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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, 2023
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 SCUNew 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 2, 2023, there were 24,971,561 Class A Shares, 4,645,054 Restricted Class A Shares and 33,018,248 Class B Shares outstanding.
 




SCULPTOR CAPITAL MANAGEMENT, INC.
TABLE OF CONTENTS
 
  Page
PART I — FINANCIAL INFORMATION
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
 
PART II — OTHER INFORMATION 
 
Item 1.
 
Item 1A.
 
Item 2.
 
Item 3.
 
Item 4.
 
Item 5.
 
Item 6.
 

i


Defined Terms
2007 Offerings
Refers collectively to our IPO and the concurrent private offering of approximately 3.81 million Class A Shares to DIC Sahir Limited, a wholly owned indirect subsidiary of Dubai Holdings LLC.
Accrued but unrecognized incentive incomeAccrued but unrecognized incentive income (“ABURI”) is the amount of incentive income accrued at the fund level on longer-term AUM that has not yet been recognized in our revenues. These amounts may ultimately not be recognized as revenue by us in the event of future losses in the respective funds.
active executive managing directorsExecutive managing directors who remain active in our business.
Annual Report
Our annual report on Form 10-K for the year ended December 31, 2022, dated March 3, 2023, and filed with the SEC.
Advisers ActInvestment Advisers Act of 1940, as amended.
Assets Under Management
Assets Under Management (“AUM”) refers to the assets for which we provide investment management, advisory or certain other investment-related services. Specifically:
a.AUM for our multi-strategy and opportunistic credit funds is generally based on the net asset value of those funds plus any unfunded commitments, if applicable. AUM is reduced for unfunded commitments that will be funded through transfers from other funds.
b.AUM for Institutional Credit Strategies is generally based on the amount of equity outstanding for CLOs and CBOs (during the warehouse period) and the par value of the collateral assets and cash held (after the warehouse period). For aircraft securitization vehicles, AUM is based on the adjusted portfolio appraisal values for the aircraft collateral within the securitization. AUM is reduced for any investments in these CLOs and securitization vehicles held by our other funds. AUM also includes the net asset value of other investment vehicles within this strategy.
c.AUM for our real estate funds is generally based on the amount of capital committed by our fund investors during the investment period and the amount of actual capital invested for periods following the investment period. AUM is reduced for unfunded commitments that will be funded through transfers from other funds. AUM for our new real estate investment vehicle is based on net asset value.
d.AUM for our special purpose acquisition company (“SPAC”) sponsored by us includes the proceeds raised in the initial public offering that are currently held in a trust account for use in a business combination.

AUM includes amounts that are not subject to management fees, incentive allocation or other amounts earned on AUM, including without limitation, investments by the Company, its executive managing directors, employees and certain other related parties. Our calculation of AUM may differ from the calculations of other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. Our calculations of AUM are not based on any definition set forth in the governing documents of the investment funds and are not calculated pursuant to any regulatory definitions.
Class A 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.
1


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.
Consolidated Entities
Refers to funds, special purpose entities, investment vehicles and other similar structures for which the Company is required to consolidate in accordance with GAAP.
Distribution HolidayThe Sculptor Operating Partnerships initiated a distribution holiday (the “Distribution Holiday”) on the Group A Units, Group E Units and Group P Units and on certain RSUs and RSAs that will terminate on the earlier of (x) 45 days after the last day of the first calendar quarter as of which the achievement of $600.0 million of Distribution Holiday Economic Income is realized and (y) April 1, 2026. Holders of Group A Units, Group E Units and Group P Units and certain RSUs and RSAs, do not receive distributions during the Distribution Holiday.
Distribution Holiday Economic 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.
Economic Income
Economic Income is a non-GAAP measure of pre-tax operating performance that excludes the following from our results on a GAAP basis: noncontrolling interests, redeemable noncontrolling interests, equity based compensation expense, net of cash settled RSUs, depreciation and amortization expenses, components of our other income (loss), non-cash interest expense accretion on debt, and amounts related to consolidated entities. In addition, expenses related to incentive income profit-sharing arrangements are generally recognized at the same time the related incentive income revenue is recognized. The fair value of RSUs that are settled in cash to employees or executive managing directors, where the number of RSUs to be settled in cash is not certain at the time of grant, is included as an expense at the time of settlement. Where the number of RSUs to be settled in cash is certain on the grant date, the expense is recognized during the performance period to which the award relates. Similarly, deferred cash compensation is expensed in full during the performance period to which the award relates for Economic Income, rather than over the service period for GAAP. Further, impairment of right-of-use lease assets is excluded from Economic Income at the time the impairment is recognized for GAAP and the impact is then amortized over the lease term for Economic Income. Additionally, rent expense is offset by subrental income as management evaluates rent expenses on a net basis.
Exchange 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.
Fee Paying Assets Under ManagementFee Paying Assets Under Management (“FP AUM”) refers to the AUM on which we earn management fees and/or incentive income.
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, as well as the SPAC we sponsor.
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.
2


