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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 ended March 31, 2021
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 Number: 001-33805
SCULPTOR CAPITAL MANAGEMENT, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware   26-0354783
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
9 West 57th Street, New York, New York 10019
(Address of principal executive offices)
(212) 790-0000
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:

Title of each class   Trading symbol(s) Name of each exchange on which registered
Class A Shares   SCU New 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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer    Accelerated filer
   
Non-accelerated filer    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 
As of May 3, 2021, there were 24,854,188 Class A Shares and 32,887,882 Class B Shares outstanding.
 




SCULPTOR CAPITAL MANAGEMENT, INC.
TABLE OF CONTENTS
 
    Page
PART I — FINANCIAL INFORMATION
 
Item 1.
6
 
 
6
7
 
 
8
 
 
9
 
 
11
 
 
13
 
Item 2.
37
 
Item 3.
71
 
Item 4.
73
 
PART II — OTHER INFORMATION  
 
Item 1.
75
 
Item 1A.
75
 
Item 2.
75
 
Item 3.
75
 
Item 4.
75
 
Item 5.
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Item 6.
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77

i


Defined Terms
2007 Offerings
Refers collectively to our IPO and the concurrent private offering of approximately 38.1 million Class A Shares to DIC Sahir Limited, a wholly owned indirect subsidiary of Dubai Holdings LLC
active executive managing directors
Executive managing directors who remain active in our business
Annual Report
Our annual report on Form 10-K for the year ended December 31, 2020, dated February 23, 2021 and filed with the SEC
Class A Shares
Our Class A Shares, representing Class A common stock of Sculptor Capital Management, Inc., which are publicly traded and listed on the NYSE
Class B Shares
Class B Shares of Sculptor Capital Management, 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 Shares
CLOs
Collateralized loan obligations
the Company, Sculptor Capital, the firm, we, us, our
Refers, unless the context requires otherwise, to the Registrant and its consolidated subsidiaries, including the Sculptor Operating Group
Distribution Holiday The Sculptor Operating Partnerships initiated a distribution holiday (the “Distribution Holiday”) on the Group A Units, Group D Units, Group E Units and Group P Units and on certain RSUs 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 D Units, Group E Units and Group P Units and certain RSUs, do not receive distributions during the Distribution Holiday
Distribution Holiday Economic Income Distribution 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.
Exchange Act
Securities Exchange Act of 1934, as amended
executive managing directors
The current executive managing directors of the Company, and, except where the context requires otherwise, also includes certain executive managing directors who are no longer active in our business
funds
The multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles for which we provide asset management services
GAAP
U.S. generally accepted accounting principles
Group A Units
Refers collectively to one Class A operating group unit in each of the Sculptor Operating Partnerships. Group A Units are limited partner interests held by our executive managing directors
1


Group A-1 Units
Refers 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 Units
Refers collectively to one Class B operating group unit in each of the Sculptor Operating Partnerships. Group B Units are limited partner interests held by Sculptor Corp
Group E Units
Refers collectively to one Class E operating group unit in each of the Sculptor Operating Partnerships. Group E Units are limited partner interests held by our executive managing directors
Group P Units
Refers collectively to one Class P operating group unit in each of the Sculptor Operating Partnerships. Group P Units are limited partner interests held by our executive managing directors
Institutional Credit Strategies
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, collateralized bond obligations, and other customized solutions
IPO
Our initial public offering of 3.6 million Class A Shares that occurred in November 2007
NYSE
New York Stock Exchange
Partner Equity Units
Refers collectively to the Group A Units, Group E Units and Group P Units
Preferred Units
One Class A cumulative preferred unit in each of the Sculptor Operating Partnerships collectively represents one “Preferred Unit.” Certain of our executive managing directors collectively owned 100% of the Preferred Units. Preferred Units issued in 2016 and 2017 are, collectively, referred to as “2016 Preferred Units.” Preferred Units issued in 2019 are referred to as “2019 Preferred Units.” We redeemed in full the Preferred Units in the fourth quarter of 2020, and as of March 31, 2021 there were no Preferred Units outstanding.
PSUs
Class A performance-based RSUs
Recapitalization
Refers to the recapitalization of our business that occurred in February 2019. As part of the Recapitalization, a portion of the interests held by our active and former executive managing directors were reallocated to existing members of senior management. In addition, we restructured the previously outstanding senior debt and Preferred Units
Registrant
Sculptor Capital Management, Inc., a Delaware corporation
RSUs
Class A restricted share units
Sculptor Corp
Sculptor Capital Holding Corporation, a Delaware corporation
Sculptor Operating Group
Refers collectively to the Sculptor Operating Partnerships and their consolidated subsidiaries
Sculptor Operating Group Units
Refers collectively to Sculptor Operating Group A, B, D, E, and P Units
Sculptor Operating Partnerships
Refers collectively to Sculptor Capital LP, Sculptor Capital Advisors LP and Sculptor Capital Advisors II LP
SEC
U.S. Securities and Exchange Commission
2


Securities Act
Securities Act of 1933, as amended
Special Investments
Investments 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

3


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.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 webcast. The contents of our website are not, however, a part of this report.
Also posted on our website in the “Investor Relations—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 Sculptor Capital Management, 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).
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
This report contains 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, including the impact of public health crises, such as the ongoing COVID-19 pandemic; United States (“U.S.”) and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy; the outcome of third-party litigation involving us; the consequences of the Foreign Corrupt Practices Act settlements with the SEC and the U.S. Department of Justice (the “DOJ”) and any claims arising therefrom; whether the Company realizes all or any of the anticipated benefits from the Recapitalization and other related transactions; whether the Recapitalization and other related transactions result in any increased or unforeseen costs, indemnification obligations or have an impact on our ability to retain or compete for professional talent or investor capital; conditions impacting the alternative asset management industry; our ability to retain existing 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; our ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to our business; the anticipated benefits of changing the Registrant’s tax classification from a partnership to a corporation and subsequently converting from a limited liability company to a corporation; 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
4




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 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.
5

SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS — UNAUDITED
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

  March 31, 2021 December 31, 2020
  (dollars in thousands)
Assets    
Cash and cash equivalents $ 198,039  $ 183,815 
Restricted cash 3,219  3,162 
Investments (includes assets measured at fair value of $307,778 and $309,805, including assets sold under agreements to repurchase of $118,926 and $123,616 as of March 31, 2021 and December 31, 2020, respectively)
432,526  414,974 
Income and fees receivable 82,298  539,623 
Due from related parties 16,936  14,086 
Deferred income tax assets 244,012  240,288 
Operating lease assets 104,408  104,729 
Other assets, net 80,013  82,500 
Assets of consolidated funds:  
Other assets of consolidated funds — 
Total Assets $ 1,161,454  $ 1,583,177 
Liabilities and Shareholders’ Equity  
Liabilities    
Compensation payable $ 39,355  $ 234,006 
Unearned income and fees 57,470  61,880 
Due to related parties 184,580  202,225 
Operating lease liabilities 114,604  115,237 
Debt obligations 185,793  334,972 
Warrant liabilities, at fair value 62,771  37,827 
Securities sold under agreements to repurchase 117,780  122,638 
Other liabilities 32,152  39,512 
Liabilities of consolidated funds:  
Other liabilities of consolidated funds — 
Total Liabilities 794,507  1,148,297 
Commitments and Contingencies (Note 16)
Shareholders’ Equity    
Class A Shares, par value $0.01 per share, 100,000,000 and 100,000,000 shares authorized, 23,899,777 and 22,903,571 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
239  229 
Class B Shares, par value $0.01 per share, 75,000,000 and 75,000,000 shares authorized, 32,887,883 and 32,824,538 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
329  328 
Additional paid-in capital 185,961  166,917 
Accumulated deficit (255,522) (178,674)
Accumulated other comprehensive income 350  732 
Shareholders’ deficit attributable to Class A Shareholders (68,643) (10,468)
Shareholders’ equity attributable to noncontrolling interests 435,590  445,348 
Total Shareholders’ Equity 366,947  434,880 
Total Liabilities and Shareholders’ Equity $ 1,161,454  $ 1,583,177 
See notes to consolidated financial statements.
6


