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Och-Ziff’s AUM continues to slide in fourth quarter amid hedge fund outflows

Manager reports additional 11% drop in January in latest earnings statement

Dan Och
Daniel S. Och

Och-Ziff Capital Management Group's assets under management fell 3.6% in the quarter and were down 16.7% in the year ended Dec. 31 to $37.9 billion, showed the firm's earnings report released Wednesday. During the year ended Dec. 31, investment fund outflows totaled $8 billion, fund distributions were $900 million and investment gains were $1.3 billion for a net decline of $7.6 billion.

The fund’s multistrategy hedge funds were down 28.5% for the year ended Dec. 31 to $21.1 billion after net outflows of $9 billion and performance gains of $537 million. Assets managed in the multistrategy fund family declined 9.8% in the fourth quarter.

“As expected, our Jan. 1 net outflows were elevated with redemptions primarily concentrated in our multistrategy funds. The (Foreign Corrupt Practices Act) investigation and resulting settlement obviously had an impact on outflows, (but) we believe the worst quarter is behind us,” said Daniel S. Och, the company’s chairman and CEO, during Wednesday morning’s analysts’ call.

“That is not to say we won't experience additional outflows. However, investor conversations over the past few months have changed for the better. Investors are pleased with our recent performance, and to have the investigation behind us,” Mr. Och added.

Och-Ziff paid $412 million in 2016 to the Department of Justice and Securities and Exchange Commission to settle charges of FCPA violations.

Performance of the company’s flagship multistrategy hedge fund, OZ Master Fund, has been strong at 2.7% net of fees in the fourth quarter and 3.8% for the year ended Dec. 31, according to the company report.

Assets managed in Och-Ziff’s opportunistic credit funds were flat for the year at $5.4 billion; institutional credit fund assets were up 11.1% to $8 billion; real estate funds rose 10% to $2.2 billion; and other strategies fell 7.7% to $1.2 billion.

The alternative investment manager’s total assets under management fell a further 11.3% during the month of January after $4.3 billion of outflows to $33.6 billion as of Feb. 1. Redemptions were concentrated in the hedge funds, according to the earnings report.

Och-Ziff's assets have declined by $14.7 billion, or 30.4%, as of Feb. 1 from peak assets of $48.3 billion as of March 31, 2015.

Also, Och-Ziff announced the appointment of its first chief investment officers during the call.

Executive managing directors David Windreich and James “Jimmy” Levin now are co-CIOs, although their job responsibilities won’t change, said Joseph Snodgrass, an OZ spokesman, in an interview.

“David, while now formally assuming the co-CIO title, has been a senior leader of our team for the last two decades and has been effectively operating in this role for many years,” Mr. Och said.

Messrs. Windreich and Levin remain co-chairs of Och-Ziff’s portfolio management committee for the multistrategy hedge fund family. Mr. Windrich was head of U.S. and European investment and was an equities specialist. Mr. Levin was the firm’s global head of credit.