| Daniel Och, Och-Ziff Capital Management (Bloomberg) |
Redemptions continue to plague Och-Ziff Capital Management Group.
On Friday the New York multistrategy specialist headed by Daniel Och disclosed in a regulatory filing that investors yanked out another $500 million or so from the firm’s hedge funds in August.
The firm did not explicitly reveal this in its monthly regulatory filing that reports the prior month’s performance for its three major funds. Investors need to do the math themselves.
Rather, Och-Ziff reported that its flagship OZ Master Fund was up 2.04 percent in August and is now up 0.36 percent for the year to date. OZ Europe Master Fund rose 2.01 percent last month and is now up 1.06 percent for the year. OZ Asia Master Fund rose 1.69 percent in August, cutting its loss for the year to 2.75 percent.
The firm also reported that assets under management rose $100 million last month to $39.2 billion. Up is always better than down, right?
However, if all of the firm’s funds were up nearly 2 percent in August, then assets should have risen by between $700 million and $800 million for the month. Instead, the firm said they were up about only $100 million.
Even if you allow for other funds being up less than 2 percent or down, at the minimum the firm suffered at least $500 million in redemptions.
Och-Ziff declined to comment.
In any case, it’s likely that most of the redemptions came from Goldman Sachs’ retirement plan. Bloomberg reported a month ago that Goldman anticipated removing some $350 million of the plan’s funds from Och-Ziff.
Och-Ziff has been plagued with a rash of redemptions for more than a year as it works to settle bribery charges with the federal government, which has investigated the placement of funds by a foreign sovereign wealth fund in Och-Ziff in 2007 and the investments by some of its funds in a number of African companies.
Och-Ziff recently added $214.3 million to the $200 million reserve it established in anticipation of settling the bribery probe.
In August the firm reported that in the 12-month period ended in June, it suffered net redemptions of $3.1 billion, including $4.9 billion from its multistrategy funds, primarily the OZ Master Fund.
The firm also suffered another $3 billion in net capital outflows in July.
Bloomberg recently reported that Och-Ziff is considering cutting its management fees on its multistrategy funds.
Last month the Wall Street Journal reported that the company was thinking about selling the firm earlier in the year and had spoken with Pacific Investment Management Co. (Pimco) about a deal, including a buyout or a joint venture. “We are not contemplating selling any part of the firm or any other strategic transactions,” Och-Ziff spokesman Joseph Snodgrass told the paper, which said deal talks are not currently taking place.
Och-Ziff’s woes have pounded its stock; the company is one of the only publicly traded hedge fund firms.
Investors buy the stock in hopes that fee income will steadily rise at the firm, which in turn generally pays out healthy dividends. As the flow of fees sharply slows and the prospect of a big settlement looms, investors have lost interest in the stock.
Although the shares rose more than 1 percent on Friday, they are now down 70 percent from their June 2015 high.
The stock’s sharp decline, however, has attracted some so-called smart money.
In the second quarter New York–based Tiger Cub Blue Ridge Capital took a new position of 8.84 million shares, making it the fourth-largest investor in the stock, while Boston-based Baupost Group took a new stake of more than 3.73 million shares, making it the seventh-largest shareholder of Och-Ziff.