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED
  Three Months Ended March 31,
2021 2020
  (dollars in thousands)
Revenues    
Management fees $ 73,961  $ 66,953 
Incentive income 47,804  9,322 
Other revenues 1,581  2,953 
Income of consolidated funds — 
Total Revenues 123,349  79,228 

Expenses    
Compensation and benefits 89,234  67,419 
Interest expense 4,868  5,782 
General, administrative and other 27,376  34,706 
Expenses of consolidated funds — 
Total Expenses 121,480  107,907 

Other Loss    
Changes in fair value of warrant liabilities (24,944) — 
Changes in tax receivable agreement liability 580  278 
Net losses on retirement of debt (23,673) (523)
Net gains (losses) on investments 5,362  (34,069)
Total Other Loss (42,675) (34,314)

Loss Before Income Taxes (40,806) (62,993)
Income taxes (1,715) (9,968)
Consolidated Net Loss (39,091) (53,025)
Less: Net loss attributable to noncontrolling interests 18,798  26,085 
Net Loss Attributable to Sculptor Capital Management, Inc. (20,293) (26,940)
Change in redemption value of Preferred Units —  (1,327)
Net Loss Attributable to Class A Shareholders $ (20,293) $ (28,267)
Loss per Class A Share    
Loss per Class A Share - basic $ (0.85) $ (1.27)
Loss per Class A Share - diluted $ (0.99) $ (1.27)
Weighted-average Class A Shares outstanding - basic 23,853,428  22,304,713 
Weighted-average Class A Shares outstanding - diluted 39,872,934  38,319,348 

See notes to consolidated financial statements.

7


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED

Three Months Ended March 31,
2021 2020
(dollars in thousands)
Consolidated net loss $ (39,091) $ (53,025)
Other Comprehensive Loss, Net of Tax
Other comprehensive loss - currency translation adjustment (868) — 
Comprehensive Loss (39,959) (53,025)
Less: Comprehensive loss attributable to noncontrolling interests 19,284  26,085 
Comprehensive Loss Attributable to Sculptor Capital Management, Inc. $ (20,675) $ (26,940)

See notes to consolidated financial statements.
8


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

Three Months Ended March 31,
  2021 2020
(dollars in thousands)
Number of Class A Shares
Beginning balance
22,903,571  21,284,945 
Equity-based compensation
996,206  661,694 
Ending Balance
23,899,777  21,946,639 
Number of Class B Shares
Beginning balance
32,824,538  29,208,952 
Equity-based compensation
63,345  3,636,462 
Ending Balance
32,887,883  32,845,414 
Class A Shares Par Value
Beginning balance
$ 229  $ 213 
Equity-based compensation
10 
Ending Balance
$ 239  $ 219 
Class B Shares Par Value
Beginning balance
$ 328  $ 292 
Equity-based compensation
36 
Ending Balance
$ 329  $ 328 
Additional Paid-in Capital
Beginning balance
$ 166,917  $ 117,936 
Dividend equivalents on Class A restricted share units 590  875 
Equity-based compensation, net of taxes 18,454  13,484 
Change in redemption value of Preferred Units —  (1,327)
Ending Balance
$ 185,961  $ 130,968 
9


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

Three Months Ended March 31,
  2021 2020
(dollars in thousands)
Accumulated Deficit
Beginning balance
$ (178,674) $ (343,759)
Cash dividends declared on Class A Shares (55,965) (11,613)
Dividend equivalents on Class A restricted share units (590) (875)
Consolidated net loss (20,293) (26,940)
Ending Balance
$ (255,522) $ (383,187)
Accumulated Other Comprehensive Income
Beginning balance $ 732  $ — 
Currency translation adjustment (382) — 
Ending Balance $ 350  $  
Shareholders’ Deficit Attributable to Class A Shareholders $ (68,643) $ (251,672)
Shareholders’ Equity Attributable to Noncontrolling Interests
Beginning balance
$ 445,348  $ 440,779 
Currency translation adjustment (486) — 
Capital contributions 468  1,490 
Capital distributions (1,016) (286)
Equity-based compensation, net of taxes 10,074  9,870 
Consolidated net loss (18,798) (26,085)
Ending Balance
$ 435,590  $ 425,768 
Total Shareholders’ Equity $ 366,947  $ 174,096 
Cash dividends paid on Class A Shares $ 2.35  $ 0.53 

See notes to consolidated financial statements.
10


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED




  Three Months Ended March 31,
  2021 2020
  (dollars in thousands)
Cash Flows from Operating Activities    
Consolidated net loss $ (39,091) $ (53,025)
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:    
Amortization of equity-based compensation 30,897  24,729 
Depreciation, amortization and net gains and losses on fixed assets 1,735  1,802 
Changes in fair value of warrant liabilities 24,944  — 
Net losses on retirement of debt 23,673  523 
Deferred income taxes (3,311) (11,195)
Non-cash lease expense 5,645  5,298 
Net (gains) losses on investments, net of dividends (4,622) 35,204 
Operating cash flows due to changes in:    
Income and fees receivable 457,239  171,613 
Due from related parties (2,855) (2,458)
Other assets, net 3,321  4,439 
Compensation payable (196,865) (164,961)
Unearned income and fees (4,410) 1,569 
Due to related parties (17,642) (16,716)
Operating lease liabilities (5,744) (6,261)
Other liabilities (5,980) (5,616)
Consolidated funds related items:    
Other assets of consolidated funds (3) — 
Other liabilities of consolidated funds — 
Net Cash Provided by (Used in) Operating Activities 266,933  (15,055)
Cash Flows from Investing Activities    
Purchases of fixed assets (1,290) (394)
Purchases of United States government obligations (91,533) (89,489)
Maturities and sales of United States government obligations 90,892  50,632 
Investments in funds (25,477) (7,852)
Return of investments in funds 4,996  288 
Net Cash Used in Investing Activities (22,412) (46,815)
11


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED — (continued)

  Three Months Ended March 31,
  2021 2020
  (dollars in thousands)
Cash Flows from Financing Activities    
Contributions from noncontrolling interests 468  1,490 
Distributions to noncontrolling interests (1,016) (285)
Dividends on Class A Shares (55,965) (11,613)
Proceeds from debt obligations, net of issuance costs 1,746  1,988 
Repayment of debt obligations, including prepayment costs (174,400) (27,000)
Other, net (787) (789)
Net Cash Used in Financing Activities (229,954) (36,209)
Effect of exchange rate changes on cash and cash equivalents and restricted cash (286) — 
Net change in cash and cash equivalents and restricted cash 14,281  (98,079)
Cash and cash equivalents and restricted cash, beginning of period 186,977  245,439 
Cash and Cash Equivalents and Restricted Cash, End of Period $ 201,258  $ 147,360 
Supplemental Disclosure of Cash Flow Information    
Cash paid during the period:    
Interest $ 4,678  $ 2,937 
Income taxes $ 974  $ 2,113 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents $ 198,039  $ 142,753 
Restricted cash 3,219  4,607 
Total Cash and Cash Equivalents and Restricted Cash $ 201,258  $ 147,360 

See notes to consolidated financial statements.