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 Group 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, the structured alternative investment solution, and other customized solutions.
IPO
Our initial public offering of 3.6 million Class A Shares that occurred in November 2007.
Longer-term AUM
AUM from investors that are subject to initial commitment periods of three years or longer. Investors with longer-term AUM may have less than three years remaining in their commitment period. This excludes AUM that had initial commitment periods of three years or longer and subsequently moved to shorter commitment periods at the end of their initial commitment period.
NYSE
New York Stock Exchange.
Partner Equity Units
Refers collectively to the Group A Units, Group E Units and Group P Units.
Preferred UnitsOne Class A cumulative preferred unit in each of the Sculptor Operating Partnerships collectively represented one “Preferred Unit.” Certain of our executive managing directors collectively owned 100% of the Preferred Units. We redeemed in full the Preferred Units in the fourth quarter of 2020, and as of December 31, 2020, 2021 and 2022 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 former executive management 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.
RSAs
Restricted Class A Shares.
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.
3


Sculptor Operating Group Units
Refers collectively to Sculptor Operating Group A, B, 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.
Securities Act
Securities Act of 1933, as amended.
SPACRefers to special purpose acquisition company.
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.
4


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 webcasts. The contents of our website are not, however, a part of this report.
Also posted on our website in the “Shareholder Services—Corporate Governance” section are charters for our Audit Committee; Compensation Committee; Nominating, Corporate Governance and Conflicts Committee and Corporate Responsibility and Compliance Committee, as well as our Corporate Governance Guidelines and Code of Business Conduct and Ethics governing our directors, officers and employees. Information on, or accessible through, our website is not a part of, and is not incorporated into, this report or any other SEC filing. Copies of our SEC filings or corporate governance materials are available without charge upon written request to 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, poor investment performance of, or lack of capital flows into, the funds we manage; our investors’ right to redeem their investments from our funds on a regular basis; the highly variable nature of our revenues, results of operations and cash flows; difficult market conditions that could adversely affect our funds; counterparty default risks; the United Kingdom’s withdrawal from the European Union; the outcome of third-party litigation involving us; the consequences of the Foreign Corrupt Practices Act settlements with the SEC and the United States (“U.S.”). Department of Justice and any claims or negative publicity arising therefrom or from matters involving the founder and former CEO of our predecessor Och-Ziff; 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 executive managing directors, managing directors and other investment professionals; our successful formulation and execution of our business and growth strategies; the publicly announced special committee process and any outcome thereof; our ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to our business; U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy; and assumptions relating to our operations, investment performance, financial results, financial condition, business prospects, growth strategy and liquidity.
If one or more of these or other risks or uncertainties materialize, or if our assumptions or estimates prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors are not and should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to those described in our Annual Report.
5




