Sculptor credit funds draw cash after deep March losses: source

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BOSTON (Reuters) – Sculptor Capital Management’s (N:SCU) credit funds drew inflows from investors even as losses piled up at its SCU Credit Opportunities fund after weeks of coronavirus-fueled market swings.

Credit funds operated by Sculptor, formerly known as Och-Ziff Capital Management, received around $1 billion in new money in recent weeks, a person familiar with the fund said.

Those inflows come despite a rocky March in which the fund badly underperformed its peers. The SCU Credit Opportunities Fund, part of Sculptor’s $6 billion lineup of credit portfolios, was down 19.2% in the year to date through April after a 21.5% drop in March, according to investors in the fund.

By contrast, the credit-sensitive HFRI Event Driven Index was down 9.32% in the same time frame.

A representative for Sculptor, which manages a total of $35 billion in assets for pension funds and other wealthy clients and is one of the industry’s few publicly-listed firms, declined to comment.

Investors have piled into some credit funds amid the market’s recent gyrations, after the Federal Reserve pledged to buy investment-grade bonds as well as select high-yield bonds.

Sculptor’s credit fund, led by Chief Investment Officer James Levin, gained 1.4% in 2019 and was up 6.5% in 2018. Since its launch in late 2011 it has returned an average 7.4% a year, beating the BofA Merrill Lynch US High Yield Index return of 4.9% during the same time.

Levin, who as CIO also oversees Sculptor’s flagship $10 billion multi-strategy fund, was promoted to head global credit strategies after engineering a bet on structured credit debt which earned Och-Ziff a $2 billion profit in 2012.

Levin became sole CIO in 2018 after Dan Och, the firm’s founder, changed his succession plans that had originally envisioned Levin replacing him as CEO. Och has left the company and Levin is expected to be elected to the board in a few weeks.

Some investors in Sculptor’s credit fund continue to expect steady performance, despite this year’s so-far lackluster results.

“If (Sculptor) can avoid defaults in the portfolio, and a permanent impairment of capital, future returns should be very strong,” said Michael Rosen, chief investment officer at Angeles Investment Advisors.

Sculptor’s stock price has dropped nearly 50% since January to stand at around $11.79, near record lows. Investors added $555 million in new money to all portfolios during the first quarter after inflows of $2.1 billion in the previous quarter.

In April, the SCU Credit Opportunities fund gained 1.2% percent after March’s big drop, investors said.

But other funds have gained more. Oaktree Capital’s Oaktree Value Opportunities fund rose 8% last month, leaving it down 6.5% for the year through April, and Mudrick Capital’s Distressed Opportunities Fund gained 6.3% in April, leaving it down 4.9% for the year to date through April. PIMCO’s Global Credit Opportunities Fund is up 1% through April and Diameter Capital’s fund is up 7.5%.

Representatives for those funds declined to comment.