OAK - Oaktree Cap Group LLC

[Liberty]

OAK is interesting, but since everybody suddenly seems interested in it (the Gio effect?), I'll point out that in my opinion (which isn't worth much, I know) the most interesting asset manager for the long haul is FRMO (indirectly, Horizon Kinetics).

 

IMO Murray Stahl is a deeper thinker than Howard Marks, and while Marks sits around waiting for distressed debt (which is a good model that works), Stahl sits around and thinks of new clever investment products that exploit structural market inefficiencies, then creates them at basically zero cost, and many of them grow pretty fast, making the fees roll it at basically infinite ROIC since all they invested is intellectual capital. They have an incredible track record, and I expect them to keep innovating and to find ways to make money in both up and down markets for the long-term, and to manage things very conservatively as owner-managers who see FRMO as their long-term vehicle.

 

Anyway, I didn't mean to derail the thread. Carry on.

[giofranchi]

Picasso,

I don't know what to answer to 1) and 3), but I will answer 2):

 

OAK is a value investor looking for distressed opportunities... It is not an investor in government bonds... In which situation do you think the largest number of distressful opportunities might occour: when government bonds yields are high and gradually coming down with debt burdens that are light and easily manageable... Or when yields cannot possibly go lower, and yet debt burdens have become so heavy that the payment of interests is a problem?

 

Also don't forget we are talking of markets that are already huge! Many trillions of capital! OAK at $93 billion might still be just scratching the surface!

 

Gio

[Picasso]

Picasso,

I don't know what to answer to 1) and 3), but I will answer 2):

 

OAK is a value investor looking for distressed opportunities... It is not an investor in government bonds... In which situation do you think the largest number of distressful opportunities might occour: when government bonds yields are high and gradually coming down with debt burdens that are light and easily manageable... Or when yields cannot possibly go lower, and yet debt burdens have become so heavy that the payment of interests is a problem?

 

Also don't forget we are talking of markets that are already huge! Many trillions of capital! OAK at $93 billion might still be just scratching the surface!

 

Gio

 

I think you are missing the point.  Not only has the benchmark rate dropped while their hurdle rate remains the same, but the spread on the kinds of bonds you speak of are the narrowest they have been in years.  By Howard Marks own admission, they are raising capital to deploy later because they are not seeing opportunities given current high yield spreads.  There is a reason a lot of these PE guys are heading over to Europe to try and find bargains.

 

Howard Marks has said in his own memos that in order to get back to historical returns you have to be willing to take on more risk.  Unless you think OAK is going to take on lots of risk today you just aren't going to get much in terms of incremental return over their hurdles.

 

That said there are a lot of things to like about about OAK such as the stake in DoubleLine and the long lock-up periods with sticky capital.  I just feel investors are looking past what is going to be a difficult investing environment.

[giofranchi]

Picasso,

What you are pointing out is true, and it is precisely the reason why OAK is cheap today... Because the cycle is so much overextended that opportunities for value investments are very difficult to come by... And the high yield bonds market is no exception... I have said many times that OAK is a countercyclical investment and that patience will be required... Therefore, I don't think I am missing the point...

 

What I asked you is: don't you think the current economic environment in North America, Europe, Japan, and even China might lead to lots of distressed debt opportunities? This is what truly interests me... Because, when something stressful happens, yields will increase very rapidly, and that's when OAK will raise tens of billions and deploy them opportunistically.

 

Gio

[Picasso]

That is true, but you are going to lose the value on the accrued incentives and value of Oaktree's own capital in their funds in the process.  If you think the opportunity set will get better you are also implying your sum of the parts is way off.  You can't keep a stable sum of the parts valuation while there is turmoil in their markets.

 

Over the long run I agree it is better for OAK shareholders to have some volatility.  But you have to consider there has been a massive bull market in junk and distressed debt over the past two decades.  By yours and Howard Marks own admission that rates will move up in junk debt, you are also impying a drop in sum of the parts which is not very much above the current share price.

[james22]

Oaktree pounces as energy tumbles

 

"Virtuous cycles don’t go on forever," said Oaktree Capital (OAK +0.4%) CEO Howard Marks on a recent earnings call.

 

Oaktree has been in the investor penalty box for much of the year as the rally in pretty much everything is not the kind of environment in which Marks' shop can stand out above the rest. The energy rout, however, has made it possible for the company to put some of its dry powder to work.

 

"We have been investing," says Marks, reports Bloomberg.