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.
6

SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS — UNAUDITED
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
 March 31, 2023December 31, 2022
 (dollars in thousands)
Assets  
Cash and cash equivalents$211,758 $258,863 
Restricted cash7,912 7,895 
Investments (includes assets measured at fair value of $217,008 and $231,929 including assets sold under agreements to repurchase of $161,424 and $157,107 as of March 31, 2023 and December 31, 2022, respectively)
292,978 299,059 
Income and fees receivable46,439 56,360 
Due from related parties24,860 32,846 
Deferred income tax assets246,230 257,939 
Operating lease assets72,985 75,861 
Other assets, net79,248 106,442 
Assets of consolidated entities: 
Cash and cash equivalents12,655 3 
Restricted cash and cash equivalents9,906 9,805 
Investments of consolidated entities547,834 544,554 
Other assets of consolidated entities2,241 2,579 
Total Assets$1,555,046 $1,652,206 
Liabilities and Shareholders’ Equity 
Liabilities  
Compensation payable$26,162 $127,209 
Unearned income and fees45,504 53,869 
Tax receivable agreement liability190,188 190,245 
Operating lease liabilities88,601 92,045 
Debt obligations119,869 124,176 
Warrant liabilities, at fair value23,989 24,163 
Securities sold under agreements to repurchase168,931 166,632 
Other liabilities44,854 43,049 
Liabilities of consolidated entities: 
Notes payable, at fair value197,813 196,106 
Warrant liabilities, at fair value1,082 596 
Other liabilities of consolidated entities12,917 9,669 
Total Liabilities919,910 1,027,759 
Commitments and Contingencies (Note 16)
Redeemable Noncontrolling Interests of Consolidated Entities (Note 3)240,541 237,864 
Shareholders’ Equity  
Class A Shares, par value $0.01 per share, 100,000,000 shares authorized; 27,992,537 and 26,729,608 shares issued and 24,970,157 and 23,707,228 shares outstanding as of March 31, 2023 and December 31, 2022, respectively
250 238 
Class B Shares, par value $0.01 per share, 75,000,000 shares authorized; 33,018,248 and 33,569,188 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
330 336 
Treasury stock, at cost; 3,022,380 as of March 31, 2023 and December 31, 2022
(32,495)(32,495)
Additional paid-in capital263,607 255,293 
Accumulated deficit(272,410)(276,149)
Accumulated other comprehensive income (loss)546 (119)
Shareholders’ deficit attributable to Class A Shareholders(40,172)(52,896)
Shareholders’ equity attributable to noncontrolling interests434,767 439,479 
Total Shareholders’ Equity394,595 386,583 
Total Liabilities and Shareholders’ Equity$1,555,046 $1,652,206 
    See notes to consolidated financial statements.
7


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended March 31,
20232022
 (dollars in thousands)
Revenues  
Management fees$63,708 $73,437 
Incentive income40,286 21,642 
Other revenues6,545 2,430 
Income (loss) of consolidated entities2,696 (161)
Total Revenues113,235 97,348 

Expenses  
Compensation and benefits68,622 77,785 
Interest expense5,596 3,285 
General, administrative and other33,795 27,316 
Expenses of consolidated entities547 244 
Total Expenses108,560 108,630 

Other Income  
Changes in fair value of warrant liabilities174 24,336 
Changes in tax receivable agreement liability57 (7)
Net gains (losses) on investments4,928 (5,344)
Net gains of consolidated entities7,877 4,140 
Total Other Income13,036 23,125 

Income Before Income Taxes17,711 11,843 
Income taxes12,747 6,967 
Consolidated Net Income4,964 4,876 
Less: Net loss attributable to noncontrolling interests6,205 12,006 
Less: Net income attributable to redeemable noncontrolling interests(1,499)(3,068)
Net Income Attributable to Sculptor Capital Management, Inc.9,670 13,814 
Change in redemption value of redeemable noncontrolling interests(1,178)3,068 
Net Income Attributable to Class A Shareholders$8,492 $16,882 
Earnings per Class A Share  
Earnings per Class A Share - basic$0.34 $0.63 
Earnings per Class A Share - diluted$0.05 $(0.29)
Weighted-average Class A Shares outstanding - basic25,173,834 26,596,572 
Weighted-average Class A Shares outstanding - diluted53,633,608 43,693,932 

See notes to consolidated financial statements.
8


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Ended March 31,
20232022
(dollars in thousands)
Consolidated net income$4,964 $4,876 
Other Comprehensive Income, Net of Tax
Other comprehensive income (loss) - currency translation adjustment665 (750)
Comprehensive Income5,629 4,126 
Less: Comprehensive loss attributable to noncontrolling interests 6,205 12,006 
Less: Comprehensive income attributable to redeemable noncontrolling interests(1,499)(3,068)
Comprehensive Income Attributable to Sculptor Capital Management, Inc.$10,335 $13,064 