12


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021


1. ORGANIZATION
Sculptor Capital Management, Inc. (the “Registrant”), a Delaware corporation, together with its consolidated subsidiaries (collectively, the “Company” or “Sculptor Capital”), is a global alternative asset management firm providing investment products in a range of areas, including multi-strategy, credit and real estate. With offices in New York, London, Hong Kong and Shanghai, the Company serves global clients through commingled funds, separate accounts and specialized products (collectively, the “funds”). Sculptor Capital’s distinct investment process seeks to generate attractive and consistent risk-adjusted returns across market cycles through a combination of bottom-up fundamental analysis, a high degree of flexibility, a collaborative team and integrated risk management. The Company’s capabilities span all major geographies, in strategies including fundamental equities, corporate credit, real estate debt and equity, merger arbitrage and structured credit.
The Company manages multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate 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”), commingled products and other customized solutions for clients.
The Company’s primary sources of revenues are management fees, which are based on the amount of the Company’s assets under management, and incentive income, which is based on the investment performance of its funds. Accordingly, for any given period, the Company’s revenues will be driven by the combination of assets under management and the investment performance of the funds.
The Company conducts its business and generates substantially all of its revenues primarily in the United States (the “U.S.”) through one operating and reportable segment. The single 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 executive managing directors who are no longer active in the Company’s business. References to the Company’s “active executive managing directors” refer to executive managing directors who remain active in the Company’s business.
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 Shares—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 on the Class A Shares by the Registrant’s Board of Directors.
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
13


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

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 Distribution Holiday discussed below.
The Company conducts its operations through the Sculptor Operating Group. The following is a list of the outstanding units of the Sculptor Operating Partnerships as of March 31, 2021:
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. Beginning on the final day of the Distribution Holiday, each executive managing director may exchange his or her vested and booked-up (as defined below) Group A Units for an equal number of Class A Shares (or the cash 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 Partnership limited partnership agreements.
Group A Unit grants are accounted for as equity-based compensation. See Note 13 in the Company’s Annual Report for additional information. The Company completed a recapitalization in February 2019 (“Recapitalization”). See Note 3 in the Company’s Annual Report for additional details. In connection with the Recapitalization 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 extent 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 Group A Units held by executive managing directors but are not exchangeable for Class A Shares and are not subject to vesting, 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. 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 Committee). 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. See Note 3 in the
14


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

Company’s Annual Report for additional details. Group E Unit grants are accounted for as equity-based compensation. See Note 13 in the Company’s Annual Report for additional information.
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. 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 performance conditions at such time and, with respect to exchanges, to the extent there has been sufficient appreciation for a Group P 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 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 performance 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 13 in the Company’s Annual Report for additional information.
Preferred Units— The Preferred Units were non-voting preferred equity interests in the Sculptor Operating Partnerships. Preferred Units issued in 2016 and 2017 are collectively referred to as the “2016 Preferred Units.” The 2016 Preferred Units were redeemed in full as a part of the Recapitalization. The Preferred Units issued in 2019 are referred to as the “2019 Preferred Units.” The 2019 Preferred Units were redeemed in full at a 25% discount in the fourth quarter of 2020.
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 a 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.
The following table presents the number of shares and units of the Registrant and the Sculptor Operating Partnerships, respectively, that were outstanding as of March 31, 2021:
  As of March 31, 2021
Sculptor Capital Management, Inc.
Class A Shares 23,899,777
Class B Shares 32,887,883
Warrants to purchase Class A Shares (Note 7)
4,338,015 
Sculptor Operating Partnerships
Group A Units 16,019,509
Group A-1 Units 9,779,446
Group B Units 23,899,777
Group E Units 13,009,153
Group P Units 3,385,000
In addition, the Company grants Class A restricted share units (“RSUs”) and performance-based RSUs (“PSUs”) to its employees and executive managing directors as a form of compensation. RSU and PSU grants are accounted for as equity-based compensation. See Note 13 in the Company’s Annual Report for additional information.
15


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited, interim, consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”), and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s unaudited, interim, consolidated financial statements have been included and are of a normal and recurring nature. 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. For example, incentive income for the majority of the Company’s multi-strategy assets under management is recognized in the fourth quarter each year, based on full year investment performance.
Recently Adopted Accounting Pronouncements
No changes to GAAP that went into effect in the three months ended March 31, 2021, had a material effect on the Company’s consolidated financial statements.
Future Adoption of Accounting Pronouncements
No 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
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 executive managing directors.
Prior to the Recapitalization, the attribution of net income (loss) of each Sculptor Operating Partnership was based on the relative ownership percentages of the Group A Units (noncontrolling interests) and the Group B Units (indirectly held by the 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 Distribution Holiday, the Company will allocate net income of each Sculptor Operating 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.
16


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

The table below sets forth the calculation of noncontrolling interests related to the Group A Units for each Sculptor Operating Partnership (rounding differences may occur). The blended participation percentages presented below take into account ownership changes throughout the periods presented.
Three Months Ended March 31,
  2021 2020
  (dollars in thousands)
Sculptor Capital LP
Net loss $ (47,463) $ (41,177)
Blended participation percentage 40  % 42  %
Net Loss Attributable to Group A Units $ (19,047) $ (17,374)
Sculptor Capital Advisors LP
Net loss $ (513) $ (9,938)
Blended participation percentage 40  % 42  %
Net Loss Attributable to Group A Units $ (206) $ (4,193)
Sculptor Capital Advisors II LP
Net income (loss) $ 5,215  $ (8,933)
Blended participation percentage % 42  %
Net Income (Loss) Attributable to Group A Units $   $ (3,770)
Total Sculptor Operating Group
Net loss $ (42,761) $ (60,048)
Blended participation percentage 45  % 42  %
Net Loss Attributable to Group A Units $ (19,253) $ (25,337)
The following table presents the components of the net loss attributable to noncontrolling interests:
Three Months Ended March 31,
  2021 2020
(dollars in thousands)
Group A Units $ (19,253) $ (25,337)
Other 455  (748)
  $ (18,798) $ (26,085)
The following table presents the components of the shareholders’ equity attributable to noncontrolling interests:
  March 31, 2021 December 31, 2020
(dollars in thousands)
Group A Units $ 424,091  $ 433,756 
Other 11,499  11,592 
  $ 435,590  $ 445,348 

17


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

4. INVESTMENTS AND FAIR VALUE DISCLOSURES
The following table presents the components of the Company’s investments as reported in the consolidated balance sheets:
March 31, 2021 December 31, 2020
(dollars in thousands)
U.S. government obligations, at fair value $ 104,936  $ 104,295 
CLOs, at fair value 202,842  205,510 
Equity method investments 124,748  105,169 
Total Investments $ 432,526  $ 414,974 
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 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 financial assets and liabilities. Financial assets and liabilities 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.
Financial assets and liabilities measured at fair value are classified and disclosed into one of the following categories based on the observability of inputs used in the determination of fair values:
Level I – Quoted prices that are available in active markets for identical financial assets or liabilities as of the     reporting date. The types of financial assets and liabilities that would generally be included in this category are certain listed equities, U.S. government obligations and certain listed derivatives.
Level II – Quotations received from dealers making a market for these financial assets or liabilities (“broker 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 measurement date. The types of financial assets and liabilities that would generally be included in this category are certain corporate bonds, 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 where the fair value is based on observable inputs. These financial assets and liabilities exhibit higher levels of liquid market observability as compared to Level III financial assets and liabilities.
Level III – Pricing inputs that are unobservable in the market and includes situations where there is little, if any, market activity for the financial asset or liability. The inputs into the determination of fair value of financial assets and liabilities in this category may require significant management judgment or estimation. The fair value of these
18


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

financial assets and liabilities 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 (e.g., cash flows, implied yields, EBITDA multiples). The types of financial assets and liabilities that would generally be included in this category include CLOs, warrant liabilities, real estate investments, equity and debt securities issued by private entities, limited partnerships, certain corporate bonds, 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.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial asset or liability’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 financial asset or liability when the fair value is based on unobservable inputs.
Fair Value Measurements Categorized within the Fair Value Hierarchy
The following table summarizes the Company’s investments measured at fair value on a recurring basis within the fair value hierarchy as of March 31, 2021:
  As of March 31, 2021
  Level I Level II Level III Total
  (dollars in thousands)
Assets, at Fair Value
Included within investments:
U.S. government obligations $ 104,936  $ —  $ —  $ 104,936 
CLOs(1)
$ —  $ —  $ 202,842  $ 202,842 
Liabilities, at Fair Value
Warrants $ —  $ —  $ 62,771  $ 62,771 
_______________
(1) As of March 31, 2021, investments in CLOs had contractual principal amounts of $190.1 million outstanding, which excludes the Company’s investments in subordinated tranches of the notes, as these do not have contractual principal payments.
19