 

http://seekingalpha.com/news/2168625-oaktree-pounces-as-energy-tumbles

 

 

[giofranchi]

If you think the opportunity set will get better you are also implying your sum of the parts is way off.  You can't keep a stable sum of the parts valuation while there is turmoil in their markets.

 

Imo this is a misconception about OAK, and one of the reasons this company is very cheap today. The sum of the parts I calculated for OAK is made of two parts basically: BV + a multiple of fees and incentives income.

 

Now let’s examine both:

 

- Fees and incentives income depends on AUM. My belief is that, should trouble come our way, OAK’s AUM will increase substantially… not decrease! If we don’t experience a contraction in the multiple assigned by the market to OAK’s fees and incentive income, this part of my sum of the parts won’t go down. Vice versa, it will increase!

 

- Book Value: first of all almost half of BV today is in cash and equivalent, therefore a lot of dry powder to be opportunistically deployed when the right time comes. Second, don’t forget they are first and foremost value investors: they don’t go where they don’t see value. For instance, $36 billion out of $93 billion of AUM are invested in strategies other than Distressed Debt or High Yield Bonds, and also Distressed Debt and High Yield Bonds strategies are focused on regions like Europe and some emerging markets, where the pain of too much debt has already been felt. This is what Marks had to say during the Conference Call for Q3 2014:

That said, I'm often asked for my thoughts regarding the next downturn. One thing seems safe to predict, the timing and trigger are unpredictable. At least that has been the case for the downturns I've lived through. But as they approached, we have usually felt that we could add value by preparing for downturns. It is essential to understand where we are in the cycle and to adjust our actions on that basis. We adjust both the balance between offense and defense in our portfolio management and the amount of money we raise. Our global footprint benefits us as the environment isn't always uniform worldwide. Thus we may pursue different paths given the diverging trajectories of the US and other economies.

Value might be destroyed only if they fail to understand where we are in the cycle and to act accordingly. Making, as a consequence, stupid investments. And I don’t believe they are making stupid investments! Instead, I think their investments right now will make some money... just not as much money as with the opportunities that will present themselves when the next downturn finally arrives.

After all, I guess their track record speaks loudly enough: OAK has produced strong earnings and cash flow even during the global financial crisis of 2008-09. It has generated positive adjusted net income for 18 consecutive years and paid quarterly distributions for 71 straight quarters! It is difficult to destroy value, when you generate earnings for almost 20 years in a row, right? ;)

 

Gio

 

[fareastwarriors]

 

Oaktree Investing in Energy Debt Amid Oil Price Drop, Marks Says

 

 

 

http://www.bloomberg.com/news/2014-12-09/oaktree-investing-in-energy-debt-amid-oil-price-drop-marks-says.html

[giofranchi]

What I think is important to understand regarding OAK is that their ability to raise funds has little to do with the short term performance of their investment strategies. Instead, it depends almost exclusively on two things:

 

1) Their reputation of being great at scooping up bargains in the middle of markets turmoil,

2) And of course the long term performance of their investment strategies.

 

As an example, look no further than this year: their investments clearly are performing well below their long term average, Investment income for the 9 months ended September 30 have decreased from $170 million last year to $98 million this year… This notwithstanding they have been able to increase fee-generating AUM 18%!

 

Don’t get me wrong: when the next downturn comes, their BV might surely suffer, though as I have already said almost half of their BV is in cash and equivalents, and their Incentives income might suffer too, though somewhat mitigated by Management fees that might instead get a boost.

But all that will surely be only temporary: their BV will rebound strongly when $1.1 billion they are holding in cash and equivalents is put to good use and starts paying off, while both their Management fees and Incentives income should increase substantially, following AUM on their way up.

 

Gio

 

[giofranchi]

Vinod,

this is my attempt to make a sum of the parts analysis for OAK.

In the 10-K for 2013 we read:

“net asset value,” or “NAV,” refers to the value of all the assets of a fund (including cash and accrued interest and dividends) less all liabilities of the fund (including accrued expenses and any reserves established by us, in our discretion, for contingent liabilities) without reduction for accrued incentives (fund level) because they are reflected in the partners’ capital of the fund.

 

Therefore, I will consider OAK as the sum of two businesses:

business 1): BV + Accrued Incentives is the partners’ capital that gets managed for our own benefit.

business 2): AUM generating fees and incentives is the capital that gets managed for our clients’ benefit.