See notes to consolidated financial statements.
9


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
Sculptor Capital Management, Inc. Shareholders
 Class A SharesClass B SharesTreasury Stock SharesClass A Shares Par ValueClass B Shares Par ValueAdditional Paid in CapitalAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTreasury Stock, at costShareholders’ Deficit Attributable to Class A ShareholdersShareholders’ Equity Attributable to Noncontrolling InterestsTotal Shareholders’ Equity
(dollars in thousands, except share data)
Balance at January 1, 202323,707,228 33,569,188 3,022,380 $238 $336 $255,293 $(276,149)$(119)$(32,495)$(52,896)$439,479 $386,583 
Equity-based compensation, net of taxes1,262,929 (550,940)— 12 (6)8,555 — — — 8,561 1,361 9,922 
Dividend equivalents on Class A restricted share units— — — — — 937 (937)— —  —  
Change in redemption value of SPAC Class A Shares— — — — — (1,178)— — — (1,178)— (1,178)
Cash dividends declared on Class A Shares ($0.20 per share)
— — — — — — (4,994)— — (4,994)— (4,994)
Consolidated net income (loss), excluding amounts attributable to redeemable noncontrolling interests— — — — — — 9,670 — — 9,670 (6,205)3,465 
Currency translation adjustment— — — — — — — 665 — 665  665 
Capital contributions— — — — — — — — — — 1,280 1,280 
Capital distributions— — — — — — — — — — (1,148)(1,148)
Balance at March 31, 202324,970,157 33,018,248 3,022,380 $250 $330 $263,607 $(272,410)$546 $(32,495)$(40,172)$434,767 $394,595 
Balance at January 1, 202225,668,987 33,613,023  $257 $336 $184,691 $(253,521)$51 $ $(68,186)$446,469 $378,283 
Equity-based compensation, net of taxes856,845 63,308 — 9 1 14,477 — — — 14,487 1,924 16,411 
Repurchase of Class A Shares(473,719)— 473,719 (5)— — — — (6,249)(6,254)— (6,254)
Dividend equivalents on Class A restricted share units— — — — — 69 (69)— —  —  
Change in redemption value of SPAC Class A Shares— — — — — 3,068 — — — 3,068 — 3,068 
Consolidated net loss (gain), excluding amounts attributable to redeemable noncontrolling interests— — — — — — 13,814 — — 13,814 (12,006)1,808 
Currency translation adjustment— — — — — — — (750)— (750) (750)
Capital contributions— — — — — — — — — — 4,997 4,997 
Capital distributions— — — — — — — — — — (3,448)(3,448)
Balance at March 31, 202226,052,113 33,676,331 473,719 $261 $337 $202,305 $(239,776)$(699)$(6,249)$(43,821)$437,936 $394,115 

See notes to consolidated financial statements.
10


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS



 Three Months Ended March 31,
 20232022
 (dollars in thousands)
Cash Flows from Operating Activities 
Consolidated net income$4,964 $4,876 
Adjustments to reconcile consolidated net income to net cash provided by (used in) operating activities:  
Amortization of equity-based compensation13,916 24,843 
Depreciation, amortization and net gains and losses on fixed assets1,043 1,394 
Changes in fair value of warrant liabilities(174)(24,336)
Deferred income taxes11,689 5,522 
Non-cash lease expense4,605 4,803 
Net (gains) losses on investments, net of dividends(3,715)6,706 
Operating cash flows due to changes in:  
Income and fees receivable9,992 128,362 
Due from related parties8,028 7,607 
Other assets, net(2,323)(17,708)
Compensation payable(102,583)(218,098)
Unearned income and fees(8,365)16,293 
Tax receivable agreement liability(57)(16,766)
Operating lease liabilities(5,173)(5,508)
Other liabilities1,700 (5,123)
Consolidated entities related items:  
Net gains of consolidated entities(7,877)(4,140)
Purchases of investments(4,887)(32,778)
Proceeds from sale of investments16,768 8,760 
Other assets of consolidated entities340 (3,687)
Other liabilities of consolidated entities(1,840)27,785 
Net Cash Used in Operating Activities(63,949)(91,193)
Cash Flows from Investing Activities  
Purchases of fixed assets(66)(418)
Purchases of United States government obligations (13,992)
Maturities and sales of United States government obligations15,000 219,144 
Investments in funds(7,713)(42,472)
Return of investments in funds33,862 15,757 
Net Cash Provided by Investing Activities41,083 178,019 
11


