A compensation scheme masquerading as an asset class

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The spat between Sculptor Capital Management and its founder and erstwhile head Daniel Och is solely pleasant, and, as Marc Rubinstein has noted, gives an enchanting look beneath the hood of the hedge fund business.

The most recent twist is a superb instance. After Och began trying to sabotage the hedge fund’s deal to promote itself, Sculptor has launched several savage letters criticising its former supremo.

One included this absolute pearl of a chart (zoomable version here).

For context, considered one of Och’s most potent assault traces towards Sculptor (née Och-Ziff Capital Administration) is that it has grossly overpaid Jimmy Levin, his former protégé and present CEO and CIO, whilst efficiency has been woefully poor.

That’s . . . not totally fallacious. Sculptor’s funding efficiency has been dismal for some time, and its share value has bombed. It IPO’d at $320 again in 2007, and now desires to promote itself for $11.15 per share. Over 2021-22 it has paid workers led by Levin $732.8mn in salaries, bonuses and benefits, even because it reported losses of $27mn.

However as Sculptor archly famous in its letter to Och, nobody has executed higher than Och himself, regardless of presiding over a lot of the hedge fund’s interval as a public firm and the debilitating results of an African bribery scandal (detailed in the second letter).

There’s a lot to say right here — and there’ll virtually definitely be extra twists on this saga — but it surely actually does hammer house the adage that hedge funds are a compensation scheme masquerading as an asset class.

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