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

The following table summarizes the Company’s investments measured at fair value on a recurring basis within the fair value hierarchy as of December 31, 2020:
  As of December 31, 2020
  Level I Level II Level III Total
  (dollars in thousands)
Assets, at Fair Value
Included within cash and cash equivalents:
U.S. government obligations $ 29,999  $ —  $ —  $ 29,999 
Included within investments:
U.S. government obligations $ 104,295  $ —  $ —  $ 104,295 
CLOs(1)
$ —  $ —  $ 205,510  $ 205,510 
Liabilities, at Fair Value
Warrants $ —  $ —  $ 37,827  $ 37,827 
_______________
(1) As of December 31, 2020, investments in CLOs had contractual principal amounts of $194.5 million 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
Gains and losses, excluding those related to foreign currency translation adjustments, are recorded within net gains (losses) on investments in the consolidated statements of operations. Gains and losses related to foreign currency translation adjustments are recorded in the statements of comprehensive income (loss). 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 tables below.
The following table summarizes the changes in the Company’s Level III assets and liabilities for the three months ended March 31, 2021:
December 31, 2020 Purchases / Issuances Investment Sales / Settlements Gains / Losses Included in Earnings Gains / Losses Included in Other Comprehensive Income March 31, 2021
(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs $ 205,510  $ 2,448  $ (20) $ 1,423  $ (6,519) $ 202,842 
Liabilities, at Fair Value
Warrants $ 37,827  $ —  $ —  $ 24,944  $ —  $ 62,771 
20


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

The following table summarizes the changes in the Company’s Level III assets for the three months ended March 31, 2020:
December 31, 2019 Purchases / Issuances Investment Sales / Settlements Gains / Losses Included in Earnings Gains / Losses Included in Other Comprehensive Income March 31, 2020
(dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs $ 182,870  $ 3,333  $ —  $ (30,916) $ —  $ 155,287 
The table below summarizes the net change in unrealized gains and losses on the Company’s Level III investments held and warrant liabilities outstanding as of the reporting date:
  Three Months Ended March 31,
  2021 2020
  (dollars in thousands)
Assets, at Fair Value
Included within investments:
CLOs $ (5,096) $ (30,916)
Liabilities, at Fair Value
Warrants $ (24,944) $ — 
Valuation Methodologies for Fair Value Measurements Categorized within Levels II and III
Investments in CLOs, are valued using independent pricing services, and therefore the Company does not have transparency into the significant inputs used by such services. Warrant liabilities are valued using a Black-Scholes model by independent pricing services, for which the Company’s Class A Share price, exercise price, risk free rate, volatility and term to expiry are the primary inputs to the valuation.
Fair Value of Other Financial Instruments
Management estimates that the carrying value of the Company’s other financial instruments, including its debt obligations and repurchase agreements, approximated their fair values as of March 31, 2021. The fair value measurements for the Company’s repurchase agreements are categorized as Level III within the fair value hierarchy and were determined using independent pricing services. The fair value measurements for the Company’s debt obligations are categorized as Level III within the fair value hierarchy and for the 2020 Term Loan is determined using a discounted cash flow model and for CLO Investments Loans are determined using independent pricing services.
Loans Sold to CLOs Managed by the Company
From time to time the Company sells loans to CLOs managed by the Company. These loans are purchased by the Company in the open market and simultaneously sold for cash to the CLOs. The loans are accounted for as transfers of financial assets as they meet the criteria for derecognition under GAAP. No loans were sold in each of the three months ended March 31, 2021 and 2020. The Company invests in senior secured and subordinated notes issued by certain CLOs to which it sold loans in the 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 issued by each CLO). The retained interests are reported within investments on
21


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

the Company’s consolidated balance sheet. As of March 31, 2021 and December 31, 2020, the Company’s investments in these retained interests had a fair value of $88.9 million and $90.3 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 interest and principal, as applicable, on these retained interests. In the three months ended March 31, 2021 and 2020, the Company received $717 thousand and $893 thousand, respectively, of interest and principal payments related to the retained interests.
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.
5. VARIABLE INTEREST ENTITIES
In the ordinary course of business, the Company sponsors the formation of funds that are considered VIEs. See Note 2 in the Company's Annual Report for a discussion of entities that are VIEs and the evaluation of those entities for consolidation by the Company. The assets and liabilities of consolidated VIEs were not material as of March 31, 2021 and December 31, 2020.
The Company’s direct involvement with funds that are VIEs and not consolidated by the Company is generally limited to providing asset management services and, in certain cases, insignificant 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 income and fees, primarily incentive income subject to clawback, in the event of any future fund losses. The Company has commitments to certain funds that are VIEs as discussed in Note 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.
The table below presents the net assets of VIEs in which the Company has variable interests along with the maximum risk of loss as a result of the Company’s involvement with VIEs:
March 31, 2021 December 31, 2020
(dollars in thousands)
Net assets of unconsolidated VIEs in which the Company has a variable interest $ 9,994,208  $ 10,481,312 
Maximum risk of loss as a result of the Company’s involvement with VIEs:
Unearned income and fees 57,391  61,879 
Income and fees receivable 22,849  192,826 
Investments 227,646  233,638 
Maximum Exposure to Loss $ 307,886  $ 488,343 

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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

6. LEASES
The Company 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 through the end of the lease term. In addition, the Company has finance leases for computer hardware.
Three Months Ended March 31,
2021 2020
(dollars in thousands)
Lease Cost
Operating lease cost $ 5,437  $ 5,147 
Short-term lease cost 17  13 
Finance lease cost - amortization of leased assets 199  137 
Finance lease cost - imputed interest on lease liabilities 10  14 
Less: Sublease income (411) (384)
Net Lease Cost $ 5,252  $ 4,927 

Three Months Ended March 31,
2021 2020
(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 $ 5,809  $ 5,602 
Operating cash flows for finance leases $ $
Finance cash flows for finance leases $ 624  $ 459 
Right-of-use assets obtained in exchange for lease obligations
Operating leases $ 2,893  $

March 31, 2021 December 31, 2020
Lease Term and Discount Rate
Weighted average remaining lease term
Operating leases 8.2 years 8.5 years
Finance leases 1.8 years 1.6 years
Weighted average discount rate
Operating leases 7.8  % 7.9  %
Finance leases 6.7  % 7.2  %

23


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

Operating
Leases
Finance
Leases
(dollars in thousands)
Maturity of Lease Liabilities
April 1, 2021 to December 31, 2021 $ 16,150  $ 242 
2022 20,851  248 
2023 20,079  — 
2024 16,133  — 
2025 14,330  — 
Thereafter 68,042  — 
Total Lease Payments 155,585  490 
Imputed interest (40,981) (20)
Total Lease Liabilities $ 114,604  $ 470 
As of March 31, 2021, the Company has pledged collateral related to its lease obligations of $6.2 million, which is included within investments in the consolidated balance sheets.
Operating Leases
  (dollars in thousands)
Sublease Rent Payments Receivable
April 1, 2021 to December 31, 2021 $ 1,232 
2022 1,642 
2023 1,286 
2024 — 
2025 — 
Thereafter — 
Total Sublease Rent Payments Receivable $ 4,160 

24


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

7. DEBT OBLIGATIONS AND WARRANTS
2020 Term Loan CLO Investments Loans Total
(dollars in thousands)
Maturity of Debt Obligations
April 1, 2021 to December 31, 2021 $ —  $ —  $ — 
2022 —  2,199  2,199 
2023 —  —  — 
2024 —  19,130  19,130 
2025 —  —  — 
2026 —  —  — 
Thereafter 145,000  39,035  184,035 
Total Payments 145,000  60,364  205,364 
Unamortized discounts & deferred financing costs (19,278) (293) (19,571)
Total Debt Obligations $ 125,722  $ 60,071  $ 185,793 
2020 Credit Agreement
On September 25, 2020, Sculptor Capital LP, as borrower, (the “Borrower”), and certain other subsidiaries of the Company, as guarantors, entered into a credit and guaranty agreement (the “2020 Credit Agreement”), consisting of (i) a senior 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. In the three months ended March 31, 2021, the Company repaid $174.4 million of the 2020 Term Loan, resulting in an outstanding balance of $145.0 million, which is due at maturity. The Company recognized a $23.7 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”). Proceeds from the 2020 Term Loan, together with cash on hand, were used to repay the Debt Securities and the 2018 Term Loan, as well as to redeem the 2019 Preferred Units in full.
Borrowings under the 2020 Credit Agreement bear interest at a per annum rate equal to, at the Company’s option, one, two, three or six month LIBOR (subject to a 0.75% floor) plus 6.25%, or a base rate (subject to a 1.75% floor) plus 5.25%. The Borrower is also required to pay an undrawn commitment fee at a rate per annum equal to 0.50% of the undrawn portion of the 2020 Revolving Credit Facility.
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 four anniversary of the Closing Date, a premium of 2.0%
25