SCULPTOR CAPITAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
 Three Months Ended March 31,
 20232022
 (dollars in thousands)
Cash Flows from Financing Activities  
Contributions from noncontrolling interests1,280 4,997 
Distributions to noncontrolling interests(1,148)(3,447)
Dividends on Class A Shares(4,994) 
Proceeds from debt obligations, net of issuance costs 4,852 
Repayment of debt obligations, including prepayment costs(4,760)(9,424)
Proceeds from securities sold under agreements to repurchase, net of issuance costs 20,395 
Purchases of treasury stock (6,249)
Other, net(2,612)(4,969)
Consolidated entities related items:
Proceeds from debt obligations of consolidated entities, net of issuance costs 215,733 
Net Cash (Used in) Provided by Financing Activities(12,234)221,888 
Effect of exchange rate changes on cash and cash equivalents and restricted cash765 (137)
Net change in cash and cash equivalents and restricted cash(34,335)308,577 
Cash and cash equivalents and restricted cash, beginning of period276,566 412,671 
Cash and Cash Equivalents and Restricted Cash, End of Period$242,231 $721,248 
Supplemental Disclosure of Cash Flow Information  
Cash paid during the period:  
Interest$4,854 $2,922 
Income taxes$2,054 $3,439 
Non-cash transactions:  
Assets related to initial consolidation of funds$ $16,699 
Liabilities related to initial consolidation of funds$ $2,364 
Assets related to deconsolidation of funds$ $44,042 
Liabilities related to deconsolidation of funds$ $29,632 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents$211,758 $135,951 
Restricted cash7,912 7,188 
Cash and cash equivalents of consolidated entities12,655 343,486 
Restricted cash and cash equivalents of consolidated entities9,906 234,623 
Total Cash and Cash Equivalents and Restricted Cash$242,231 $721,248 
See notes to consolidated financial statements.
12


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023

1. ORGANIZATION
Sculptor Capital Management, Inc. (the “Registrant”), a Delaware corporation, together with its consolidated subsidiaries (collectively, the “Company” or “Sculptor Capital”), is a leading global alternative asset manager and a specialist in opportunistic investing with offices in New York, London, Hong Kong and Shanghai. The Company provides asset management services and investment products across Credit, Real Estate, and Multi-Strategy. The Company serves its global client base through commingled funds, separate accounts and specialized products, as well as sponsoring a special purpose acquisition company (“SPAC”) (collectively, the “funds”). The Company’s model is driven by a global team that is predominantly home-grown, long tenured and incentivized to put client outcomes first. The Company’s capabilities span all major geographies and asset classes, including corporate credit, structured credit, real estate debt and equity, fundamental equities, merger arbitrage, and convertible and derivative arbitrage.
The Company manages dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds, multi-strategy funds, and other alternative investment vehicles. Through Institutional Credit Strategies, the Company’s asset management platform that invests in performing credits, the Company manages collateralized loan obligations (“CLOs”), aircraft securitization vehicles, collateralized bond obligations (“CBOs”), structured alternative investment solutions, commingled products and other customized solutions for clients.
The Company’s primary sources of revenues are management fees, which are generally based on the amount of the Company’s assets under management (“Assets Under Management” or “AUM”), as defined below, and incentive income, which is based on the investment performance of 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. AUM refers to the assets of the funds to which the Company provides investment management and advisory services. The Company’s AUM are a function of the capital that is allocated to it by the investors in its funds and the investment performance of its funds.
The Company 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 former executive managing directors who are no longer 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 (the “Board of Directors” or the “Board”) (other than RSAs, where entitlement to distributions may be subject to limitations and conditions).
13