 

I will use an asset value approach to put a number on business 1), while using an earnings value approach to put a number on business 2).

 

For the Nine Months Ended September 30, 2014 Management fees have been $572 million, while Incentive income has been $438 million. Fee-related earnings per Class A unit have been $1.03. For Incentive income per Class A unit a simple proportion would yield: (438 / 572) x 1.03 = $0.79.

 

Therefore, Fee-related earnings per Class A unit + Incentive income per Class A unit = 1.03 + 0.79 = $1.82, which annualized would become: (1.82 / 3) x 4 = $2.43.

 

Let’s normalize this number 15% higher: 1.15 x 2.43 = $2.80.

 

Business 1):

Book Value: $11.30 per share

Accrued Incentives: $7.06 per share, which are pre-taxes, so let’s just consider $4.00 per share

DoubleLine Stake: it earns circa $60 million after taxes in 2014, applying a multiple of 14, you get to $4.63 per share

Total for business 1): 11.30 + 4.00 + 4.63 = $19.93.

To this I am applying a multiple of 1.

 

Business 2):

Fee-related earnings per Class A unit + Incentive income per Class A unit = $2.80.

To this I am applying a multiple of 12: 2.80 x 12 = $33.60.

 

Sum of the parts: 19.93 + 33.60 = $53.53.

 

Now, let me be clear: this sum of the parts IS NOT FAIR VALUE.

All I have asked myself is: which multiple might the market assign to business 1) and to business 2) 20 years  from now? 1 and 12? Ok. Is OAK selling at those multiples today or lower? It seems so.

 

Of course, if BV + Accrued Incentives grow at a CAGR of 15%, and Fee-related earnings + Incentive income grow at a CAGR of 15%, OAK’s fair value is much higher than my sum of the parts.

 

Gio

 

PS

If you want to simply use ANI and an earnings value approach to put a number on OAK as a whole entity, you might consider an ANI per Class A Unit of $2.63 for the first 9 months of 2014, which annualized is ($2.63 / 3) x 4 = $3.50. Let’s normalize this number 15% higher: 1.15 x 3.50 = $4.03. Therefore, OAK is selling at a multiple of $49.3 / $4.03 = 12.2 x ANI per Class A Unit.

Will the market price OAK at 12 x ANI per Class A Unit 20 years from now? Probably yes! Therefore, if Management fees + Incentive income + Investment income grow at a CAGR of 15%, the return on my investment will be 15% compounded annual.

 

It is just like saying: Fairfax is selling for 1.3 x BVPS. Will the market possibly price Fairfax at 1.3 x BVPS 20 years from now? If yes, and if Fairfax achieves a CAGR of 15% for its BVPS, the return on my investment will be 15% compounded annual.

 

 

[giofranchi]

Also think about this:

 

If Oaktree succeeds in increasing AUM at a CAGR of 15% for the next 20 years, by then it will be managing just 33% of the assets BlackRock is managing today.

 

Lots of room for growth! :)

 

Gio

 

[stahleyp]

Also think about this:

 

If Oaktree succeeds in increasing AUM at a CAGR of 15% for the next 20 years, by then it will be managing just 33% of the assets BlackRock is managing today.

 

Lots of room for growth! :)

 

Gio

 

Gio, what percent of Blackrock's AUM is in ETFs?

 

[giofranchi]

Gio, what percent of Blackrock's AUM is in ETFs?

 

Well, what’s the matter with that? The fact is BlackRock, notwithstanding its huge size, has been able to increase EPS by 25% YTD and at a CAGR of 15% in the 2010-2013 period! And is still targeting a 5% CAGR in AUM.

 

Gio

 

[vinod1]

Vinod,

this is my attempt to make a sum of the parts analysis for OAK.

In the 10-K for 2013 we read:

“net asset value,” or “NAV,” refers to the value of all the assets of a fund (including cash and accrued interest and dividends) less all liabilities of the fund (including accrued expenses and any reserves established by us, in our discretion, for contingent liabilities) without reduction for accrued incentives (fund level) because they are reflected in the partners’ capital of the fund.

 

Therefore, I will consider OAK as the sum of two businesses:

business 1): BV + Accrued Incentives is the partners’ capital that gets managed for our own benefit.

business 2): AUM generating fees and incentives is the capital that gets managed for our clients’ benefit.

 

I will use an asset value approach to put a number on business 1), while using an earnings value approach to put a number on business 2).