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

of the principal amount of loans prepaid and (d) thereafter, 0%. No Call Premium was due on the first $175.0 million prepaid by the Company.
The 2020 Credit Agreement prohibits the total fee-paying assets under management, subject to certain exclusions, of the Borrower, the guarantors and their consolidated subsidiaries as of the last day of any fiscal quarter to be less than $20.0 billion. The 2020 Credit Agreement contains customary events of default for 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.
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 the Closing Date and an initial exercise price per share equal to $11.93. The exercise price is subject to reduction by an amount equal to any dividends paid on Class A Shares. As a result, the exercise price was $9.58 per share as of March 31, 2021. 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, one of the warrants provides that, upon exercise in whole or in part by the holder, the Company may decide in its 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 procedure 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 change of control prior to the expiration date, the holder will have the right to require the Company to repurchase any remaining portion of the warrants not yet exercised at their Black-Scholes value as provided for in the applicable agreement. The warrants restrict transfers and other dispositions for 18 months from the Closing Date, subject to certain exceptions.
CLO Investments Loans
The Company entered into loans to finance portions of investments in certain CLOs (collectively, the “CLO Investments Loans”). In general, the Company will make interest 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 also 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, which investments had fair values of $66.0 million and $66.5 million as of March 31, 2021 and December 31, 2020, respectively.
26


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

Carrying amounts presented in the table below are net of discounts, if any, and unamortized deferred financing costs. The interest rates on the CLO Investments Loans are variable based on LIBOR or EURIBOR (subject to a floor of zero percent). The maturity date for each CLO Investments Loan is the earlier of the final maturity date presented in the table below or the date at which the Company no longer holds a risk retention investment in the respective CLO.
Initial Borrowing Date Contractual Rate Final Maturity Date Carrying Value
March 31, 2021 December 31, 2020
(dollars in thousands)
June 7, 2017 LIBOR plus 1.48% November 16, 2029 $ 17,205  $ 17,200 
August 2, 2017 LIBOR plus 1.41% January 21, 2030 21,585  21,584 
September 14, 2017 EURIBOR plus 2.21% September 14, 2024 19,082  19,868 
February 27, 2020 EURIBOR plus 0.80% January 11, 2022 2,199  505 
$ 60,071  $ 59,157 

8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company has a €200.0 million master credit facility agreement (the “CLO Financing Facility”) to finance portions of the risk retention investments in certain CLOs managed by the Company. Subject to the terms and conditions of the CLO Financing Facility, the Company and the counterparty may enter into repurchase agreements on such terms agreed upon by the parties. Each transaction entered into under the CLO Financing Facility will bear interest at a rate based on the weighted average effective interest rate of each class of securities that have been sold plus a spread to be agreed upon by the parties. As of March 31, 2021, €98.8 million of the CLO Financing Facility remained available.
Each transaction entered into under the CLO Financing Facility provides for payment netting and, in the case of a default or similar event with respect to the counterparty to the CLO Financing Facility, provides for netting across transactions. Generally, upon a counterparty default, the Company can terminate all transactions under the CLO Financing Facility and offset amounts it owes in respect of any one transaction against collateral it has received in respect of any other transactions under the CLO Financing Facility; 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 Facility, 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 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 Facility may be terminated at any time upon certain defaults or circumstances 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 the securities pledged as collateral.
27


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

The table below presents securities sold under agreements to repurchase that are offset, if any, as well as securities transferred to counterparties 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 Repurchase Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Liabilities in the Consolidated Balance Sheet Securities Transferred Net Amount
  (dollars in thousands)
As of March 31, 2021 $ 117,780  $ —  $ 117,780  $ 117,780  $ — 
As of December 31, 2020 $ 122,638  $ —  $ 122,638  $ 122,638  $ — 
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 under agreement to repurchase by class of collateral pledged:
Investments in CLOs
Securities Sold under Agreements to Repurchase Overnight and Continuous Up to 30 Days 30-90 Days Greater Than 90 Days Total
(dollars in thousands)
As of March 31, 2021 $ —  $ —  $ —  $ 117,780  $ 117,780 
As of December 31, 2020 $ —  $ —  $ —  $ 122,638  $ 122,638 

9. OTHER ASSETS, NET
The following table presents the components of other assets, net as reported in the consolidated balance sheets:
March 31, 2021 December 31, 2020
(dollars in thousands)
Fixed Assets:    
  Leasehold improvements $ 52,443  $ 52,801 
  Computer hardware and software 52,870  50,085 
  Furniture, fixtures and equipment 8,411  8,411 
  Accumulated depreciation and amortization (81,310) (80,833)
Fixed assets, net 32,414  30,464 
Goodwill 22,691  22,691 
Prepaid expenses 16,812  19,229 
Other 8,096  10,116 
Total Other Assets, Net $ 80,013  $ 82,500 

28


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

10. OTHER LIABILITIES
The following table presents the components of other liabilities as reported in the consolidated balance sheets:
  March 31, 2021 December 31, 2020
  (dollars in thousands)
Accrued expenses $ 12,452  $ 16,904 
Uncertain tax positions 8,250  8,250 
Unused trade commissions 3,503  3,494 
Other 7,947  10,864 
Total Other Liabilities $ 32,152  $ 39,512 

11. REVENUES
The following table presents management fees and incentive income recognized as revenues for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
2021 2020
Management Fees Incentive Income Management Fees Incentive Income
(dollars in thousands)
Multi-strategy funds $ 36,348  $ 25,984  $ 32,373  $ 1,824 
Credit
    Opportunistic credit funds 13,247  8,767  9,563  4,670 
    Institutional Credit Strategies 15,103  —  15,266  — 
Real estate funds 9,263  13,053  9,743  2,828 
Other —  —  — 
Total $ 73,961  $ 47,804  $ 66,953  $ 9,322 
29


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

The following table presents the composition of the Company’s income and fees receivable as of March 31, 2021 and December 31, 2020:
March 31, 2021 December 31, 2020
(dollars in thousands)
Management fees $ 23,516  $ 25,937 
Incentive income 58,782  513,686 
Income and Fees Receivable $ 82,298  $ 539,623 
The Company recognizes management fees over the period in which the performance obligation is satisfied. 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 March 31, 2021 and December 31, 2020:
March 31, 2021 December 31, 2020
(dollars in thousands)
Management fees $ 809  $ 78 
Incentive income 56,661  61,802 
Unearned Income and Fees $ 57,470  $ 61,880 
A liability for unearned incentive income is generally recognized when the Company receives incentive income distributions from its funds, primarily its real estate funds, whereby the distributions received have not 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 the Company on a quarterly basis in advance, based on the amount of assets under management at the beginning of the quarter. In the three months ended March 31, 2021, and 2020, the Company recognized $9.8 million and $2.1 million, respectively, of the beginning balance of unearned incentive income for each respective year. The Company recognized all of the beginning balances of unearned management fees during the respective quarter.
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. Accordingly, the effective tax rate for interim periods is not indicative of the tax rate expected for a full year.
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