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Class B Shares—Class B Shares are held by executive managing directors, as further discussed below. These shares are not publicly traded but rather entitle the executive managing directors to one vote per share on matters submitted to a vote of shareholders. These shares do not participate in the earnings of the Registrant, as the executive managing directors participate in the related economics of the Sculptor Operating Group through their direct ownership in the Sculptor Operating Group, subject to the 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, 2023:
Group A Units—Group A Units are limited partner interests issued to certain executive managing directors. In connection with the Recapitalization, as defined below, the Sculptor Operating Partnerships initiated a distribution holiday (the “Distribution Holiday”). Holders of Group A Units do not receive distributions on such units during the Distribution Holiday. Each executive managing director may exchange his or her vested and 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, book-up, forfeiture or minimum retained ownership requirements.
Group E Units—Group E Units are limited partner interests issued to certain executive managing directors that are only entitled to future profits and gains upon satisfaction of a certain performance condition. Each Group E Unit converts into a Group A Unit and becomes exchangeable for one Class A Share (or the cash equivalent thereof) to the extent there has been a sufficient amount of appreciation for a Group E Unit to achieve a book-up target and, subject to other conditions contained in the limited partnership agreements of the Sculptor Operating Partnerships, the Distribution Holiday has ended (or an earlier exchange date is established by the Exchange Committee, which consists of the Chief Executive Officer and the Chief Financial Officer of Sculptor Capital Management, Inc.). The Group E Units are entitled to share in residual assets upon liquidation, dissolution or
14


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
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 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 upon satisfaction of certain service and market conditions. Each Group P Unit becomes exchangeable for one Class A Share (or the cash equivalent thereof), in each case upon satisfaction of certain service and market conditions at such time and, with respect to exchanges, to the 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 market conditions are met and to the extent of their relative positive capital accounts (if any). The terms of the Group P Units may be varied for certain executive managing directors. Group P Unit grants are accounted for as equity-based compensation. See Note 13 in the Company’s Annual Report for additional information.
Executive managing directors hold a number of Class B Shares equal to the number of Group A Units, vested Group E Units, Group A-1 Units (to the extent the corresponding Class B Shares have not been canceled in connection with the vesting of certain Group E Units issued in connection with the Recapitalization, as further discussed in Note 3 in the Company’s Annual Report), and Group P Units held. Upon the exchange of a Group A Unit or Group P Unit for a Class A Share, the corresponding Class B Share is canceled and a Group B Unit is issued to Sculptor Corp. Class B Shares that relate to Group A-1 Units will be voted pro rata in accordance with the vote of the Class A Shares.
15


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
The following table presents the number of shares and units of the Company and the Sculptor Operating Partnerships, respectively, that were outstanding as of March 31, 2023:
 As of March 31, 2023
Sculptor Capital Management, Inc.
Class A Shares24,970,157
Class B Shares33,018,248
Restricted Class A Shares (“RSAs”)4,645,054
Restricted Share Units (“RSUs”)2,779,823 
Performance-based RSUs (“PSUs”)912,500 
Warrants to purchase Class A Shares (Note 7)
4,338,015 
Sculptor Operating Partnerships
Group A Units15,025,994
Group A-1 Units9,244,477
Group B Units24,970,157
Group E Units13,021,158
Group P Units4,734,286
The Company grants RSAs, RSUs and PSUs to its employees and executive managing directors as a form of compensation. These grants are accounted for as equity-based compensation. See Note 13 in the Company's Annual Report for additional information. In addition, the Company has 3,022,380 shares of treasury stock as of March 31, 2023.
Share Repurchase Program
In February 2022, the Company’s Board of Directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock. The Company records its treasury stock repurchases at cost on a trade date basis. As of March 31, 2023, the Company repurchased 3,022,380 Class A Shares at a cost of $32.5 million for an average price of $10.75 per share through open market purchase transactions. No shares were purchased in the three months ended March 31, 2023. As of March 31, 2023, $67.5 million remained available for repurchase of the Company’s common stock under the share repurchase program. All of the repurchased shares are classified as treasury stock in the Company’s consolidated balance sheets.
The repurchase program has no expiration date. The Company may purchase shares on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means including through Rule 10b5-1 trading plans or through the use of other techniques such as accelerated share repurchases. The timing and amount of any transactions will be subject to the discretion of the Company based upon market conditions and other opportunities that the Company may have for the use or investment of its cash balances. The repurchase program does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice.
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 exclude some of the disclosures required in audited financial statements and therefore should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report. Management believes all adjustments considered necessary for a fair presentation of the Company’s unaudited, interim, consolidated financial
16


SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
statements have been included and are of a normal and recurring nature and that estimates made in preparing unaudited, interim, consolidated financial statements are reasonable and prudent. The consolidated financial statements include the accounts of the Company, its wholly owned or majority owned subsidiaries, the consolidated entities which are considered to be variable interest entities and for which the Company is considered the primary beneficiary, and certain other entities which are not considered variable interest entities but the Company is determined to have control. All significant intercompany transactions and balances have been eliminated in consolidation.
The results of operations presented for the interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. For example, incentive income for the majority of the Company’s multi-strategy AUM 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, 2023, 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.
Noncontrolling interests are presented as a separate component of shareholders’ equity on the Company’s consolidated balance sheets. The primary components of noncontrolling interests are separately presented in the Company’s consolidated statements of changes in shareholders’ equity (deficit) to distinguish the shareholders’ equity (deficit) attributable to Class A shareholders and noncontrolling interest holders. Net income (loss) includes the net income (loss) attributable to the holders of noncontrolling interest on the Company’s consolidated statements of operations.
Sculptor Operating Group Ownership
The Company’s equity interest in the Sculptor Operating Group decreased to 47.1% as of March 31, 2023, from 48.2% as of March 31, 2022. Changes in the Company’s interest in the Sculptor Operating Group have historically been, and in the future may be, driven by the following: (i) the exchange of Group A Units and Group P Units for Class A Shares, at which time the related Class B Shares are also canceled; (ii) vesting of RSAs; (iii) the issuance of Class A Shares under the Company’s Amended and Restated 2007 Equity Incentive Plan, 2013 Incentive Plan and 2022 Incentive Plan related to the settlement of
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
RSUs or PSUs; (iv) the forfeiture of Group A Units and participating Group P Units by a departing executive managing director; and (v) the repurchase of Class A Shares and Group A Units. The Company’s interest in the Sculptor Operating Group is generally expected to continue to increase over time as additional Class A Shares are issued upon the exchange of Group A Units and Group P Units, as well as the settlement of vested RSUs, PSUs and RSAs. However, additional repurchases of Class A Shares under the Company’s 2022 Share Repurchase Program may lead to a decrease of the Company’s interest in the Sculptor Operating Group. Additionally, the Company’s economic interest in the Sculptor Operating Group will decline when Group P Units begin to participate, as described in Note 13 in the Company's Annual Report.
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,
 20232022
 (dollars in thousands)
Sculptor Capital LP
Net income$31,087 $41,216 
Blended participation percentage0 %0 %
Net Income Attributable to Group A Units$ $ 
Sculptor Capital Advisors LP
Net loss$(4,182)$(16,820)
Blended participation percentage38 %37 %
Net Loss Attributable to Group A Units$(1,571)$(6,153)
Sculptor Capital Advisors II LP
Net loss$(14,451)$(17,796)
Blended participation percentage38 %37 %
Net Loss Attributable to Group A Units$(5,429)$(6,510)
Total Sculptor Operating Group
Net income$12,454 $6,600 
Blended participation percentage-56 %-192 %
Net Loss Attributable to Group A Units$(7,000)$(12,663)
The following table presents the components of the net loss attributable to noncontrolling interests:
Three Months Ended March 31,
 20232022
(dollars in thousands)
Group A Units$(7,000)$(12,663)
Other795 657 
 $(6,205)$(12,006)
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
The following table presents the components of the shareholders’ equity attributable to noncontrolling interests:
 March 31, 2023December 31, 2022
(dollars in thousands)
Group A Units$407,302 $412,941 
Other27,465 26,538 
 $434,767 $439,479 
Redeemable noncontrolling interests
In 2021, the Company consolidated the SPAC it sponsors. The Class A shares issued by the consolidated SPAC are redeemable for cash by the public shareholders in the event the SPAC is unable to complete a business combination or a tender offer provision by a set date. Therefore, the investors’ interests in the SPAC are classified as redeemable noncontrolling interests in the consolidated balance sheets. The following table presents the activity in redeemable noncontrolling interests for the three months ended March 31, 2023 and 2022 :
Three Months Ended March 31,
20232022
(dollars in thousands)
Beginning balance$237,864 $234,600 
Change in redemption value of Class A Shares of consolidated SPAC1,178 (3,068)
Comprehensive income1,499 3,068 
Ending Balance$240,541 $234,600 
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, 2023December 31, 2022
(dollars in thousands)
U.S. government obligations, at fair value$9,978 $24,782 
CLOs, at fair value207,030 207,147 
Equity method investments75,970 67,130 
Total Investments$292,978 $299,059 
Investments of Consolidated Entities$547,834 $544,554 
The Company invests in U.S. government obligations to manage excess liquidity. CLOs, at fair value, consist of investments in notes of unconsolidated CLOs. These investments are carried at fair value under the irrevocable fair value option election at initial recognition. Changes in fair value are recorded within net gains (losses) on investments in the consolidated statements of operations. Interest income on these investments is accrued using the effective interest method and separately presented from the overall change in fair value and is recognized in other revenue in the consolidated statement of operations.
The Company’s equity method investments include investments in funds, which are not consolidated, but in which the Company exerts significant influence, but not control. The Company has not elected the fair value option and accounts for such
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
investments under the equity method. Under the equity method of accounting, the Company recognizes its share of the underlying earnings (losses) from equity method investments within net gains (losses) on investments in the consolidated statements of operations. The carrying amounts of equity method investments are recorded in investments in the consolidated balance sheets. Refer to Note 15 for details of the related party nature of such investments.
Investments of consolidated entities include both investments of the Company’s consolidated SPAC, which consists of investments in U.S. Treasury bills held in a trust account and measured at fair value, as well as investments held by the Company’s consolidated structured alternative investment solution. The investments of the consolidated structured alternative investment solution that the Company manages are generally measured at fair value using the NAV per share practical expedient. The Company may determine based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Company will estimate the fair value in good faith and in a manner that it reasonably chooses in accordance with GAAP. The Company does not categorize investments where fair value is measured using the NAV practical expedient within the fair value hierarchy.
The following table summarizes the fair value of the investments of the structured alternative investment solution that are measured using the NAV practical expedient by strategy type and ability to redeem such investments as of March 31, 2023:
Fund Type(1)
Fair Value (as of March 31, 2023)
Redemption Frequency(2)
Redemption Notice Period(2)
(dollars in thousands)
Multi-strategy67,514 
Quarterly - Annually
30 days - 90 days
Credit231,028 
Monthly - Annually(3)
30 days - 90 days
Real estate8,757 
None(4)
N/A
Total$307,299 
_______________
(1)The structured alternative investment solution invests in both open-ended and close-ended funds. The investments in each fund may represent investments in a particular tranche of such fund subject to different withdrawal rights.
(2)$154.2 million of investments are subject to an initial lock-up period of three years during which time no withdrawals or redemptions are allowed. Once the lock-up period ends, the investments are able to be redeemed with the frequency noted above.
(3)22% of these investments are in closed-end funds which cannot be redeemed, as distributions will be received as the underlying assets are liquidated, which is expected to be approximately six years.
(4)100% of these investments are in closed-end funds which cannot be redeemed, as distributions will be received as the underlying assets are liquidated, which is expected to be approximately seven to nine years.

