Och-Ziff Drops by Most Ever Amid Legal Woes, Asset Decline

  • Hedge fund firm says legal costs may continue after probe ends
  • Firm's assets fall $1.8 billion from Dec. 31 to Feb. 1

Shares of Och-Ziff Capital Management Group LLC, the publicly traded hedge fund led by Daniel Och, lost more than a quarter of their value Thursday and hit a record low after the firm said assets declined and legal costs are likely to continue even after U.S. authorities resolve an ongoing investigation.

"While it is certainly still our hope the investigation is concluded by the middle of this year, we may see some heightened level of legal expenses for a period of time after that," Joel Frank, Och-Ziff’s chief financial officer, said in a call discussing the firm’s earnings for the fourth-quarter of 2015. U.S. regulators are looking into whether the firm broke bribery laws in accepting an investment from the Libyan Investment Authority.

Legal woes, coupled with a decline in assets and mediocre performance in the firm’s main multistrategy hedge fund, are taking a toll on the company’s stock. The shares fell 26 percent to $3.48 Thursday in New York. They’ve dropped 75 percent since the firm first told investors in March 2014 that it was under scrutiny from the U.S. Securities and Exchange Commission and the Justice Department.

The firm also disclosed that its assets declined by $1.8 billion to $43.7 billion from Dec. 31 to Feb. 1. Och-Ziff had $47.5 billion under management at the end of 2014. The outflows stem mainly from the OZ Master Fund, the firm’s main multistrategy pool. The fund lost 1.7 percent in January and 0.22 percent last year, filings showed.

The investigation into whether the firm violated the Foreign Corrupt Practices Act by accepting an investment from a sovereign wealth fund has impacted the firm’s financials. Och Ziff’s non-compensation expenses totaled $201.4 million in 2015, 60 percent higher than in 2014, according to Thursday’s earnings statement. The increase was driven by additional legal expenses, the firm said.

Frank said he couldn’t comment on details of the ongoing investigation.

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