The following is a reconciliation of the statutory U.S. federal income tax rate to the Company’s effective income tax rate: 
  Three Months Ended March 31,
  2021 2020
Statutory U.S. federal income tax rate 21.00  % 21.00  %
Income passed through to noncontrolling interests 0.24  % -9.04  %
Foreign income taxes -3.16  % 3.99  %
RSU excess income tax benefit or expense -2.02  % 0.63  %
State and local income taxes 1.59  % 1.44  %
Nondeductible amortization of Partner Equity Units -1.38  % -2.31  %
Nondeductible interest expense —  % -0.45  %
Change in fair value of warrants -12.84  % —  %
Other, net 0.77  % 0.56  %
Effective Income Tax Rate 4.20  % 15.82  %
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 March 31, 2021 and December 31, 2020, the Company had a liability for unrecognized tax benefits of $8.3 million. As of and for the three months ended March 31, 2021, the Company did not accrue interest or penalties related to uncertain tax positions. As of March 31, 2021, 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 if recognized, would affect its tax expense by $4.8 million as of March 31, 2021.
13. GENERAL, ADMINISTRATIVE AND OTHER
The following table presents the components of general, administrative and other expenses as reported in the consolidated statements of operations:
  Three Months Ended March 31,
  2021 2020
  (dollars in thousands)
Occupancy and equipment $ 8,032  $ 7,605 
Information processing and communications 5,357  5,024 
Professional services 4,428  9,749 
Recurring placement and related service fees 4,351  6,492 
Insurance 2,222  2,130 
Business development 152  1,060 
Other expenses 3,053  2,675 
27,595  34,735 
Foreign currency transaction gains (219) (29)
Total General, Administrative and Other $ 27,376  $ 34,706 

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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

14. LOSS PER CLASS A SHARE
Basic loss per Class A Share is computed by dividing the net loss attributable to Class A Shareholders by the weighted-average number of Class A Shares outstanding for the period.
For the three months ended March 31, 2021 and 2020, the Company included 232,235 and 566,136 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 loss per Class A Share.
When calculating dilutive loss per Class A Share, the Company applies the treasury stock method to outstanding warrants and unvested RSUs. 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 the Group P Units or PSUs in the calculation of dilutive earnings (loss) per Class A Share, as the applicable market performance conditions had not yet been met as of the end of each reporting period presented below. The effect of dilutive securities on net income (loss) attributable to Class A Shareholders is presented net of tax.
The following tables present the computation of basic and diluted loss per Class A Share:
Three Months Ended March 31, 2021 Net Loss Attributable to Class A Shareholders Weighted- Average Class A Shares Outstanding Loss Per Class A Share Number of Antidilutive Units and Warrants Excluded from Diluted Calculation
  (dollars in thousands, except per share amounts)
Basic $ (20,293) 23,853,428  $ (0.85)
Effect of dilutive securities:
Group A Units (19,362) 16,019,506  — 
Group E Units —  —  13,012,857 
RSUs —  —  3,702,394 
Warrants —  —  2,237,743 
Diluted $ (39,655) 39,872,934  $ (0.99)

Three Months Ended March 31, 2020 Net 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 $ (28,267) 22,304,713  $ (1.27)
Effect of dilutive securities:
Group A Units (20,416) 16,014,635  — 
Group E Units —  —  13,450,821 
RSUs —  —  4,169,785 
Diluted $ (48,683) 38,319,348  $ (1.27)

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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

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.
Due to Related Parties
Amounts due to related parties relate primarily to future payments owed to current and former executive managing directors and Ziff Investors Partnership, L.P. II and certain of its affiliates and control persons (the “Ziffs”) under the tax receivable agreement, as discussed further in Note 16. The Company made payments totaling $7.2 million, and $18.2 million under the tax receivable agreement (inclusive of interest thereon) in the three months ended March 31, 2021 and 2020, respectively.
Management Fees and Incentive Income Earned from Related 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.
As of March 31, 2021 and 2020, respectively, approximately $916.6 million and $869.8 million of the Company’s assets under management represented investments by the Company, its executive managing directors, employees and certain other related parties in the Company’s funds. As of March 31, 2021 and 2020, approximately 52% and 43%, respectively, of these assets under management were not charged management fees or incentive income. The following table presents management fees and incentive income charged on investments held by the Company’s executive managing directors, employees and certain other related parties:
  Three Months Ended March 31,
  2021 2020
(dollars in thousands)
Fees charged on investments held by related parties:    
Management fees $ 972  $ 1,066 
Incentive income $ 1,979  $ 337 
Commitment to Purchase Interest in BharCap Sponsor LLC.
In March 2021, the Company committed to acquire a non-controlling membership interest of BharCap Sponsor LLC, an entity managed by a member of the Company’s board of directors. In connection with the anticipated initial public offering of BharCap Acquisition Corp., a newly organized blank check company, BharCap Sponsor LLC purchased shares of BharCap Acquisition Corp.’s Class B common stock and has committed to purchase warrants in a private placement that will close simultaneously with the closing of the initial public offering of BharCap Acquisition Corp.
16. COMMITMENTS AND CONTINGENCIES
Tax Receivable Agreement
The purchase of Group A Units from current and former executive managing directors and the Ziffs with the proceeds from the 2007 Offerings, and subsequent taxable exchanges by them of Partner Equity Units 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 assets of the Sculptor Operating Group that would not otherwise have been available. The Company anticipates that any such tax basis adjustment resulting from an exchange will be allocated principally to certain
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

intangible assets of the Sculptor Operating Group, and the Company will 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 Sculptor Corp and any other future corporate taxpaying entities that acquire 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 Sculptor Capital Management, Inc. once it became treated as a corporate taxpayer following the Corporate Classification Change) have agreed to pay the executive managing directors and the Ziffs a percentage 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 amended 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 approximately 69% of the amount of cash savings, if any, in federal, state and local income taxes in the 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 parties 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 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 Sculptor Corp will have sufficient taxable income in the relevant tax years to utilize the tax benefits that would give rise 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 March 31, 2021, the estimated future payment under the tax receivable agreement was $182.5 million, which is recorded in due to related parties on the consolidated balance sheets.
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

The table below presents management’s estimate as of March 31, 2021, of the maximum amounts that would be payable under the tax receivable agreement assuming that the Company will 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 losses is included in the “Thereafter” amount in the table below.
  Potential Payments Under Tax Receivable Agreement
  (dollars in thousands)
April 1, 2021 to December 31, 2021 $ 20,037 
2022 3,006 
2023 26,266 
2024 20,008 
2025 24,396 
2026 27,192 
Thereafter 61,589 
Total Payments $ 182,494 
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, or may in the future result, in regulatory agency investigations, litigation and subpoenas and costs related to each.
In U.S. v. Oz Africa Management GP, LLC, Cr. No. 16-515 (NGG) (EDNY), on November 4, 2020, the U.S. District Court for the Eastern District of New York (the “Court”) ordered restitution consistent with the terms of the settlement agreement between Oz Africa Management GP, LLC (“Oz Africa”) and certain former shareholders of Africo Resources Ltd. (the “Claimants”), and imposed a sentence otherwise consistent with the Plea Agreement, dated September 29, 2016, between Oz Africa and the Department of Justice (the “DOJ”) and U.S. Attorney’s Office for the Eastern District of New York (the “USAO”). Per the Court’s sentence and the settlement agreement, Oz Africa paid approximately $138.0 million to former shareholders of Africo Resources Ltd. Additionally, the Deferred Prosecution Agreement (the “DPA”) between the Company, the DOJ and the USAO was terminated shortly thereafter.
With completion of the foregoing events, the Company has put all legal issues stemming from legacy dealings in Africa behind it.
Investment Commitments
The Company has unfunded capital commitments of $75.2 million to certain funds it manages. Approximately $52.8 million of these 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 seven years. In addition, certain current and former executive managing directors of the Company, collectively, have unfunded capital commitments to funds managed by the Company of up to $35.3 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.
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021