 

For the Nine Months Ended September 30, 2014 Management fees have been $572 million, while Incentive income has been $438 million. Fee-related earnings per Class A unit have been $1.03. For Incentive income per Class A unit a simple proportion would yield: (438 / 572) x 1.03 = $0.79.

 

Therefore, Fee-related earnings per Class A unit + Incentive income per Class A unit = 1.03 + 0.79 = $1.82, which annualized would become: (1.82 / 3) x 4 = $2.43.

 

Let’s normalize this number 15% higher: 1.15 x 2.43 = $2.80.

 

Business 1):

Book Value: $11.30 per share

Accrued Incentives: $7.06 per share, which are pre-taxes, so let’s just consider $4.00 per share

DoubleLine Stake: it earns circa $60 million after taxes in 2014, applying a multiple of 14, you get to $4.63 per share

Total for business 1): 11.30 + 4.00 + 4.63 = $19.93.

To this I am applying a multiple of 1.

 

Business 2):

Fee-related earnings per Class A unit + Incentive income per Class A unit = $2.80.

To this I am applying a multiple of 12: 2.80 x 12 = $33.60.

 

Sum of the parts: 19.93 + 33.60 = $53.53.

 

Now, let me be clear: this sum of the parts IS NOT FAIR VALUE.

All I have asked myself is: which multiple might the market assign to business 1) and to business 2) 20 years  from now? 1 and 12? Ok. Is OAK selling at those multiples today or lower? It seems so.

 

Of course, if BV + Accrued Incentives grow at a CAGR of 15%, and Fee-related earnings + Incentive income grow at a CAGR of 15%, OAK’s fair value is much higher than my sum of the parts.

 

Gio

 

PS

If you want to simply use ANI and an earnings value approach to put a number on OAK as a whole entity, you might consider an ANI per Class A Unit of $2.63 for the first 9 months of 2014, which annualized is ($2.63 / 3) x 4 = $3.50. Let’s normalize this number 15% higher: 1.15 x 3.50 = $4.03. Therefore, OAK is selling at a multiple of $49.3 / $4.03 = 12.2 x ANI per Class A Unit.

Will the market price OAK at 12 x ANI per Class A Unit 20 years from now? Probably yes! Therefore, if Management fees + Incentive income + Investment income grow at a CAGR of 15%, the return on my investment will be 15% compounded annual.

 

It is just like saying: Fairfax is selling for 1.3 x BVPS. Will the market possibly price Fairfax at 1.3 x BVPS 20 years from now? If yes, and if Fairfax achieves a CAGR of 15% for its BVPS, the return on my investment will be 15% compounded annual.

 

Gio,

 

Thanks for sharing.

 

It is minor and does not change the IV all that much, but, "Accrued Incentives: $7.06 per share" flow through into next year incentive income. Incentive income per Class A unit of $0.79, for nine months of 2013, is flowing from Accured Incentives that were shown in 2012. This is double counting. Company is saying, I have $7 of incentive earnings coming in the next few years. What you are doing is adding up these accrued earnings and then applying a multiple to earnings some of which flowed through from the accrued earnings.

 

Take for example, IBM, it publishes the contract backlog at a given point in time. Say it is $100 billion. Just hypothetically, if it had further spelled out that the profits from this backlog are going to be $10 billion in the future. Say next year total earnings are $15 billion. What you are saying is I am going to add up $10 billion and put a multiple on the $15 billion earnings as well. My point is that part of the $15 billion comes from the contract backlog profits of $10 billion.

 

Oak is exactly the same situation.

 

Other than that, I agree with the valuation approach.

 

Vinod

[stahleyp]

Gio, what percent of Blackrock's AUM is in ETFs?

 

Well, what’s the matter with that? The fact is BlackRock, notwithstanding its huge size, has been able to increase EPS by 25% YTD and at a CAGR of 15% in the 2010-2013 period! And is still targeting a 5% CAGR in AUM.

 

Gio

 

If you're gonna compare a completely active manager against a manager with a significant amount of AUM as ETFs...that's not really a fair comparison. Margins on ETFs are incredibly tight. Vanguard is in the game. I think Vanguard will win that game (hard to beat a not for profit - afterall).

[Picasso]

You would be better off comparing against other private equity firms.  Don't forget that Oaktree is constantly returning capital to investors.  It is a lot different than someone like Blackrock.

