Redemptions Slow at Och-Ziff Capital Management As Performance Rebounds

Aug 4 2017 | 7:32pm ET

Investors have continued to redeem their capital from beleaguered hedge fund manager Och-Ziff Capital Management, pulling a total of $2.9 billion out in the last four months, although at a slower pace as the company posts strong performance and moves past its legacy legal issues. 

Och-Ziff’s flagship OZ Master Fund is up 8.8% for the first seven months of 2017 and is ahead 19.5% in the last 12 months, according to a Reuters article citing a company statement earlier this week. Other fund vehicles have also performed well over the same perood: The OZ Asia Master Fund is up 17.9%, while the OZ Europe Master Fund has gained 4.8% in the first seven months of the year, the article continued. 

Och-Ziff was accused of violating the U.S. Foreign Corrupt Practices Act by paying bribes to officials in various African countries, including Libya and Congo, through a subsidiary, and authorities charged two former Och-Ziff executives with violations of the FCPA in January. The U.S. Foreign Corrupt Practices Act bars the payment of money or provision of gifts by U.S. companies to foreign officials in exchange for business, directly or otherwise.

The company itself settled multiple U.S. probes into the bribery case in September 2016, paying $412 million and agreeing to a deferred prosecution agreement, among other things. However, investor redemptions soared, totaling around $8 billion in 2016, $4.8 billion in the first quarter and $1.4 billion in the second quarter. 

Yet with performance ticking up and the substantial legal woes apparently behind it, the company’s outflows may be coming to an end. AUM was $32 billion as of August 1, significantly down from $42 billion in June 2016 but slightly up - by a marginal $200 million but up nonetheless – from June’s levels.  

"We believe that the redemption cycle that started in the second quarter of last year has largely ended," CEO Daniel Och said during the company’s second quarter earnings call. "We believe that multi-strategy flows will return to being primarily driven by our performance and broader industry trends."

Och-Ziff is the largest publicly traded hedge fund manager in the U.S. The company was founded in 1994 and brought public at $32 per share in late 2007. The company’s stock closed Friday at $2.88, down 20% year-to-date. 

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