In addition, in March 2021, the Company committed to acquire a non-controlling membership interest of BharCap Sponsor LLC., see Note 15 for additional details.
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 three months ended March 31, 2021 and 2020 these amounts were not material.
17. SUBSEQUENT EVENTS
Dividend
On May 5, 2021, the Company announced a cash dividend of $0.30 per Class A Share. The dividend is payable on May 25, 2021, to holders of record as of the close of business on May 18, 2021.
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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 this report, and under the heading “Item 1A. Risk Factors” in this quarterly report and in our Annual Report, and in other reports we file with the SEC, that could cause actual results to differ materially from the results describe in or implied by the forward-looking statements contained in the following discussion and analysis. An investment in our Class A Shares is not an investment in any of our funds.
Overview
COVID-19 Pandemic
In 2020, the COVID-19 pandemic spread across the world, resulting in a wide-spread economic downturn. We successfully executed our business continuity plan and continued operations with no material interruptions by implementing a work from home model necessary to protect the health and well-being of our employees and in response to mandated precautions, where applicable. We also reached out to our critical vendors to ensure that they are well positioned to operate during the pandemic. We rely significantly on the effectiveness of our information technology infrastructure to continue our operations and to continue to maintain appropriate controls over operations, treasury function, accounting and financial reporting.
The COVID-19 pandemic impacted our results negatively in the first quarter of 2020, and those impacts mostly reversed in the subsequent quarters. In the quarters following the first quarter of 2020 through the first quarter of 2021, we generated strong returns and continued to grow our assets under management. However, due to the uncertainty over the timing and extent of any possible global economic recovery, we cannot readily estimate or determine the effects that the ongoing COVID-19 pandemic will ultimately have on our future business and financial results, as well as on our liquidity and capital resources. Please see the COVID-19 commentary included throughout this MD&A, including “—Liquidity and Capital Resources,” “Part I—Item 1A. Risk Factors” and Note 1 to our consolidated financial statements included in our Annual Report for additional information.
2020 Credit Agreement
On September 25, 2020, we entered into a new financing facility, the 2020 Credit Agreement, consisting of (i) a senior 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”). Upon the closing of the 2020 Credit Agreement in the fourth quarter of 2020, we used the proceeds from the 2020 Term Loan to repay in full our existing 2018 Term Loan and Debt Securities, as well as to redeem the 2019 Preferred Units in full, which allowed us to capture $62.3 million of negotiated discounts available under the Debt Securities and the 2019 Preferred Units. In connection with the 2020 Credit Agreement, we issued warrants to purchase approximately 4.3 million Class A Shares and provided the counterparty a seat on our Board of Directors. Through March 31, 2021, we voluntarily prepaid an aggregate of $175.0 million of the 2020 Term Loan, leaving a balance of $145.0 million, which is due at maturity. As a result of the prepayments, we are no longer subject to the cash sweep or financial maintenance covenants other than the $20.0 billion minimum fee-paying assets under management covenant. The 2020 Revolving Credit Facility remains undrawn and available for working capital and general corporate purposes. Please see “—Liquidity and Capital Resources” for additional information.
Overview of Our Financial Results
We reported a GAAP net loss of $20.3 million in the first quarter of 2021, compared to net loss of $28.3 million in the first quarter of 2020. The decrease in net loss attributable to Class A Shareholders for the first quarter of 2021 was primarily due to higher incentive income and management fees, higher gains on investments and lower operating expenses, partially offset by change in fair value of warrant liabilities, losses on retirement of debt, higher bonus expense, and higher income tax expense. Please see “—Results of Operations” for detailed discussion of the drivers of our results.
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Economic Income was $40.9 million in the first quarter of 2021, compared to $2.3 million in the first quarter of 2020. This increase was primarily due to higher incentive income and management fees and lower operating expenses, partially offset by 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
Assets under management totaled $37.4 billion as of March 31, 2021. Longer-dated assets under management, which are those subject to initial commitment periods of three years or longer, were $25.0 billion, comprising 67% of our total assets under management as of March 31, 2021. This amount excludes assets under management that had initial commitment periods of three year or longer and subsequently moved to shorter commitment periods at the end of their initial commitment period.
Assets under management in our multi-strategy funds totaled $10.9 billion as of March 31, 2021, increasing $2.5 billion, or 29%, year-over-year. This change was driven by performance-related appreciation of $2.7 billion, partially offset by net capital outflows of $175.9 million, primarily in the Sculptor Master Fund, our largest multi-strategy fund.
Sculptor Master Fund generated a gross return of 4.8% and a net return of 3.6% year-to-date through March 31, 2021. Idiosyncratic gains from high conviction positions within corporate credit, structured credit and convertible and derivative arbitrage drove the positive performance in the first quarter of 2021. Please see “—Assets Under Management and Fund Performance—Multi-Strategy Funds” for additional information regarding the returns of the Sculptor Master Fund.
Assets under management in our dedicated credit products totaled $22.2 billion as of March 31, 2021, increasing $1.3 billion, or 6%, year-over-year. Assets under management in our opportunistic credit funds totaled $6.6 billion as of March 31, 2021, increasing $1.6 billion, or 33%, year-over-year. This was driven by $1.4 billion of performance-related appreciation and $359.6 million of net inflows, partially offset by $187.4 million of distributions in our closed-end opportunistic credit funds.
Sculptor Credit Opportunities Master Fund, our global opportunistic credit fund, generated a gross return of 8.7% and a net return of 7.2% year-to-date through March 31, 2021. Idiosyncratic, less correlated high-yielding special situations and process-driven investments drove Sculptor Credit Opportunities Master Fund’s strong performance in the first quarter of 2021. Assets under management for the fund were $2.5 billion as of March 31, 2021.
Assets under management in Institutional Credit Strategies totaled $15.7 billion as of March 31, 2021, decreasing $342.0 million, or 2%, year-over-year. This was driven primarily by a decrease in the number of aircraft serving as collateral in certain of our aircraft securitization vehicles, as well as changes in underlying collateral values, partially offset by the launch of additional CLOs.
Assets under management in our real estate funds totaled $4.3 billion as of March 31, 2021, increasing $260.9 million, or 7%, year-over-year primarily due to additional closings of Sculptor Real Estate Fund IV, which had its final closing in the second quarter of 2020, partially offset by $776.5 million of distributions and other reductions, primarily related to the expiration of the investment period of Sculptor Real Estate Credit Fund I in the fourth quarter of 2020. Since inception through March 31, 2021, the gross internal rate of return (“IRR”) was 27.8% and 18.2% net for Sculptor Real Estate Fund III (for which the investment period ended in September 2019).
Assets Under Management and Fund Performance
Our financial results are primarily driven by the combination of our assets under management 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 investors 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 management and increasing the potential for redemptions from our funds, which would have a negative effect on our revenues and earnings.
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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 these funds (other than with respect to capital invested in Special Investments) typically have the right to redeem their interests in a fund following an initial lock-up period of one to four years. Following the expiration of these lock-up periods, subject to certain limitations, investors may redeem capital generally on a quarterly or annual basis upon giving 30 to 90 days’ prior written notice. The lock-up requirements for our funds may generally be waived or modified at the sole discretion of each fund’s 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 management 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 management in the quarter in which they are paid, and therefore impact management fees for that quarter.
Investors in our closed-end credit funds, 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 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.
Information with respect to our assets under management 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 March 31, 2021, approximately 2% of our assets under management represented investments by us, our executive managing directors, employees and certain other related parties in our funds. As of that date, approximately 52% of these affiliated assets under management 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, we waive or rebate a corresponding portion of the management fees charged to the fund.
As further discussed below in “—Understanding Our Results—Revenues—Management Fees,” we generally calculate management fees based on assets under management as of the beginning of each quarter. The assets under management in the tables below are presented net of management fees and incentive income as of the end of the period. Accordingly, the assets under management 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.
Summary of Changes in Assets Under Management
The tables below present the changes to our assets under management for the respective periods based on the type of funds or investment vehicles we manage.
Three Months Ended March 31, 2021
December 31, 2020 Inflows / (Outflows) Distributions / Other Reductions Appreciation / (Depreciation)
Other(1)
March 31, 2021
(dollars in thousands)
Multi-strategy funds $ 10,504,024  $ 78,237  $ (723) $ 337,195  $ —  $ 10,918,733 
Credit
   Opportunistic credit funds 6,287,777  (117,077) (5,600) 387,399  —  6,552,499 
   Institutional Credit Strategies 15,697,827  303,522  (40,698) 209  (308,431) 15,652,429 
Real estate funds 4,308,648  139,140  (198,356) 1,325  —  4,250,757 
Total $ 36,798,276  $ 403,822  $ (245,377) $ 726,128  $ (308,431) $ 37,374,418 
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Three Months Ended March 31, 2020
December 31, 2019 Inflows / (Outflows) Distributions / Other Reductions Appreciation / (Depreciation)
Other(1)
March 31, 2020
(dollars in thousands)
Multi-strategy funds $ 9,332,118  $ (209,674) $ (5,446) $ (656,788) $ —  $ 8,460,210 
Credit
   Opportunistic credit funds 6,025,306  (279,275) —  (801,199) —  4,944,832 
   Institutional Credit Strategies 15,710,319  396,992  (6) (1,257) (111,649) 15,994,399 
Real estate funds 3,393,876  646,876  (41,390) (9,541) —  3,989,821 
Other 8,311  16  (7,113) —  —  1,214 
Total $ 34,469,930  $ 554,935  $ (53,955) $ (1,468,785) $ (111,649) $ 33,390,476 
_______________
(1)Includes the effects of changes in the par value of the underlying collateral of the CLOs, foreign currency translation changes in the measurement of assets under management of our European CLOs and changes in the portfolio appraisal value for aircraft securitization vehicles.
In the three months ended March 31, 2021, our funds experienced performance-related appreciation of $726.1 million, net inflows of $403.8 million and a decrease of $308.4 million primarily due to the effects of changes in par value of underlying collateral of the CLOs. The net inflows were comprised of (i) $942.1 million of gross inflows, driven by $486.4 million in multi-strategy funds, primarily due to new assets into the Sculptor Master Fund, and $304.0 million in Institutional Credit Strategies, primarily driven by the launch of an additional CLO; and (ii) $538.2 million of gross outflows due to redemptions, primarily in our multi-strategy and opportunistic credit funds. Distributions and other reductions of $245.4 million were driven primarily by $198.4 million of distributions from our real estate funds as a result of realizations in our real estate funds. In 2021, excluding securitization vehicles within Institutional Credit Strategies, our largest sources of gross inflows were from corporate and other institutions and pensions, while pensions and fund-of-funds were the largest source of gross outflows.
As of May 1, 2021, estimated assets under management decreased to $36.8 billion, driven by $707.7 million of distributions and other reductions to investors in certain funds, paydowns in our CLOs and a wind down of one of our CLOs, and $248.2 million of net outflows, partially offset by $364.2 million of performance-related appreciation.