 

The accrued incentives which are part of your sum of the parts calculation can decline very rapidly since they are the first to decline when you have market turmoil. 

 

I think the right way to value OAK is to stress the downside and assume a flat AUM and come up with a share price.  I got somewhere in the low 40's.  If they can grow like you say then yeah it's going to do well.  But that goes for any stock if everything goes well.  Generally speaking a value investor is more interested in the worst case scenario and then lets the upside take care of itself.

 

Like I said, the stock isn't expensive or cheap.  I hope they hit the targets you talk about because I still own some shares.

[vinod1]

Gio,

 

1. I am not sure if DoubleLine had some unusual income but its value seems a little high, just on surface. At $50 billion in assets and even using a generous value of 3% AUM for primarily a bond fund manager, it should be worth $1.5 billion and OAK's 20 or 22% stake should be worth about $0.3 billion. But I have not looked at this in detail.

 

2. Oak has generated 15% AUM growth on a much smaller asset base. So future growth is likely to much lower, just because of size.

 

3. You cannot really compare with BlackRock as others have pointed out. OAK is a specialty manager. Think Lancashire. They cannot just start up a fund for a particular asset class and buy up those assets. It relies on dislocation for it to deploy its assets and it needs very specialized group of people to take advantage of those opportunities. It is much much simpler to BlackRock.

 

4. If you assume 15% growth for any business for any length of time and especially 20 years, it cannot be anything else but look dramatically undervalued, unless you are paying a PE multiple of 40 or something like that. We do not really have to do valuation other than a cursory glance at the financial data for valuation purposes for a 15% grower for 20 years.

 

Vinod

[vinod1]

The IPO range has been $43 to $46 and it came at the lower end.  As the company is led by astute investors, it is unlikely that they sold the business at a price much below intrinsic value but they also bought back shares at $35. So if you adjust for business growth from the time of the IPO, it provides another data point of some value.

 

It would be anathema for these hard core value investors to sell far below IV.

 

Vinod

[giofranchi]

Vinod,

 

1) You are right: DoubleLine might earn $50 million for OAK, not $60 million.

 

2) What matters is the size of AUM compared to the size of the markets OAK might invest in... And those markets are huge: many trillions of $. If OAK keeps generating stronger results than competitors', we still have much room for growth. I have little doubt about this. Just look at this year: despite their already large AUM at the end of 2013, AUM generating fees are up 18%!

 

3) I am not the one who compares Oaktree with BlackRock... Oaktree compares itself to BlackRock!... Just look at OAK Q3 2014 presentation. Anyway, I agree: AUM generating fees should be compared!... Tomorrow I'll check.

 

4) That's why Mr. Munger and me only look for that kind of businesses!! Ahahahah!!!!

 

Gio

[giofranchi]

The accrued incentives which are part of your sum of the parts calculation can decline very rapidly since they are the first to decline when you have market turmoil. 

 

They mostly come from liquidating funds, don’t they?… Therefore, I don’t see how they could decline very rapidly...

 

Generally speaking a value investor is more interested in the worst case scenario and then lets the upside take care of itself.

 

On the contrary, I have realized that, if you find a company you believe has a very real possibility of compounding capital at 15% annual for many years into the future… well, the downside will take care of itself!... If things go bad, usually it ends up compounding at 10%! ;)

 

Anyway, it was you who pointed out how many times Marks repeats the work “risk” in his memos, right? That’s the best downside protection I could ask for!

 

Gio

[giofranchi]

This is double counting.

 

Vinod,

 

I don’t agree. When we put a multiple on today’s earnings, we are implicitly discounting to the present all future earnings. Past earnings, instead, have already flown onto the balance sheet. In OAK’s case they have already been either distributed, or become partners’ capital.

 

Accrued Incentives are incentives for a job already done: let’s suppose for instance that Fund A, B, and C have been very successful, and now are liquidating. The capital of those funds will be either reinvested in other funds or given back to clients. But incentives, even if not yet recognized as earnings, are for the partners to keep.

 

The multiple I am assigning to today’s normalized fees + incentives takes into consideration the fact that, despite capital has always been periodically given back to clients, AUM have increased at an healthy CAGR for more than 20 years, and are likely to continue doing so in the future. Therefore, Accrued Incentives imo have nothing to do with the expected growth in earnings in coming years. Instead, that growth will only be a consequence of the underlying growth in AUM.

