Meeting.
Section 220 Demands
The Company has also received four books and records demands pursuant to 8 Del. C. § 220 (the “Section 220 Demands”), including one submitted by the Former EMD Group, seeking, among other things, meeting minutes concerning the Mergers or any strategic alternatives, all materials considered by the Board and Special Committee in connection with its consideration of the Mergers or any strategic alternatives, and communications from the Board, the Special Committee, and the Company’s management related to the same. The Company received the fourth Section 220 Demand on October 9, 2023. The Company has sent a letter objecting to each of the four Section 220 Demands. The Company has commenced production in response to three of the demands, and will produce additional records in response to the Section 220 Demands as deemed appropriate. The Company has entered into an NDA with three of the Section 220 shareholders, which governs the treatment of all materials produced in response to the Section 220 Demands. On October 27, 2023, the Former EMD Group agreed to withdraw its Section 220 Demand.
Class E Unitholder Action
On November 1, 2023, former executive managing directors and holders of LP Class E Units Akhil Mago, David Becker, Andrew Frank, and Nathaniel Ewing filed an action against the Company in the Supreme Court of the State of New York, captioned Akhil Mago et al. v. Sculptor Capital Management et al. (N.Y. Sup. Ct. Nov. 1, 2023) (the “Class E Unitholder’s Complaint”), along with an order to show cause why the Court should not issue an order preliminarily enjoining the Company from holding the Special Meeting on November 16, 2023.The Class E Unitholders’ Complaint alleges that the proposed cancellation of the LP Class E Units contemplated by the transactions without the consent of the Class E Unitholders violates the terms of the limited partnership agreements of the Operating Partnerships.It seeks a declaration that the consummation of the transactions without the consent of the Class E Unitholders constitutes a breach of those agreements, and an injunction precluding the Company from consummating the transactions.The Company believes that the allegations set forth in the Class E Unitholders’ Complaint are without merit and intends to oppose the request to enjoin the Special Meeting. On November 14, 2023, the Court will hear oral argument on the Class E Unitholders’ request for a preliminary injunction.
Item 1A. Risk Factors
Please see “Item 1A. Risk Factors”There have been no material changes from the risk factors disclosed in Part I, Item 1A "Risk Factors" included in our Annual Report on Form 10-K for a discussionthe fiscal year ended December 31, 2022 other than as disclosed in Item 1A. “Risk Factors” included in our Quarterly Report on Form 10-Q for the period ended June 30, 2023, which is incorporated herein by reference, and the following:
Any legal proceedings filed against us in connection with the Merger could delay or prevent the completion of the Mergers.
Transactions such as the Mergers often give rise to lawsuits by shareholders or other third parties. In connection with the Mergers, plaintiffs have and may continue to file lawsuits against us and/or our directors and officers in connection with the Mergers.We are currently subject to a number of litigation matters and demands in connection with the proposed Mergers as described in Item 1 “Legal Proceedings”. Such legal proceedings and demands, or other similar matters, could prevent or delay the completion of the Mergers and result in substantial additional costs, including costs associated with indemnification of directors, and may require our management team to devote significant time and resources in an effort to address the consequences of these
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and other litigation matters, any of which could materially adversely affect our funds, business, financial condition and results of operations. If closing of the Mergers is delayed as a result of such legal proceedings, or any other reason, then we may be unable to satisfy certain conditions to closing. Specifically, consummation of the proposed Mergers is subject to the satisfaction or waiver of, among other things, the receipt of consent of investment funds or other vehicles managed by us and our subsidiaries representing at least 85% of such parties’ run rate revenue to the “assignment” (as defined in the Investment Advisers Act of 1940) of their client contracts, provided that Rithm has agreed to waive such condition, solely to the extent the closing of the Mergers occurs on or prior to November 17, 2023. While, as of this date of this report, we have obtained necessary client consents to satisfy this condition, if the closing of the Mergers is delayed, clients may withdraw consents or redeem assets, which could cause us to be unable to satisfy such condition. If such condition is not waived, we may be unable to satisfy such condition to closing, which could have a material adverse effect on our business, financial condition, results of operations and stock price. In addition, if any lawsuit is successful in obtaining an injunction prohibiting us or Rithm from consummating the Mergers on the agreed upon terms, the injunction may prevent the Mergers from being completed within the expected timeframe, or at all, which could have a material adverse effect on our business, financial condition, results of operations and stock price. The Company would face significant risks as a standalone company. If the Rithm transaction does not close, there is a material to ourrisk of significant client redemptions and employee attrition jeopardizing the business.
If any third party pursues a competing transaction with us, the continued publicity and uncertainty regarding the Mergers that would result could cause a loss of clients and employees, which could have a material adverse effect on the Company and could, in certain circumstances, result in the failure of the conditions to closing of the Mergers to be satisfied, which could result in the Company being unable to consummate the Mergers.In the event that the Company is unable to consummate the Mergers and is unable to reach agreement with a third party on the terms of an alternative transaction, the business, operations and prospects of the Company could be materially and adversely affected and the Company’s stock price could decline materially.
The Special Committee may continue to receive non-binding proposals from third parties seeking to acquire the Company. For example, the Special Committee received non-binding proposals from a consortium of bidders led by Boaz Weinstein, as previously disclosed (the “Consortium”) relating to a potential transaction, and may in the future continue to receive proposals from the Consortium or other third parties. Engagement with third parties may create uncertainty with respect to the Mergers and could adversely impact our relationships with our clients and prospective clients as well as our employees. Such actions could materially adversely affect our funds, business, financial condition and results of operations and may require our management team to devote significant time and resources, which could further materially adversely affect our business, financial condition and results of operations.
If the Special Committee continues to receive non-binding proposals from third parties, including the Consortium, engagement with such third parties may prevent the Company from completing the Mergers within the expected timeframe or at all. In the event that the Company is unable to consummate the Mergers and is unable to reach an alternative agreement with a third party, the Company would face significant risks as a standalone company. If the Rithm transaction does not close, there is a material risk of significant client redemptions and employee attrition jeopardizing the business.
Further, the Merger Agreement also provides that the Merger Agreement may be terminated by us or Rithm under certain circumstances, and in certain specified circumstances upon termination of the Merger Agreement we will be required to pay Rithm a termination fee of approximately $22.4 million. If we are required to make this payment, doing so could materially adversely affect our business, financial condition, results of operations or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
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Item 5. Other Information
None.

Rule 10b5-1 Trading Plans


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During the three months ended September 30, 2023, no director or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.





Item 6. Exhibits
Exhibit
No.		Description
Exhibit No.Description
2.1*
3.1*
31.1*
31.2
31.2*
32.1
32.1*
101.INSXBRL Instance Document
101.SCH101*XBRL Taxonomy Extension Schema DocumentThe following financial information from the Quarterly Report on Form 10-Q for the three months ended September 30, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Changes in Shareholders’ Equity (Deficit); (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEF104*XBRL Taxonomy Extension Definition Linkbase DocumentCover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith



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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Dated: November 2, 20178, 2023

OCH-ZIFFSCULPTOR CAPITAL MANAGEMENT, GROUP LLCINC.
By:/s/ Alesia J. HaasDava Ritchea
Alesia J. HaasDava Ritchea
Chief Financial Officer and Executive Managing Director




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