In the three months ended March 31, 2020, our funds experienced performance-related depreciation of $1.5 billion,
net inflows of $554.9 million. The net inflows were comprised of (i) $1.1 billion of gross inflows, driven by $646.9 million in real estate funds, primarily due to additional closes of Sculptor Real Estate Fund IV, and $427.1 million in Institutional Credit Strategies, primarily driven by a launch of an aircraft securitization vehicle; and (ii) $571.8 million of gross outflows due to redemptions, primarily in our open-ended credit and multi-strategy funds. In 2020, excluding securitization vehicles within Institutional Credit Strategies, our largest sources of gross inflows were from private banks and pensions, while pensions were the largest source of gross outflows.
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Weighted-Average Assets Under Management and Average Management Fee Rates
The table below presents our weighted-average assets under management and average management fee rates. Weighted-average assets under management exclude the impact of first 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. Our average management fee may vary from period to period based on the mix of products that comprise our assets under management.
Three Months Ended March 31,
2021 2020
(dollars in thousands)
Weighted-average assets under management $ 36,747,298  $ 34,393,956 
Average management fee rates 0.76  % 0.70  %
Fund Performance Information
The tables below present performance information for the funds we manage. The performance information presented in this report 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.
The return information presented in this report represents, where applicable, the composite performance of all 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 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 not allocated to all investors in the funds, and investors that were not allocated Special Investments and initial public offering investments may experience materially different returns.
Multi-Strategy Funds
The table below presents assets under management and investment performance for our multi-strategy funds. Assets under management are generally based on the net asset value of these products. Management fees generally range from 1.00% to 2.00% annually of assets under management. For the first quarter of 2021, our multi-strategy funds had an average management fee rate of 1.26%.
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 management in each of the Sculptor Master Fund and our other multi-strategy funds is subject to initial commitment periods of three years, and for certain of these assets, we only earn incentive income once profits attributable to an investor exceed a preferential return, or “hurdle rate,” which is generally equal to the 3-month T-bill 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.
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Returns for the Three Months Ended March 31, Annualized Returns Since Inception Through March 31, 2021
Assets Under Management as of March 31, 2021 2020
2021 2020 Gross Net Gross Net Gross Net
Fund (dollars in thousands)
Sculptor Master Fund(1)
$ 10,016,988  $ 7,776,131  4.8  % 3.6  % -6.5  % -6.6  % 16.9  %
(2)
11.8  %
(2)
Sculptor Enhanced Master Fund 892,589  622,453  1.3  % 0.8  % -7.5  % -7.2  % 15.1  % 10.5  %
Other funds 9,156  61,626  n/m n/m n/m n/m n/m n/m
$ 10,918,733  $ 8,460,210 
_______________
n/m not meaningful
(1)The 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 assets under management in the fund. Inclusive of these Special Investments, the returns of the Sculptor Master Fund for three months ended March 31, 2021 were 4.8% gross and 3.6% net, for three months ended March 31, 2020 were -6.8% gross and -6.8% net, and annualized since inception through March 31, 2021 were 16.5% gross and 11.6% net.
(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 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, 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 Sculptor 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 March 31, 2021, the annualized returns since the Sculptor Master Fund’s inception on January 1, 1998 were 13.7% gross and 9.3% net excluding Special Investments and 13.3% gross and 9.1% net inclusive of Special Investments.
The $2.5 billion, or 29%, year-over-year increase in assets under management in our multi-strategy funds was primarily due to performance-related appreciation of $2.7 billion, partially offset by capital net outflows of $175.9 million, primarily from the Sculptor Master Fund, our largest multi-strategy fund. In 2021, the largest sources of gross inflows into our multi-strategy funds were from corporate and other institutions, private banks, and pensions, while the largest sources of gross outflows were attributable to pensions and private banks .
In the first quarter of 2021, the Sculptor Master Fund generated a gross return of 4.8% and a net return of 3.6%. Idiosyncratic gains from high conviction positions within corporate credit, structured credit and convertible and derivative arbitrage drove the positive performance in the first quarter of 2021.
In the first quarter of 2020, the Sculptor Master Fund generated a gross return of -6.5% and a net return of -6.6%. Losses in Sculptor Master Fund were concentrated in corporate credit where even the highest quality securities widened to levels not seen since the global financial crisis of 2008. We have fully recovered these losses in the latter part of 2020.
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Credit
Assets Under Management as of March 31,
2021 2020
(dollars in thousands)
Opportunistic credit funds $ 6,552,499  $ 4,944,832 
Institutional Credit Strategies 15,652,429  15,994,399 
$ 22,204,928  $ 20,939,231 
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 management for our opportunistic credit funds are generally based on the net asset value of those funds plus any unfunded commitments. Management fees for our opportunistic credit funds generally range from 0.75% to 1.75% annually of the net asset value of these funds. For the first quarter of 2021, our opportunistic credit funds had an average management fee rate of 0.87%.
The table below presents assets under management 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 management is subject to hurdle rates, which are generally 6% to 8% for our open-end opportunistic credit funds. Once the cumulative investment performance has exceeded the hurdle rate, 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 funds. The measurement periods for these assets under management generally range from one to five years.
Returns for the Three Months Ended March 31, Annualized Returns Since Inception Through March 31, 2021
Assets Under Management as of March 31, 2021 2020
2021 2020 Gross Net Gross Net Gross Net
Fund (dollars in thousands)
Sculptor Credit Opportunities Master Fund(1)
$ 2,548,631  $ 1,064,409  8.7  % 7.2  % -19.8  % -20.0  % 14.0  % 10.0  %
Customized Credit Focused Platform 3,660,340  2,878,029