 

If you want, you can also look at it this way: Accrued Incentives is a revolving Balance Sheet item. For any $ that might flow into future ANI from Accrued Incentives, there will be probably more than one $ that won’t be recognized as income yet and will go to increase Accrued Incentives.

 

I don’t know IBM well enough to understand the comparison, but as far as OAK is concerned I don’t see the double counting.

 

Gio

 

[vinod1]

Vinod,

 

1) You are right: DoubleLine might earn $50 million for OAK, not $60 million.

 

2) What matters is the size of AUM compared to the size of the markets OAK might invest in... And those markets are huge: many trillions of $. If OAK keeps generating stronger results than competitors', we still have much room for growth. I have little doubt about this. Just look at this year: despite their already large AUM at the end of 2013, AUM generating fees are up 18%!

 

3) I am not the one who compares Oaktree with BlackRock... Oaktree compares itself to BlackRock!... Just look at OAK Q3 2014 presentation. Anyway, I agree: AUM generating fees should be compared!... Tomorrow I'll check.

 

4) That's why Mr. Munger and me only look for that kind of businesses!! Ahahahah!!!!

 

Gio

 

My understanding is that the size of the high yield market itself is around $2.5 trillion - this includes bonds & loans both public and private. Distressed is a much smaller portion of this. Since Oaktree is not indexing into this market and most of the public bond market does not offer much scope for alpha, the opportunity set for them is a fraction of this market. They cannot own say 25% of the market and still generate a ton of alpha as implied by your 20% return expectation on their investments.

 

I just do not see them growing AUM at 15% given how large they already. Either their returns or their growth in assets have to come down. All I am saying is, I cannot be really confident upon lot of growth going forward.

 

Vinod

[giofranchi]

All I am saying is, I cannot be really confident upon lot of growth going forward.

 

Well, as I have already pointed out, almost 40% of their AUM right now are in strategies that have nothing to do with the High Yield market. Marks has always said he likes High Yield, because that’s where he finds the largest number of opportunities! But I think it would be really diminishing to come to the conclusion that OAK might achieve excellence in investing only in the High Yield market… If opportunities present themselves somewhere else, they will act accordingly… Like any good value oriented and opportunistic investor would do!

 

Furthermore, who knows how much and how fast the High Yield market might grow in the future? With a lot of distressed debt probably showing up?

 

With the only exception of KKR, which manages the same amount of assets, OAK is still the smallest of its peers!

 

Don’t get me wrong: you can never be confident about growth, especially if sustained for many years in the future. All I am saying is: might growth be a sure thing for OAK? Certainly NOT… Might growth be possible and even probable for OAK? YES, of course.

 

Gio

 

[vinod1]

This is double counting.

 

Vinod,

 

I don’t agree. When we put a multiple on today’s earnings, we are implicitly discounting to the present all future earnings. Past earnings, instead, have already flown onto the balance sheet. In OAK’s case they have already been either distributed, or become partners’ capital.

 

Accrued Incentives are incentives for a job already done: let’s suppose for instance that Fund A, B, and C have been very successful, and now are liquidating. The capital of those funds will be either reinvested in other funds or given back to clients. But incentives, even if not yet recognized as earnings, are for the partners to keep.

 

The multiple I am assigning to today’s normalized fees + incentives takes into consideration the fact that, despite capital has always been periodically given back to clients, AUM have increased at an healthy CAGR for more than 20 years, and are likely to continue doing so in the future. Therefore, Accrued Incentives imo have nothing to do with the expected growth in earnings in coming years. Instead, that growth will only be a consequence of the underlying growth in AUM.

 

If you want, you can also look at it this way: Accrued Incentives is a revolving Balance Sheet item. For any $ that might flow into future ANI from Accrued Incentives, there will be probably more than one $ that won’t be recognized as income yet and will go to increase Accrued Incentives.

 

I don’t know IBM well enough to understand the comparison, but as far as OAK is concerned I don’t see the double counting.

 

Gio

 

I understand your point and I have seen a couple of valuations that are done just like yours.

 

To me, there is a reason why they are accrued and not realized. There is a chance that they might not be realized. In your incentive income calculation you are measuring the realized part, why also count the chickens before they are hatched?

 

Vinod

[giofranchi]

To me, there is a reason why they are accrued and not realized. There is a chance that they might not be realized.

 

80% of Accrued Incentives are from funds that are already liquidating. Of course, I understand your doubt about the remaining 20%. But why should incentives accrued from funds that are liquidating not be realized?

 

Gio