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Money Management

Och-Ziff’s AUM down for the quarter, up slightly for the year

Och-Ziff Capital Management Group's assets under management fell 1.5% in the quarter to $32.5 billion but rose a slight 0.3% in the year ended Dec. 31.

Och-Ziff's net inflows for the year totaled $1.4 billion, fund distributions were $1.3 billion and investment depreciation was $100 million, the firm's earnings report released Thursday showed.

By contrast, net outflows in the year ended Dec. 31, 2017 totaled $7.6 billion, fund distributions were $300 million and investment gains were $2.4 billion for a net decline of $5.5 billion.

Och-Ziff does not provide quarterly asset flow information in its year-end earnings reports.

CEO Robert S. Shafir attributed the firm's asset growth over the year primarily to the successful closure of several new collateralized loan obligation strategies, including a $460 million European CLO fund in the fourth quarter, a new aircraft securitization fund, as well inflows to institutional credit and real estate funds, during an earnings conference call.

Assets managed in Och-Ziff's institutional credit funds totaled $13.5 billion as of year-end 2018, an increase of 3.1% over the prior quarter and up 33.7% over the 12 months preceding. The firm's opportunistic credit funds increased 3.6% over the previous quarter and 5.5% over the year-earlier quarter to $5.8 billion.

Mr. Shafir acknowledged that the firm's multistrategy hedge funds continue to experience net outflows but said "redemptions have normalized" during his conversation with analysts.

Hedge fund assets totaled $10.4 billion as of Dec. 31, down 9.6% from the previous three-month period and down 24.1% from a year earlier.

Och-Ziff's real estate funds totaled $2.6 billion, a 4% rise over both the prior quarter and year.

Assets managed by OZ in other miscellaneous funds totaled $300 million, down 25% from the prior quarter and down 50% from Dec. 31, 2017.

Och-Ziff's AUM as of Dec. 31 was down $15.8 billion, or 32.7%, compared to the firm's peak AUM of $48.3 billion as of March 31, 2015.

Och-Ziff's AUM fell an estimated 0.6% % to $32.3 billion as of March 1 due to redemptions associated with the firm's realignment of employee-held shares in the company.

For the quarter ended Dec. 31, Och-Ziff experienced a net loss of $1 million and net revenue of $175 million.

The firm also announced in the earnings release that it will change its tax classification to a corporation from a partnership effective April 1

Mr. Shafir told analysts on the call that the firm's efforts to better align the interests of its senior managers with those of its employees, clients and shareholders as well as efforts to strengthen its balance sheet received a "resoundingly positive" reaction from stakeholders.

In response to analyst questions about the firm's prospects for net inflows, Mr. Shafir said the firm has been making progress in "opening channels that have been closed to us for a long time" including intermediaries such as private banks.

Regarding potential inflows from institutional investors, Mr. Shafir said "major consultants are beginning to upgrade us. They've seen the performance and what we've done to improve the company."

Stressing that "it's early days" and that the "sales cycle for institutions is very long," based on the firm's pipeline of potential new investors, Mr. Shafir said he's making "a leap of faith" and expects to see stronger inflows in the second half of 2019 continuing into 2020.

The firm's largest opportunistic credit strategy, the $3.1 billion Customized Credit Focused Platform, returned a net 4.3% in 2018 while the net return of the $1.8 billion Oz Credit Opportunities Master Fund was 6.5%.

The company's flagship multistrategy hedge fund, Oz Master Fund, was down net 1.9% in the year ended Dec. 31