Och-Ziff Saw $2.5 Billion of Outflows After Bribery AccordBy
Assets under management were $37 billion as of Nov. 1
The firm’s OZ Master Fund gained 0.59 percent last month
Och-Ziff Capital Management Group LLC, the hedge fund that settled a federal bribery probe in September, said clients pulled $2.5 billion of assets in the last month.
The firm suffered withdrawals of $2.4 billion on Oct. 1, and about $102 million over the rest of the month, the company said Wednesday in a statement. Some of the asset declines were offset by performance gains. Assets under management for the firm were $37 billion as of Nov. 1, a decrease of $2.3 billion from Sept. 30.
Founder Dan Och is seeking to repair the firm after a Sept. 29 a settlement with the Securities and Exchange Commission and the Justice Department. An Och-Ziff unit pleaded guilty to charges stemming from a plot to pay bribes to win investments in Africa. The uncertainty around the lengthy investigation spurred client redemptions, while legal costs weighed on the firm. Goldman Sachs Group Inc.’s retirement plan decided to pull its investment from Och-Ziff, while pension funds for New Jersey and Rhode Island trimmed their holdings.
“2016 has been a difficult year, but in the most recent quarter we put one of the most challenging episodes in the firm’s history behind us,” Och said on a conference call Wednesday. “We are now well positioned to move ahead and focus on the future.”
The firm reported distributable earnings increased to $198 million, or 38 cents a share, because of a $144 million tax adjustment. Excluding the adjustment, Och-Ziff earned $51.9 million, or 10 cents a share, beating the average analysts’ estimate of 6 cents a share.
Och-Ziff said Wednesday on the call that it expects redemptions to remain elevated in the fourth quarter. It also said it cut the average management fee on its funds to 1.01 percent as of Oct. 1. The fees have ranged from 0.75 percent to 2.5 percent of assets annually for its funds, according to a March filing.
Och said that the firm saw improvement in its performance, which is “at the heart” of the company’s history and ability to succeed.
Its OZ Master Fund rose 0.59 percent in October, bringing its return to 1.66 percent for the first 10 months of this year, the company said today. OZ Asia Master Fund fell 0.65 percent and is down 4.03 percent this year through Oct. 31. The OZ Europe Master Fund gained 0.53 percent and is up 1.71 percent this year through Oct. 31. All figures are net returns.
Och-Ziff shares have declined 50 percent this year through yesterday. The stock traded at $3.11, down 0.3 percent, as of 9:48 a.m. in New York.
S&P Global Ratings and Fitch Ratings have signaled that they may cut the company’s ratings to junk. Fitch cited “reputational damage” from the bribery case and concern about asset outflows.