As of March 31, 2023, the structured alternative investment solution had unfunded commitments of $96.9 million related to the investments presented in the table above.
See Note 2 in the Company’s Annual Report for additional information regarding the investments of consolidated entities.
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
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SCULPTOR CAPITAL MANAGEMENT, INC. — UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
not have readily ascertainable fair values, the estimates of fair value may differ from the values ultimately realized, and those differences can be material.
GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type and the specific characteristics of the financial instrument, including existence and transparency of transactions between market participants. Financial instruments with readily available actively quoted prices or for which fair value can be measured from actively-quoted prices generally will have a higher degree of market price observability and lesser degree of judgment used in measuring fair value.
Financial instruments 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 instruments as of the reporting date. The types of financial instruments that would generally be included in this category are listed equities, U.S. government obligations and listed derivatives. The Company does not adjust the quoted price for these investments.
Level II – Quotations received from dealers making a market for financial instruments (“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 observable as of the reporting date. The types of financial instruments that would generally be included in this category are certain corporate bonds and loans, certain credit default swap contracts, certain bank debt securities, certain commercial real estate debt, less liquid equity securities, forward contracts and certain over the-counter (“OTC”) derivatives where the fair value is based on observable inputs. These financial instruments exhibit higher levels of liquid market observability as compared to Level III financial instruments.