Och-Ziff Profit Plunges As Performance Fees Evaporate

Feb 9 2012 | 1:37pm ET

A difficult 2011 has hit Och-Ziff Capital Management's bottom line in a big way.

The New York-based hedge fund said today that its fourth-quarter profit plummeted 94%. Distributable profits were just $16.8 million, down from $303.1 million for the fourth quarter of 2010. The difference, of course, was the performance of the firm's hedge funds.

With most of its funds in the red last year, Och-Ziff's performance fee income fell by 90%. "Last year was particularly volatile, characterized by the most difficult market conditions since 2008," CEO Daniel Och said.

Och-Ziff said it suffered $38 million in net redemptions in the fourth quarter, cutting assets under management to $28.8 billion. It's bounced back since, with $500 million in performance gains in January offsetting another $300 million in redemptions.

Those performance gains—all four of Och-Ziff's funds were in the black last month—put the firm's flagship back over its high-water mark, ensuring that it will be able to charge performance fees this year if its performance keeps up. The OZ Master Fund rose 1.6% on the month.

Och-Ziff's OZ Asia Master Fund rose 2.6%, its Europe Master Fund 1.9% and its OZ Special Investments Master Fund 1.3%.

Using generally accepted accounting principles—not excluding costs from the firm's 2007 initial public offering—Och-Ziff lost $137 million on the quarter. In the year-earlier period, the loss was $22.8 million.

Costs from the IPO are set to leave Och-Ziff with a GAAP loss until this year.


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